The calm before the storm in insolvencies – Covid19 business news 16 June 2020.
16 June 2020.
James Salmon, Operations Director.
We look at the calm before the storm in insolvencies, covid-19 news, small firms fear on the recovery, markets, brexit, retail, unemployment, fraud, the housing market, Tax, insolvencies and a lot lot more.
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.
Covid-19 general news
Covid lockd-own restrictions across Europe were eased. Long queues formed outside some non-essential retail shops in England, open for the first time since 23rd March. Restrictions were relaxed in France as cafés and restaurants reopened, allowing customers to sit indoors, and several European Union countries reopened their borders to other EU citizens.
Iran warned it may have to reimpose strict social-distancing rules as the rate of coronavirus infections rises again
Focus is also on a cluster of new cases in Beijing and the rising numbers of new cases in a number of red U.S. states as the virus moves away from the coastal cities.
Data scientists are predicting India’s numbers may surge after it abandons its lockdown.
New Zealand, meanwhile, reported its first new cases since 22 May.
On vaccines, Moderna Inc. said efficacy data for its drug could be available by as soon as Thanksgiving if everything goes well.
Meanwhile, a new report suggested one in five people worldwide have an underlying health condition that puts them at risk for a severe Covid-19 illness.
Markets.
The FTSE 100 weakened yesterday by 40.5 points to close at 6064.7. European shares tumbled on Monday as concerns of a second wave of coronavirus infections in the US grew to dampen hopes of a quick recovery along with Beijing reporting a record number of new cases, while underwhelming economic data from China also weighed on sentiment. The Eurostoxx 50 fell 0.55% with similar falls across the blocs indexes while in the US markets erased losses and closed higher after the FED announced it would start buying corporate bonds and news trickled in over a proposed trillion dollar stimulus infrastructure plan.
‘Calm before the storm’ as figures reveal continued fall in corporate insolvencies
With unprecedented support for businesses from Government and the new insolvency laws, it is no surprise to see a fall in the number of corporate insolvencies across the country.
However this undoubtedly the ‘calm before the storm’ as a tsunami of insolvencies is expected as the measures such as furlough payments are reduced.
Statistics published on Friday by the Insolvency Service show that there were 944 company insolvencies in England and Wales in May 2020, which is a decrease on the figure for April 2020 and a 30% drop compared to the number for May 2019.
The Insolvency Service data comes after figures were published by the Treasury revealing the extent of the emergency loan package offered to businesses during the COVID-19 pandemic, with Government-guaranteed lenders approving almost £35bn of support to more than 830,000 firms nationwide.
The corporate insolvency figures show how effective the Government’s covid-19 support measures have been. Some businesses who would have gone bust anyway without the lock down have been able to delay the insolvency.
The partial closure of the courts system since March has also played its part in the delay to these insolvencies.
Therefore these figures really do not give a true picture of how the pandemic is affecting businesses across the UK , and it will be sometime before the full account of the impact is reflected in the levels of insolvencies.
This is the ‘calm before the storm’ and companies need to be prepared to combat economic turbulence.
GDP fell by 20.4% in April and research also shows consumer spending and consumer confidence decreased significantly between March and April this year. The rent quarter day, which occurs in the fourth week of June, will also put extra financial pressure on many businesses.
While we might be aware of the financial cost of continuing the lockdown continues, we also have to be aware of the human cost of easing restrictions on trading prematurely and the danger of a wave of new infections which in turn will add an even greater danger to business and personal finances.
It is a difficult balancing act as the nation plots a path forward.
Small firms concerned over recovery
A poll commissioned by Visa shows that more than half of small business owners fear their firm may not recover from the COVID-19 crisis and lockdown.
While 56% said they may not be able to bounce back and a third foresee a sustained reduction in customer numbers, 39% have adapted their business models to continue trading.
The poll, of 2,000 consumers and 500 small business owners, found that while consumers have been utilising online services in the lockdown, 31% of enterprises with fewer than 50 staff still do not sell goods or services online.
Brexit
The PM, Boris Johnson and the chiefs of the EU have agreed that “new momentum” is needed in trade negotiations for a deal to be struck by the 31st December deadline. This came after Boris Johnson held his first direct talks about a post-Brexit trade deal with EU leaders, by videolink. In a joint statement issued after their Brexit summit yeserday, leaders of the UK and EU said they needed to “intensify the talks in July and to create the most conducive conditions for concluding and ratifying a deal before the end of 2020”.
Shoppers hit the high street as stores reopen
Britain’s High Streets enjoyed a 52% jump in footfall on Monday morning, after non-essential shops opened their doors for the first time since the covid-19 lockdown was imposed in March.
The easing of lockdown measures across England which enabled many stores to open after three months saw a surge of consumers descend upon high streets, retail parks and shopping centres.
Analysis by Springboard shows that as of 5pm on Monday, footfall was 38.8% higher than a week ago.
All shops in England are now allowed to open, but with strict safety measures, with stores having to ensure social distancing rules are adhered to and plastic screens are in place at tills.
HMV owner Doug Putman told the BBC’s Today programme that he expected a rush in the first week of trading but warned that retailers will come under pressure if shoppers do not return in the same numbers as before the lockdown, saying that if operating costs remain the same but sales dip 20% “it makes a lot of companies unviable.”
The British Retail Consortium has warned that reopening stores is unlikely to deliver an immediate boost for the sector and is urging ministers to help stimulate demand with a short-term cut in VAT or a temporary income tax reduction.
Meanwhile, Lisa Hooker of PwC says stores are unlikely to roll out big price cuts this week, but added: “If June trading does not make a big enough dent in stocks, we predict a rush of promotions and sales later in the summer.”
Unemployment
UK Unemployment Rate unexpectedly remained unchanged in the 3 months to April, but workers on company payrolls fell 612,000 between March and May while job vacancies fell to a record low. The unemployment rate remained unchanged at 3.9% between February and April, new data from the Office for National Statistics showed, surprising economists who had predicted the figure to increase as lock-down measures hammered the economy.
Coronavirus tax refund scam warning
Scam emails and texts purporting to be from HMRC are on the rise, with recipients encouraged to click on links saying that they are due a tax refund due to coronavirus. Police have advised people to be wary of the messages, while HMRC has reiterated that it will never send emails or text messages in regard to rebates or refunds.
Buyer boost
Figures from estate agent Knight Frank show that buyers have jumped back into the property market after activity resumed following the coronavirus shutdown.
The firm had its best ever week outside London, with offers accepted outside of the capital the highest on record and more than 50% above the five-year average.
Knight Frank notes that the average discount to the asking price for sales outside London is 1.2% since the market reopened, compared with 5.5% in London.
Meanwhile, Rightmove figures show that the average asking price for newly-listed properties in early June was 1.9% – or £6,266 – higher than the £337,884 recorded in March.
Elsewhere, analysis shows that 40,000 sales have been agreed since the market reopened a month ago, marking a 36% dip on the same period last year
400k capital jobs at risk
GLA Economics, the Mayor of London’s official forecaster, has warned that the coronavirus crisis could see more than 400,000 jobs lost in the capital this year.
The forecast predicts a 7% decline in the workforce as the number of jobs falls from 6.07m in 2019 to 5.65m. HMRC figures show that 1.07m jobs have been furloughed in London, the most for any region of the UK.
Temporary VAT cut considered by Treasury
Rishi Sunak is considering a temporary VAT reduction in a bid to increase consumer demand and confidence. The Chancellor is reportedly concerned that a combination of low consumer confidence and social distancing rules will dampen the effect of shop re-openings this week.
Opinion: Tax troubles make UBI unworkable
Tim Worstall, a senior fellow of the Adam Smith Institute, looks at calls for a universal basic income (UBI), considering what the system might mean for tax rates as “the idea is that we tax everyone to pay for all that basic income”.
Writing in the Times, he cites a report from the Fraser of Allender Institute, IPPR Scotland and Manchester Metropolitan University which shows that for the basic income to be 60% of median income, the top rate of tax would have to be 85% and the base rate 58%.
This, he argues, “simply wouldn’t work.” “By pushing tax rates so high to raise the necessary revenue we would be gaining less, not more, tax to pay out in UBI”, Mr Worstall adds.
Extension to social investment tax relief sought
Over 30 chief executives from firms including the Big Issue Invest, Big Society Capital and Impact Investing Institute have written to Financial Secretary to the Treasury Jesse Norman seeking an extension to the use of the social investment tax relief, which is currently due to end in 2021.
The letter urges the Government to “encourage investment into businesses and organisations working in some of our toughest markets and communities,” and called for an extension to the relief until 2023.
It stated: “We also cannot afford to take away a tool for social enterprises and communities to raise investment following the impact of COVID-19.”
Auditors increase opposition to FRC reforms
Sky News reports that Deloitte, EY, KPMG and PwC are intensifying their opposition to regulators’ plans to restructure their British operations, warning that the reforms could threaten future investment in their audit businesses.
It is understood that the accountants are in the process of responding to a Financial Reporting Council (FRC) letter sent last month which informed them that they will be forced to pay partners according to the profits their divisions make on a rolling five-year basis.
The profit-sharing edict forms a central plank of the operational separation blueprint that the FRC has drawn up following more than two years of pressure on the audit firms triggered by a string of prominent failures.
However, according to Sky News, at least two of the Big Four were writing to the watchdog to highlight continuing concerns about the plans. They are said to believe that the absence of cross-subsidy would remove a key incentive to invest in improving audit quality by spending substantial sums on new technology. A spokesman for the FRC said it continued to “move forward” with a project to “achieve operational separation of audit practices”.
AIM marks 25th anniversary
With London’s Alternative Investment Market (AIM) marking its 25th anniversary this week, research published by Grant Thornton shows that AIM companies contributed £33.5bn Gross Value Added(GVA) to UK GDP in 2019 and directly supported more than 430,000 jobs.
Philip Secrett, head of public company advisory at Grant Thornton, comments: “AIM’s long-term economic role has been highlighted during the pandemic, and the market will have a critical role to play in supporting economic recovery and future growth.”
Dixons Carphone delays results
Currys and PC World owner Dixons Carphone has delayed the release of its latest financial results, with results covering the full year ending May 2 to be published on July 15, rather than the previously planned date of June 25. The firm said the move follows Financial Conduct Authority guidance on corporate reporting timetables in light of the coronavirus crisis and will allow auditors Deloitte sufficient time to prepare and review the results, “given the practical challenges of remote working and restricted access to stores.”
Oak Furnitureland snapped up
Hedge fund Davidson Kempner Capital Management has bought retailer Oak Furnitureland through a pre-pack administration. Deloitte handled the insolvency process.
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 financial crises, this one 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.
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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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections