Queens Speech brings welcomed promise on late payments.
20th December 2019.
James Salmon, Operations Director.
The Queens Speech brings welcomed promise on late payments (along with other business friendly measures) and we look at other economic news from the week for those who sell on credit.
The Queens Speech
In the Queens Speech, it was announced the government will: “clamp down on late payment more broadly and strengthen the powers of the Small Business Commissioner to support small businesses that are exploited by their larger partners.”
CPA welcomes this news and indeed any efforts made to break the late payment culture that is strangling the UK economy, reducing productivity and killing off huge numbers of small businesses each year that otherwise could lead to increased jobs, activity and prosperity.
While we believe that late payment legislation already gives businesses the tools to combat the late payment scourge, if only they could be used properly (see below), any attention to the problem and any strengthening of the powers is a bonus.
CPA also welcomes other measures such as broadband legislation that was also announced to “support the roll out of gigabit-capable broadband across the UK to achieve nationwide coverage as soon as possible”.
CPA also likes the sound of the pro-SME message that the government “want Britain to be the best country in the world to start and grow a business – a place where entrepreneurs know they can build on their ideas and find success.”
Unfortunately, not much was heard on the IR35 changes which look to cause huge headaches for business in 2020.
Government pledges ‘fundamental review’ of business rates
A bill was also announced in the Queens Speech will deliver a 50% discount in business rates for smaller retailers and will also benefit restaurants and pubs. Meanwhile, independent cinemas and music venues will qualify for the rate relief for the first time. The government said it would undertake a “fundamental review” of the whole system in the future.
Ministers say nine in ten independent firms will qualify for the relief, which is available to those with a rateable value below £51,000 and will deliver a saving of up to £12,500.
To ensure business rate payers in England have bills that more accurately reflect current property values, the government said it will bring forward legislation to increase the frequency of business rates revaluations.
Business rates revaluations will increase to every 3 years, from the current 5 years, and the next revaluation will be brought forward a year from 2022 to 2021 to ensure businesses see the benefits of this change as soon as possible.
Business groups want a business-friendly Budget
Business groups have for years been calling for an overhaul of the rates system, which raises more than £31bn for the government each year.
While the retail sector accounts for 5% of the UK economy, a quarter of the burden of business rates falls on retailers, who pay regardless of profit, says the British Retail Consortium.
Helen Dickinson, chief executive of the British Retail Consortium, said: ‘We welcome the continued commitment to a fundamental review of the business rates system and would like to see this formalised in the upcoming Budget. It would do far more to help relieve struggling high streets and safeguard jobs and communities than short-term discounts which will only impact some businesses but not all.”
Her cautious response to the government’s plans continued: “The retail rates discount is just another sticking plaster that ducks the real crisis facing high streets especially in vulnerable areas of England already suffering from years of economic decline and falling rents.”
Mike Cherry, national chairman of the Federation of Small Businesses, welcomed the government’s announcement, saying: “We’ve fought hard to secure an extension of the business rates retail discount. Today, we’ve seen the first step towards that extension being enshrined in law. Our small high street businesses are faced with a hugely challenging environment – confidence among small retailers has tumbled to new depths this year. This reduction in the £25 billion business rates burden promises to help breathe new life into our small shops, restaurants and cinemas.”
But he cautioned: “It’s vital that this Queen’s Speech is now followed-up with a business-friendly Budget in the new year, one that encompasses the fundamental review of the regressive rates system promised today.”
Government seeks to assuage councils
Local authorities will be unhappy however. Reductions in business rates mean cuts to their revenue.
“The government recognizes the role of business rates as a source of local authority income and will consider input from the sector as part of the review of business rates,” it said.
Unemployment hits 44-year low
In other news this week, credit managers will welcome the announcement that UK unemployment dropped to its lowest level in 44 years in the three months to October.
The number of people claiming unemployment benefits decreased by 13,000 to 1.28m for the quarter, Office for National Statistics (ONS) figures show.
The overall rate of unemployment held flat at 3.8%, while the unemployment rate for women fell to a record low of 3.5%. The number of people in work increased by 24,000 to 32.8m, while the proportion of people in employment was flat at 76.2%, with 27.7m people in paid employment.
The ONS data also revealed that average total pay increased by 3.2% in the quarter, slowing from 3.6%. Job vacancies fell by 20,000 to 794,000 in October, marking the tenth consecutive month of declines and the first time in more than two years that the figure slipped below 800,000.
