Business news 28 November 2022
James Salmon, Operations Director.
FSB backs Labour’s late payment plan. 1m people have lost jobs because their employers shut down as late payments hit £20bn. Fraud fear over burner firms. And more business news.
FSB backs Labour’s late payment plan
The Federation of Small Businesses (FSB) says proposed Labour plans to help small businesses get their unpaid invoices paid on time are “exactly” what the UK’s 5.5m SMEs need. Under the proposals, big businesses would be required to provide details on their company’s payment practices in their annual report, with audit committees required to issue a report on late payments.
Tina McKenzie, policy and advocacy chair of the FSB, said: “Many small businesses are being held back by a culture that says it’s acceptable to pay them late.” She added: “The laws are currently slack and supplier interest must be represented at the top of the chain, or this could have a chilling impact on the economy.”
However, CPA doesn’t share the FSB’s optimism. There are already plenty of mechanisms through the annual accounts and the Prompt Payment Code for naming and shaming late payers. These don’t take into account the long credit terms these customers impose on their small business suppliers. Instead, CPA has long advocated that the only way to improve payment terms is to stop the late payment of suppliers from being the cheapest way to boost cash flow. CPA advocates the limiting by legislation of credit terms to 30 days from either the supply of goods or services or the invoice date, which ever is greater. We also advocate the increase in penalties on late payers. The current levels of compensation were set decades ago and have been eaten into by inflation. They need increasing to represent the very real costs late payments impose on small business.
If holding onto payment, long after goods or services have been supplied was more expensive to companies than other forms of finance, you would soon find financial directors changing the payment policies of their companies to avoid those costs.
1m people have lost jobs because their employers shut down
Labour analysis of official figures shows that more than 1m workers have lost their jobs in the past year because the business they were working for closed down.
According to Office for National Statistics data, 450,000 “business deaths” were recorded in the year to September. This marks the highest level recorded for a 12-month period.
While many of these firms will have ceased trading or employing any staff long ago, they had a total of 1,011,206 employees between them at the time of their closure – an increase of 11% on the previous year.
Labour has warned that smaller firms are being driven out of business by the failure of larger clients to pay them on time, with data pointing toward £20bn of late payments outstanding at any given moment.
Shadow Business Secretary Jonathan Reynolds said a Labour Government “will work in partnership in businesses to stop disastrous late payments,” adding that it would also replace business rates with a fairer system.
Fraud fear over burner firms
The Times’ Ali Hussain and Matilda Davies look at “the scourge” of burner companies – fake firms that are set up using the addresses and sometimes the names of innocent people. These often sit dormant for months or even years until criminals use them to fraudulently claim government loans and to pull off banking scams. Campaigners have warned that this is made possible because Companies House makes almost no checks on who is actually running businesses.
They say that those looking to con people into handing over money for fake investments or savings accounts – or for services that do not exist – can easily start a website and say it is part of a legitimate company. So far this year, 728,000 firms have been set up on Companies House — an average of 2,200 every day. It is estimated that 15% of all company registrations may be fake.
Analysis by Transparency International shows that 14% of all 146,948 Limited Liability Partnerships incorporated between April 2001 and October 2021 showed money laundering red flags.
Nick Van Benschoten, director of international illicit finance at UK Finance, said: “It’s clear that the ease by which a company can be set up is open to abuse and is a significant enabler of high-volume fraud by organised criminals.” It is noted that some of the £4.9bn lost to pandemic support scheme loans were paid to owners of firms which never traded but existed only on the official register.
Shoppers turn to debt-fuelled consumption
Reports from Britain’s banks and building societies indicate consumers were spending more on credit than usual to pay for Black Friday bargains. Shoppers are turning to credit cards and buy now, pay later schemes as household budgets come under pressure from the cost of living crisis. Barclays said it had seen a 4.9% increase in credit card transactions compared to Black Friday 2019, while Nationwide said a third of purchases this year were made using a credit card or a “buy now, pay later” company. Last year this figure was 8%. Klarna, the buy now, pay later firm, said purchases had soared by 30% this week. Despite the increase in consumer spending this year, bricks-and-mortar retail saw footfall down 5% on last year and 15% on pre-pandemic levels, according to data company Springboard.
Black Friday purchases up 10% on last year
Figures from Nationwide show Black Friday purchases were up 10% compared with last year as Britons made the most of lower prices amid the cost of living crisis. The rate of spending has risen more than a third since pre-pandemic times, data show. “This year’s Black Friday was our busiest day on record as people started their Christmas shopping earlier and spent the evening watching the World Cup,” Nationwide’s director of payment strategy, Mark Nalder, explained. “While cost of living pressures will have inevitably meant some people have cut back on luxury purchases, others will have used the day to buy essential items at a lower cost.”
Energy firms warned over direct debits
The Government has warned energy firms over hiking direct debit payments for customers attempting to cut usage. Business Secretary Grant Shapps has written to suppliers asking them to ensure bills reflect what homes are actually using. He has told firms to ensure they do not over-estimate charges, voicing concern over reports that bills were rising despite people cutting back on energy use. In the letter to the chief executives of UK energy companies, he said: “I am interested to understand how you intend to ensure that your direct debit system does not over-estimate charging.” Ofgem, which has been asked to look at making billing “more responsive,” says it has already called on firms to address the issue. Dhara Vyas, Energy UK’s director of advocacy, said that while many households will be trying to cut down where they can, “it’s only when a reduction is shown in consistently lower meter readings, for example, that suppliers can reflect it.”
Treasury looks to save billions by raising pension age earlier
The Telegraph on Saturday reported that ministers are considering bringing forward the time when the pension age rises to 68. The pension age was 65 for men and women in 2018. It is gradually rising to 67 by 2028. Under the current law, it will hit 68 by 2046, though existing government policy is that it should happen by 2039. However, ministers are considering bringing that forward to the mid-2030s or even as early as 2033. Pension consultancy LCP estimates that the Treasury could save about £10bn if the state pension age rises to 68 a year earlier than planned.
However, Sir Steve Webb, a partner at LCP, says, “an aggressive schedule of pension age rises is simply not justifiable based on the latest evidence on life expectancies.” He adds: “Before pension ages are hiked again, much more needs to be done to tackle the vast inequalities across the country in health outcomes and in life expectancies.”
Treasury vetoes pay deal for train staff
The Government is said to have vetoed proposals from train operators to offer railway workers a pay increase and thus avoid Christmas strike action. The Treasury is understood to have blocked plans for an 8% and 9% pay rise over two years last week, despite indicating previously that Whitehall would support a deal.
Pay rises matching inflation are unaffordable, says minister
Transport Secretary Mark Harper says public sector pay rises in line with soaring inflation are “unaffordable,” insisting that there “simply isn’t the money” to meet the demands of workers preparing to take industrial action. Mr Harper told ITV News that public sector workers have been offered pay rises that the Government thinks are affordable, while telling Sky News’ Sophy Ridge on Sunday: “We want to try and give all the workers in the public sector who work very hard decent pay rises, but they can’t be inflation busting.”
Why should you become a CPA member!
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 some time to come.
CPA eases cash from tardy debtors – Efficiently, Effectively, Economically and Ethically. And we provide credit information so you can monitor and assess your key customers.
Unlike other credit management companies, we offer our members a fixed annual subscription regardless of how high the debt value maybe!
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.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
Do you have a commercial late payer that is causing you grief? Use CPA’s no-win, no-fee, commercial debt recovery service!
If you have a particular business customer who is late paying and causing you sleepless nights, why not offer it to CPA for purchase on recourse?
CPA’s collection department will then pursue the debt. We will be liable for any costs incurred and then when we have recovered the debt, we will pay you the net principle debt recovered less our percentage.
Once you have enjoyed that success then you can consider the more cost effective membership which includes our Overdue Account Recovery service and Status/Credit reports as well as a range of other complimentary services.
Just call 020 8846 0000 and ask for Godfrey Nelson or Cris Shirley (business hours) or email debtpurchase@cpa.co.uk today.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.
Get compensated for previous late payments
Have you been paid late by business customers in the last six years?
Maybe you no longer work with them. Under legislation, you are entitled to compensation you for those late payments you have suffered.
You put up with the PAIN – now claim the GAIN!
Claim late payment compensation (LPC) from former business customers who paid you late in the last six years!
CPA (LPC) Recoveries is using our bespoke software and decades of experience to do just that for our clients
Check our compensation calculator to see how much your business could be owed!
Discover NOW the potential value of late payment compensation hidden in your sales ledger!
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.