The IMF predicts a deeper decline – Covid-19 business news 25 June 2020.
25 June 2020.
James Salmon, Operations Director.
The IMF downgrades its predictions for the global economy, we look at news on Covid-19 and markets, the threat of another financial crisis, the danger of price hikes, zombie companies, small business investment, tax 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
The presidents of the Royal Colleges of Surgeons, Nursing, Physicians, and GPs sent an open letter in the British Medical Journal calling for an urgent review to determine whether the UK is properly prepared for the “real risk” of a second wave of covid-19. Businesses are urging Chancellor of the Exchequer Rishi Sunak to ramp-up public spending in order to shore up the economy.
The USA reported 38,115 new cases of covid-19, a new daily record. Several Southern states including Florida and Texas, that left lockdown early, reported new daily highs. Texas Governor Greg Abbott said the state is seeing a “massive outbreak” and that the hospital system was under serious strain. Experts modeling the virus now expect over 180,000 deaths in the U.S. by October, with a second surge expected at the end of August and into September.
The number of deaths in South America confirmed as from Covid-19 surpassed 100,000. Infection rates in the region have risen sharply since the middle of May. Brazil has been the epicenter with more than 50,000 confirmed covid deaths. On Tuesday a judge ordered president, Jair Bolsonaro, to wear a mask in public.
Markets.
Stock Markets sold off yesterday on concerns of a resurgence of the virus in the US and threats of a trade war between the US and Europe. The FTSE 100 was down 3.11% with the Euro Stoxx 50 down the exact same percentage. in the US the S&P500 fell 2.59% and the Nasdaq sold off by 2.19% While in Asia the sell off was less pronounced with the Nikkei down 1.22% and the Hang Seng down 0.5% and the chinese CSI300 actually up 0.42%.
The United States Trade Representative issued a draft list of 30 types of European goods that could be hit with additional tariffs in response to subsidies the European Union has given to Airbus. The threatened tariffs have raised fears that global economic growth could be dampened by an US-EU trade war.
Sterling is at 1.245 USD and 1.107 Euros.Gold is $1765 and Brent $39.80
IMF
The International Monetary Fund said the decline in global growth due to the pandemic would be far worse than it first predicted.
The IMF cut its forecast for the world economy, projecting a deeper recession and slower recovery than it expected just two months ago. Global GDP will shrink 4.9% this year according to their projections compared with the 3% fall projected in April.
This is in value terms a $12 trillion slump!
The IMF said it would take two years for world output to return to pre-2019 levels.
The UK economy was on course to shrink by 10.2% in 2020, the fund said.
For 2021, it forecast growth of 5.4%, down from the previously predicted 5.8%. U.S. GDP may drop 8% in 2020, compared with April’s 5.9% forecast. The euro area may shrink 10.2%.
The fund also expects a much deeper drop in consumer spending than it had previously estimated.
COVID debt defaults could trigger another financial crisis – Lord King
Mervyn King, a former governor of the Bank of England, has warned that a new financial crisis could be triggered by the weight of state and corporate debt.
Lord King told the Telegraph’s Planet Normal podcast: “I think the immediate concern facing us over the next few years is that the very high levels of debt we entered the COVID-19 crisis with are going to be exacerbated by even higher levels of debt. So I think we can expect to see many defaults over the next few years as businesses struggle and many governments in various parts of the world will also struggle to repay their debts. So defaults could be the trigger of another financial crisis down the road.”
He went on to say that banks in Europe and China were fragile: “I think banks are going to realise they will experience significant losses, not so much on the loans they’ve made since the COVID-19 crisis became evident, but on pre-existing loans that looked very safe when they were made, but now look a lot more dubious.”
Business urged to keep price hikes minimal
Nadhim Zahawi has warned retailers and the hospitality industry that ministers will be keeping a close eye on prices as the economy reopens and that action will be taken if businesses are found to be price gouging.
“If pubs or salons put their prices up consumers will vote with their feet. We have given over £10bn in grants to small businesses and £28bn in the bounce back loan scheme, and so there has been a lot of support from the taxpayer,” the business minister said.
“There is also the VAT deferral, the business rates holiday, so the taxpayer has given them enormous support.”
However, trade bodies have pointed out that costs for coronavirus mitigation and extra staff will have to covered – small prices may be inevitable just to remain viable.