Jing Teow, an economist at PwC, said the data shows that the labour market “remains fairly resilient despite the uncertain economic and political environment,” adding: “However, there are signs that the labour market is cooling, partly as a result of the rise in real wages and unemployment falling to near record lows.”
Inflation steady at 1.5%
We should also be glad that UK inflation held at 1.5% in November, with the Consumer Prices Index at the same level as that recorded in October.
Despite falling short of a Bank of England’s target of 2%, the figure came in higher than the forecasted 1.4%.
Mike Hardie, head of inflation at the Office for National Statistics, said: “The headline rate of inflation remained steady with prices rising across a variety of goods and services.”
Yael Selfin, chief economist at KPMG, said: “Inflation is expected to remain well below the Bank of England’s target in 2020, thanks to price caps set on regulated utilities and a stronger pound, giving the Bank of England some room to act if the economy wobbles a little next year.
The Bank may wish to secure a pre-emptive cut in rates, either in February or May, if recent economic weakness proves more persistent.”
BoE holds interest rates
The Bank of England (BoE) has held interest rates at 0.75% as it warned there was little chance of significant economic growth this quarter.
The BoE’s Monetary Policy Committee (MPC) voted 7-2 in favour of maintaining the rate, as it did at its previous meeting in November.
The monetary policymakers did point out that both sterling and the FTSE had rallied in the last month, with the pound’s exchange rate appreciating by around 2%.
Jonathan Haskel and Michael Saunders voted to cut rates by 0.25%, citing the weakness of the economy as reason to reduce the rate 0.5%. The BoE says it expects GDP to grow by 0.1% in Q4, while the 0.3% growth in Q3 was “a little weaker” than the MPC expected at its November meeting.
It added that while some company spending plans put on hold since the EU referendum could be reinstated by the end of next year, uncertainty over the future trade deal with the EU could continue to weigh on the economy. The MPC expects inflation to remain below its 2% target next year.
House price growth slows
Those in industries tied to the consumer or the housing market will be wary though that house price growth has slowed to a seven-year low.
Values were up 0.7% in the year to October, down from the 1.3% growth recorded in September and marking the slowest rate since September 2012. On a monthly basis, values decreased 0.7% between September and October.
The figures from the Office for National Statistics show that the average UK house price was £233,000 in October, a £2,000 increase on the typical price a year ago.
House prices to climb 2% in 2020
2020 looks like a quiet year for the housing market.
Analysis by Rightmove suggests house prices will climb by 2% next year, with a lack of choice for potential buyers likely to drive the increase.
Miles Shipside, director at the property portal, said: “Rightmove measures the prices of 95% of property coming to market, and we predict that buyers and sellers will on average see a 2% rise in those prices by the end of 2020.”
Data from the property website shows that the number of sales agreed so far in 2019 is down by 3% on 2018, while the number of properties coming to market has fallen by 8%.
The typical asking price of a UK home is currently £300,025 – 0.9% down on November’s average. (Don’t ask CPA to explain the disparity between Rightmove’s average price and that of the ONS)
Leading economists have also predicted that house prices will rise 2% next year as confidence returns to the market.
Howard Archer, chief UK economist at EY, said the Conservative victory would boost house price growth from its current level of about 1% a year.
He said record low interest rates would also help homebuyers although experts now think there is less chance of a rate cut by the Bank of England.
“Housing market activity could be given a modest lift in 2020 if the Government introduces specific measures aimed at boosting the sector in the Budget. Low mortgage interest rates and a shortage of properties for sale should provide some support to prices,” said Mr Archer.
Halifax predicts low price growth in 2020
Halifax expects house price growth to remain subdued at between 1% and 3% in 2020, saying that increases will remain low in a market where young buyers are held back by large deposit requirements.
Halifax’s forecast for 2019 had suggested prices would rise by 2% and 4%, with prices subsequently climbing 2.1% over the year to November 2019.
Russell Galley, Halifax’s managing director, said 2019 saw modest price growth supported by falling mortgage rates and a low volume of houses for sale, which “helped to underpin a degree of resilience in the market.”
Prospects for 2020 appear “a bit brighter”, he added, “with uncertainty in the economy falling back somewhat, transactions volumes anticipated to pick up and further price increases made possible by growth in households’ real incomes.”
Halifax’s estimates follow reports from the Royal Institution of Chartered Surveyors, which expects transaction levels to be flat and prices to climb by 2%, and Rightmove, which also foresees a 2% increase.
UK economic divide mounts as London pulls further ahead
ONS data shows a widening of the economic divide between London and the rest of the UK, although the West Midlands and the East of England were the best performing regions in terms of per capita output growth.
Do you sell on credit?
With pressures on the cash flow it is essential that you stay on top of the credit limits you grant customers and watch carefully for any late payments.
Those customers will look for the easiest option to boost their cash-flow. Don’t let it be you.
You can’t just assume your customers can and will pay you eventually, no matter how big their name is.
It is essential to have credit management systems in place to monitor and check your customers credit worthiness.
It is also best practice to use a trusted third party like CPA to make sure you are paid on time by customers, no matter how good a name they have.
About CPA
The Credit Protection Association can help!
Formed in 1914, CPA has been providing credit management services to SMEs for over 100 years.
At the Credit Protection Association, we provide first class credit information that can help you avoid being over extended to customers who are at risk. Our monitoring service can flag up warning signs long before the end, giving you the chance to adjust and reduce your exposure. We provide recommended credit limits and credit scores on a traffic light system and can help you set appropriate credit policies for your customers.
We regularly publish lists of the latest insolvencies but by then it is too late. Our credit reports however predict approximately 96% of company insolvencies long before they arrive.
Companies in trouble usually have very bad cash flow and they try to deal with it by delaying payment to their suppliers, increasing your exposure to them.
If you supply on credit, help us help you identify the risks.
Why use a third party collector?
As a third party collector, we can also get your payments prioritised over those who are not as hot on collections. When your customer receives a letter from the Credit Protection Association regarding their outstanding account, they are going to want to get that resolved as a priority. Our overdue account recovery service can get your unpaid invoices to the top of their “to do” list and get your invoice paid.
Over the years we have collected billions in overdue invoices for our customers.
Our debt recovery and credit management services give our members the financial freedom needed to grow and prosper, while our new Late Payment Compensation department could unlock hidden potential and offer the compensation needed to springboard your business to success.
You might be hesitant about contacting a debt collection agency. What are they going to be like?
Can they help your particular type of business?
There is no need for concern. CPA are courteous, helpful and very probably have had direct experience of working with your type of business.
Debt collection agencies are not all alike.
Success lies in both recovering money and keeping customers happy. The Credit Protection Association was founded in 1914 and has helped tens of thousands of UK businesses to collect outstanding payments and reduce the risk of incurring bad debt. We believe that creditors deserve to be paid for the work or goods they have supplied but we fully understand the need to maintain
the best possible relationship with customers!
At The Credit Protection Association, we provide solutions, advice and back-up in all areas relating to the supply of services or goods on account. Client-members receive everything they need from a single source to reduce debtor days and write-offs.
The Credit Protection Association has helped has assisted tens of thousands of UK businesses with their credit control requirements, since the First World War.
We are polite, firm and efficient when it comes to recovering outstanding debt.
“We have used CPA for a number of years now. The website is easy to navigate around with lots of helpful reports. The staff are always at hand and very friendly. CPA has helped us reduce our debt over the years and keep track of potential issues with our customers.”
~ CPA client in Buckinghamshire
“The service from CPA has proved to be everything that you said it would be. We have already seen a huge benefit. We have had a number of overdue accounts paid promptly and directly to us. It is also a huge weight off our mind to know that once we have passed an overdue payment over to you, you take care of everything whilst keeping us informed.
~ Credit Controller client in Warrington
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
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CPA is passionate about late payment
The Credit Protection Association has been protecting smaller firms against poor payment practices for over 100 years.
We are extremely passionate about breaking the late payment culture that holds back the UK economy and threatens many SMEs with cash flow difficulties being the single biggest killer of Britain’s small businesses.
If you were regularly paid late we can help. Those former customers used you to boost their own cashflow, regularly paying you late.
As a result you had extra costs, you had the distraction of having to chase payment, you had opportunity costs because your capital was tied up in their late invoices.
Under little used legislation, you are entitled to compensation for those late payments.
Now you can boost your own cash-flow.
CPA can help unearth the those hidden treasures.
We have the technology to reveal the compensation you are due and we have the extensive experience and expertise to then turn those claims into cash.
Yes, CPA can help you boost your business cash-flow.
Don’t let your bankers control you, contact CPA today.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections