650k UK firms in serious financial distress – business news 29 July 2021
James Salmon, Operations Director.
650k UK firms in serious financial distress; One in six SME owners will not take holiday this year, PM predicts steady economic recovery, despite ‘bumps on the road’; Pandemic hits football and more.
650k UK firms in serious financial distress
The number of businesses in serious financial distress has increased by a quarter over the past year to 650,000, according to Begbies Traynor.
If you are worried about the financial position of any of your customers or key suppliers contact CPA (020 8846 0000) . Our members have access to the best credit reports available. Find out if they are in serious financial distress. And if they owe you money, we can help you get paid before their serious financial distress becomes fatal.
The report says that while the easing of restrictions rolled out amid the pandemic has helped firms, “constant changes” to lockdown rules have left many struggling to survive.
The study also flags a rise in zombie businesses which have taken on unsustainable debt through coronavirus loan schemes which they cannot repay.
Julie Palmer, a partner at Begbies Traynor, commented: “Although the reopening of the retail and hospitality sector has given the economy a boost in Q2, the number of zombie businesses remains considerable, with many in a fragile state”.
She added that while the unlocking of the economy on July 19 “has given many businesses a sense of normality, history suggests that unmanageable levels of debts and subsequent overtrading will eventually take their toll on these businesses.”
Ric Traynor, executive chairman of Begbies Traynor, believes the number of businesses becoming insolvent is likely to increase in the latter months of this year and into 2022.
If you are suffering from a lack of funds and looking to save your business, talk to CPA (020 8846 0000), we have been helping small businesses realise an unknown asset on their books. If you sold on credit to other businesses then every time you were paid late, you are due compensation. CPA have the expertise to calculate and recover that compensation for you.
One in six SME owners will not take holiday this year
Research by iwoca shows that one in six small business owners don’t plan to take any holiday, while almost a quarter of sole traders plan to keep working without leave for the next twelve months. Despite travel restrictions easing, over half of the SME owners who do plan on taking a holiday are intending to stay in the UK. The study also saw almost three quarters of small business bosses say that taking holiday is important for their mental health.
PM predicts steady economic recovery, despite ‘bumps on the road’
While Boris Johnson believes the UK will see a “steady” economic recovery post-pandemic, he has warned there will be “bumps on the road”.
The Prime Minister told LBC that the vaccination programme has enabled England to “open up in the way that we said we would” as restrictions have eased, with this enabling the country to “make the economic progress that we are”.
He added: “I think the rest of this year… there will still be bumps on the road, but I think you’ll see a story of steady economic recovery and perhaps quite fast economic recovery as well.”
With the International Monetary Fund this week saying it expected the UK’s economic output to grow by 7% this year, having previously pointed to growth of 5.3%, Mr Johnson commented: “It’s clear that… if we’re sensible and we continue to take a cautious approach that we can see a very, very strong recovery.”
Pandemic hits European football market
Analysis by Deloitte shows that the European football market shrunk by 13% in the first few months of the pandemic, with total revenue down £3.4bn to £22.1bn in 2019/20. Clubs took a financial hit as matches were postponed and, when they eventually went ahead, were played in empty grounds, with this meaning ticket revenue was lost.
Between Europe’s five biggest football leagues – the top divisions in England, Germany, Spain, Italy and France –revenue fell 11% to £13.2bn, Deloitte’s Annual Review of Football Finance shows. In the Premier League, aggregate revenue dropped by 13% from a record £5.2bn in 2018/19 to £4.5bn, with this the first ever year-on-year decrease.
Reflecting on the findings, Deloitte’s Dan Jones said: “It will be a number of years before the full financial impact of the Covid-19 pandemic on European football is known but we’re now beginning to see the scale”. Despite the hit from the coronavirus crisis, Deloitte forecasts a “strong recovery” of football revenues in coming seasons, with Mr Jones saying the sport has “shown great resilience”.
HMRC football tax probe scores £464m
HMRC has clawed back almost £464m from players, clubs and agents after a six-year probe into tax in football. In the past year alone, the tax office recovered £55.6m following investigations into 93 footballers over potential tax avoidance breaches, with it also shown that 23 agents and nine clubs are under investigation.
Last year 246 players were under investigation, but the number of cases has fallen as HMRC focuses on helping businesses over the pandemic. The Revenue has collected £463.9m “by tackling non-compliance in the football industry” since 2015, with most of this stemming from settlements over allegedly unpaid taxes.
The investigation looked at money linked to image rights, with players often setting up companies to run their image rights deals. These companies are taxed at the 19% corporation tax rate rather than the 45% high-earner income tax rate.
Pandemic hits self-employed women harder than men
Self-employed women lost around 20% of their income during the course of the pandemic, while self-employed men saw their income take an 11% hit, a survey by insurance provider Superscript has found. The poll of 2,015 sole-traders, freelancers and micro-business owners reveals that, for those whose income was affected by the pandemic, a drop in demand for products and services was the primary reason.
As well as showing a gender gap in the financial impact of the coronavirus crisis, the research found that women saw a steeper drop in mental wellbeing linked to lost income, with 53% reporting a decline compared to 38% of men. Cameron Shearer, co-founder of SME insurer Superscript, said: “Self-employed women have been disproportionately impacted, which illustrates that society still has a way to go to encourage female entrepreneurship”.
Lloyds
Lloyds Banking Group swung to a profit in the first half of the year and unveiled an interim dividend as better-than-expected macroeconomic performance led to a net impairment credit. Pre-tax profit rose to £3.9 billion from £602 million year-on-year as net income rose 2% to £7.6 billion
AstraZeneca
AstraZeneca has announced a jump of 23 per cent to $15.5bn total revenue for the first half of 2021, as the vaccine rollout continues. The pharmaceutical company reported an increase in its product sales by almost a quarter to $15.3bn. Globally, new medicines represented over half of its total revenue, AstraZeneca said.
Diageo
Diageo reported a rise in annual profit as sales growth was boosted by growth in its off-trade business that offset pandemic-led weakness in offset on-trade. For the year ended 30 June 2021, pre-tax profit rose to £3.7 from £2.0 billion as sales increased 8.3% to £12.7 billion.
Sage
Sage Group has seen an increase in its recurring revenues of 5% to £1,220m in the nine months ended 30 June. Total group revenue increased by 2.6% to £1,329m in the first nine months of the year, and by 5.0% to £440m in the third quarter.
BT
BT Group reported a decline in first-quarter profit as weaker performance in its enterprise and global business segments weighed on revenue. For the three months to 30 June 2021, pre-tax profit fell 4% to £536 million as revenue slipped 3% to £5,071 million.
House price growth slows as tax break winds down
Property prices have continued to rise but at a slower pace since the stamp duty holiday started to taper, according to Nationwide. Annual house price growth slowed to 10.5% in July, having hit a 17-year high of 13.4% in June. Month-on-month, prices dipped 0.5% in July, having climbed 0.7% the month before.
The report shows that the average UK house price hit £244,229 in July, down from the £245,432 recorded in June. Analysis shows that house prices increased by an average of 1.6% a month over the April to June period. This is more than six times the average monthly gain recorded in the five years before the pandemic.
Nationwide’s chief economist, Robert Gardner, said: “The modest fall back in July was unsurprising given the significant gains recorded in recent months.” He added that the tapering of stamp duty relief is “likely to have taken some of the heat out of the market” but noted that “underlying demand is likely to remain solid in the near term”.
Reflecting on the report, Martin Beck, senior economic adviser at EY Item Club, said: “The odds of a significant correction in house prices anytime soon looks small”.
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