The UK slumps into recession – business news 12 August 2020.
12 August 2020.
James Salmon, Operations Director.
The UK slumps into its deepest ever recession, falling employment, a delay to the budget and lots more business, covid-19 and market news
Here are CPA we want to share the business news stories we have seen that we think will affect our members and readers. Many of us are busy fighting to protect our businesses and therefore might have missed some of the news that could impact small businesses, their owners and those that sell on credit.
UK slumps into recession with massive Q2 slump
The Office for National Statistics is expected to confirm today that UK GDP plunged by 21% between April and June, following a 2.2% fall in the first quarter of the year.
However, all eyes will be on the figures for June which analysts hope will indicate an 8% rebound in activity.
Philip Shaw, chief economist at Investec Bank, added that July’s figures next month “should contribute strongly to a material rebound in the third quarter,” however, the “test will come in the autumn when there are no further ‘lockdown releases’ to boost the economy, some restrictions (perhaps just local) are imposed and programmes such as the furlough scheme are wound up.”
Today’s GDP figures confirm that the UK is not now just technically in a recession, but that it is in fact in the deepest recession in UK history as well as the deepest of any of our fellow G7 economies.
We are in a significant downturn that looks like lasting well into late 2021 and the economy will be hurt by both SMEs closing and mass redundancies for a significant part of the workforce.
While yesterday’s unemployment figures hadn’t jumped as much as initially feared by some, the full effect of this recession will not be felt until the furlough scheme ends in October.
SMEs are currently able to service debt from remaining cash flows on off the back of government backed loans and grants. Once these come to an end, what will happen to the large number of zombie businesses? It appears an army of zombie companies are re-emerging and according to The City UK, it is estimated that businesses may build up £100 billion of debt by next March which they would be unable to repay with 780,000 SMEs in danger of insolvency.
SMEs are not just the lifeblood of the economy, it is where innovation and creativity happens. Since the epidemic took hold, the UK Government has been quick to back sectors that are resilient to recessions and market volatility, providing financial security and protection through initiatives such as the bounce-back loans scheme.
This has enabled their partners to trade safely with them. However as the recession takes hold and insolvencies rise, it is imperative that SMEs credit check who they give credit too and that they follow up overdues quickly. CPA provides credit management services to assist its members trade safely through the coming recession. If you are not already a member talk to us about how we can help you. see the section below Don’t let Covid-19 bust your business!
And if you are struggling financially and the recession is putting you at risk of insolvency, talk to us about our late payment compensation service. If you have sold on credit in the B2B market then you might be sitting on a goldmine you didn’t even know. CPA can help you uncover it with our bespoke systems that we have developed over many years. See the section below CPA is passionate about late payment
Sunak weighs delaying autumn Budget on second Covid wave
Rishi Sunak is reportedly considering scrapping his autumn Budget if Britain is hit by a big second wave of coronavirus, signalling anxiety at the heart of government over a possible second COVID-19 spike.
Soaring unemployment – “the lull before the storm”
Almost three-quarters of a million jobs have been lost from company payrolls since the start of the coronavirus pandemic in March, official figures show.
Young people aged 18 to 24 were among the worst affected by job cuts along with workers over the age of 65,according to the Office for National Statistics, which also recorded a record high number of zero-hours contracts.
Pay levels were down with wages including bonuses falling 1.2% and regular pay down 0.2%, the first negative reading since records began in 2001.
Ruth Gregory, a senior UK economist at Capital Economics, commented: “Further rises in unemployment in the coming months are all but inevitable as the furlough scheme unwinds. This is just the lull before the storm.”
Following the release of the figures, Boris Johnson said the UK has a “long, long way to go” until it sees a return to “economic vitality and health”.
Mike Cherry, national chairman of the Federation of Small Businesses, suggested the furlough scheme will need to be reviewed “and the option of a meaningful extension to furloughing should be kept open.”
Two-in-five businesses expect to cut jobs
A survey by the ICAEW of 800 senior finance executives at UK companies found 40% expect to cut jobs in the next six months as a result of the coronavirus slowdown.
One third had already cut jobs, with two-thirds of these saying the reason was due to a drop in demand and 59% said it was to increase efficiencies.
Some 54% said their organisation had furloughed staff. Just over a quarter (28%) of respondents said their organisations were hiring, while 27% said their firms had a recruitment freeze.
The measures taken by the Government to protect jobs were approved by 76% of respondents.
Iain Wright, ICAEW director for business and industrial strategy, commented: “Our members give government credit for preserving jobs so far, but they believe that a hard landing for the economy is only months away, and that employment will be badly hit.
Some of this will be because market demand is weaker, but the crisis is also driving companies to become more efficient. This may improve productivity, but it will cost jobs.”
Debenhams to cut another 2,500 jobs
Debenhams is planning to cut a further 2,500 jobs as it restructures management roles at stores and distribution centres. The retailer, which currently employs 14,500 people, announced 4,000 job losses in May.
The cuts will be mainly across its UK stores and distribution centre, but it said no new shops were slated to shut. The shopworkers union Usdaw said the latest cuts were “devastating news for staff” who were informed via a conference call and without consultation.
In response, a spokesperson for the joint administrators at advisory firm FRP said consultation was “rarely possible in insolvency where the options available are limited and the administrators must consider their own duty to creditors.”
Scots business failures expected to spike by Q4
Research by the restructuring trade body R3 reveals that 93.7% of insolvency and restructuring professionals expect corporate insolvency numbers to rise in Scotland over the next year. Some 56% predict the increase will occur between October and December. R3 Scotland chair Tim Cooper highlighted the help provided by government support measures, but warned: “It’s clear from the survey results that it’s a question of when, not if, corporate insolvency numbers increase.”
Government coronavirus business loans total nears £52bn
Data released by the Treasury on Tuesday revealed that, as of August 9th, the Government has lent £51.7bn to businesses via its emergency coronavirus loans funding schemes. Lending under the bounce back loan scheme accounted for £34.96bn, with a total of 1,404,726 applicants and 1,157,296 approvals; under the coronavirus businesses interruption loan scheme (CBILS), lending hit £13.41bn, with 121,669 applications and 59,520 approvals; and the coronavirus large business interruption loan scheme (CLBILS) made up £3.4bn of lending, with 497 loans approved out of a total of 896 applications.
Covid-19 general news
Global covid-19cases top 20.1 million as deaths pass 738,000
Russia has become the first country to deem a coronavirus vaccine as safe for widespread use after less than two months of human testing , according to President Putin. Putin said the vaccine has “passed all the needed checks” and that he had even given the vaccine to one of his daughters.
Markets.
Stocks in London were sharply higher yesterday with the FTSE climbing 1.7% to 6154 as fears about US-China tensions eased and optimism rose over the prospects of a fiscal stimulus deal from US political leaders. Major indices in Germany and France were also rising with the Eurostoxx 50 up 2.2%, In Asia, markets traded broadly lower overnight as investors continue to monitor coronavirus developments. The Nikkei closed up 0.41%. the Hong Kong HSI was up 0.96%. The China Shanghai SSE was down -0.69%. The Singapore Strait Times was up 0.47%. Overnight in the US , markets fell on Tuesday, snapping a seven-day winning streak, as declines in some of the major tech names escalated at the end of the trading day. The S&P 500 dropped -0.80%. while the NASDAQ dropped -1.69% as the US Dollar staged a strong rebound, with help from much steeper than expected correction in Gold price. Oil prices rallied on stimulus hopes whilst improving crude demand in Asia helped support prices – Brent was trading over $45 per barrel by late afternoon.
Trade talks
Trade deal talks between the UK and Japan have been held up, according to reports. It was suggested just two weeks ago that a trade deal between the two nations was on the verge of being completed, however trade secretary Liz Truss has reportedly held things up by looking for a better deal for some of the UK’s agricultural exports.
HMRC miscalculates coronavirus grants for self-employed
HMRC has admitted that over 16,000 grants given to the self-employed to help them through the coronavirus crisis were either too high or should not have been paid out at all. Integrated Dispute Resolutions, a legal services firm which highlighted the error, called on HMRC to be transparent about how much the errors have cost. A spokesman for HMRC said: “The Self Employment Income Support Scheme has been delivered at unprecedented pace and has protected the livelihoods of 2.7m self-employed people in the UK. The vast majority of grants were paid correctly but in a very small number of cases not all the information held on a tax return was taken into account when calculating eligibility and grants.”
Amazon shamed by eBay’s stance on tax
eBay has announced that it will not pass the UK Digital Services Tax to sellers in the form of fee increases, piling pressure on Amazon which was roundly condemned for saying that it will not absorb the extra costs of the digital services levy. The tax, introduced in April, levies a 2% charge on revenues generated in the UK. It is estimated that the tax will cost eBay at least £20m this year.
Mike Ashley’s Frasers Group to delay results
Mike Ashley’s Frasers Group, formerly Sports Direct, is to delay the release of its annual results, stating it needs more time to complete its accounts. Frasers was due to release its full-year figures on Thursday 13 August, but will now publish them on 20 August, as disclosures relating to new accounting rules were “completed and reviewed”. In a statement released to the City, Frasers said the delay was not linked to any “significant matters” beyond completion of “normal audit procedures”. The company added: “Due to the undoubted scrutiny of our accounts, management and our auditors RSM will take this extra week to robustly review the final accounts and ensure that all necessary disclosures have been completed.” Last year Sports Direct’s results were delayed multiple times, resulting in the resignation of auditor Grant Thornton.
Don’t let Covid-19 bust your business!
It will if your cash flow dries up, either sooner or later.
The Credit Protection Association (CPA) has been assisting thousands of UK businesses to get paid since 1914. We have seen many a recession and financial crises, this recession will be particularly deadly for suppliers for sometime to come.
CPA eases cash from tardy debtors – Efficiently, Effectively, Economically and Ethically. Above all tactfully, because maintenance of goodwill is paramount.
To meet the needs of creditors in the current crisis, we have designed a “critical care” package especially tailored for the situation.
- The annual package costs start at very low rates
- A minimum performance warranty is provided
- Several complimentary services included
Clients instruct CPA on-line via their PC or phone, completely user-friendly. Your late paying customers are told to pay you direct (not to us).
A very recent report shows a 23% increase in the number of unpaid invoices since March 11th THIS YEAR – are you getting a build-up of late payers?
Right now, overdue accounts must be a concern and CPA has a great track record of encouraging slow-payers to pay their suppliers quickly.
It takes less than 17 minutes to see how you would benefit, do you have the time now?
No face-to-face meeting required – just call Peter Uwins, CPA’s National Sales Manager, on 020 8846 0000 (business hours) or email nsm@cpa.co.uk today.
When you see your money come in, you will be so glad you used CPA.
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.
We have helped our members weather their way through many a recession.
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
Ready to speak to an advisor?
For help or advice on credit management, entirely without obligation.
Call us today
0330 053 9263
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
Do you realise you could be sitting on a fortune?
Late payments often result in a cash flow crunch and leave SMEs in need of a cash injection.
If you sold B2B on credit then there may be a hidden source of capital you can call on.
If you fancy an bit of extra cash in your business, rather than jumping through hoops with your bank, you could look to uncover the resources from an unexpected source within your own business.
Not many are aware but there could be a hidden fortune within your business, sitting there, just waiting to be uncovered and released.
We can help you uncover the pile of gold, you didn’t even know you were sitting on.
If you trade with other businesses and were often paid late then you could be entitled to significant compensation.
Under little known and under-utilised legislation your business could be due huge amounts in compensation that you didn’t even know about.
Let’s be clear – this is not a way to weaken any customer relationships you value. It is one that identifies who’s been paying late and then recover the potentially significant sums in compensation using Late Payment Legislation from businesses where the relationship has already ended.
You can pick and choose who you want us to follow up – but once we’ve agreed which companies you’d like to pursue compensation from it’s a fast process and there’s no financial outlay to you whatsoever. My team at CPA put its expertise to work to recover the compensation due and fight late payment culture.
That compensation could provide the cash boost your business needed.
But don’t delay, that compensation evaporates if not claimed within six years of the late payment.
How can CPA help?
CPA has developed a unique technology to dig into your accounting records and discover the cash injection you are due by means of compensation. The software does all the hard work. Our software interacts over the cloud with over 300 different software packages, working directly with your accounts package, just so long as it’s stored on a computer.
We recognise that most companies do not have the resources to spend time on the identification and calculation of Late Payment Compensation. Our service can produce an Analyses within just a few days with (usually) less than 30 mins of co-operation from our clients. We work directly with over 300 accounting packages but can also work with bespoke accounts packages. Indeed, speed is essential as the oldest invoices may fall foul of the 6-year time limit.
Once the Sales Ledger Analyses is made available to clients, all that is required is that management decide which commercially sensitive ex-customers to remove from the list and return it to us.
CPA then uses its years of collection experience to explain and recover the Late Payment Compensation Claims. Clients do not handle any part of the recovery process as our team will take all communications from the companies against who the claims has been made. Often, it’s simply a case of explaining the legislation, sometimes we have to go all the way and enforce the legislation through the courts.
The result is that we are realising clients’ claims worth tens and sometimes hundreds of thousands of pounds which, of course, is pure net profit. You may also be among the recipients of “hundreds of thousands of pounds” should you elect to take advantage of our services.
We do the work, you receive the cash.
If you have supplied goods and services to businesses on credit and were regularly paid late then you could be due significant sums in late payment compensation.
We are talking to companies and unearthing claims in the hundreds of thousands from former business customers who paid them late. Large business customers who abused their power to inflict unfair and sometimes illegal payment practices.
We are helping business owners who are looking to boost the returns from their business before they retire. We are helping businesses who have lost major clients after years of loyal service to get properly compensated for systematic late payment. We are helping companies that were looking to close down, who looked insolvent and finding that cash injection they need to avoid insolvency.
Those former clients who regularly paid you late can finally be made to pay.
Ready to speak to an advisor?
For help or advice on credit management, entirely without obligation.
Call us today
0330 053 9263
The Credit Protection Association is a credit management company established in 1914. If you supply goods or services on credit then we can help you!
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
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