The Telegraph’s Madeline Grant writes that for a “nation of boozers” it is our “patriotic duty to go to the pub”; which she describes as one of Britain’s “last great institutions at a time of overwhelming systemic failure.”
Reasons to fear the march of the zombie companies
The FT reports today on a rise in the number of firms unable to cover their debt-servicing costs from profits in the long term, which may obstruct post-coronavirus economic recovery.
UK small business investment soars to £8.5bn
The British Business Bank’s annual Small Business Equity Tracker report shows investment in UK tech businesses rose by 27% last year to hit £4bn – the highest level for eight years.
The study found that 52% of deals took place outside of London, with the south west of England, Scotland and Northern Ireland showing a strong increase in 2019, rising by 34%, 26% and 24%, respectively.
Meanwhile, equity investments into UK “growth stage” companies rose by 39% to £5.3bn. Keith Morgan, chief executive of the British Business Bank, said: “The UK’s small business equity finance market saw a record year in 2019 with investment amounts soaring to £8.5bn. This was a clear sign of investor confidence in UK smaller businesses located across the country and their potential for growth as well as the strong fundamentals of the UK economy as a place to start and grow a business.”
Matt Adey, director of economics at the British Bu siness Bank told City AM that there had been “a fair bit of activity in April and there were still deals being done even in May,” despite the coronavirus lockdown.
Pandemic could bring about inheritance tax changes
The Treasury’s bid to offset the costs of its furlough scheme, which now stand at £14bn per month, is expected to result in changes to inheritance tax rules, with Caroline Pringle, Associate of private client law firm Murray Beith Murray, stating that major reform of the inheritance tax system has been predicted for some time.
Both the Office of Tax Simplification and the All-Party Parliamentary Group for Inheritance and Intergenerational Fairness had recommended published reports setting out their recommendations for Inheritance Tax reform even before the coronavirus pandemic struck.
Ms Pringle commented: “While wider reform is probably coming, at the moment the government will be looking at how to easily raise revenue and that could mean reducing or restricting the reliefs currently available.”
Hospitality sector calls for VAT cut
As hotels, pubs and restaurants gear up to return to work on July 4th, bosses are calling for a VAT cut to help businesses recover.
Andy Wood, chief executive of brewer and pub chain Adnams, called for VAT on hospitality purchases to be cut to 5% so companies are better able to cope. He also said firms in the industry should be allowed to put staff on taxpayer-funded furlough until spring 2021.
Letter: A deal on corporate tax rules is still possible
NRS president Bill Parks says the OECD should proceed in developing an international corporate tax system without the US. Countries observing the benefits of sales-based apportionment will soon join in.
Landlords fear quarter rent day will yield little
High street chains such as William Hill, JD Sports, Primark and Boots were among the companies that failed withheld their quarterly rental payments yesterday, the Times reports, as Colliers International predicts that as few as 10% of property owners’ shop tenants will pay their rent in full this quarter.
The news comes as shopping centres operator Intu warned that it may have to close malls if it cannot come to an agreement with lenders, telling investors yesterday that it has appointed accountancy firm KPMG as administrator as part of a “contingency plan”.
Unite warns of income hit from rising unemployment
Unite the Union members are being affected by large-scale redundancies across the UK economy, with the union facing “significant financial strain” as a result.
Duncan Smith: Unlocking the economy must be top priority
Sir Iain Duncan Smith voices his concern in the Telegraph that messaging around the danger of coronavirus has been too threatening, citing Cambridge Professor David Spiegelhalter who says Britons under the age of 50 are more likely to die from an accident or injury, under-40s are more likely to die in a car accident and under-25s are more likely to die from flu or pneumonia, than from coronavirus.
Duncan Smith asserts that the government must now “sell the reality that unlocking is vital and that the balance of risk and reward clearly favours the resumption of economic and social activity.”
Former Wirecard boss released from custody as firm negotiates with lenders
Markus Braun, former boss of German payments firm Wirecard, has been released from custody after paying his bail of €5m.
He was arrested yesterday on suspicion of falsifying the accounts at the firm, which is now holding emergency talks with lenders.
Auditor EY had earlier refused to sign off on Wirecard’s 2019 accounts due to a missing sum of €1.9bn. Meanwhile, authorities in the Philippines are looking for former COO Jan Marsalek as part of a broader probe into the payments group.
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