SMEs begin Bounce Back loan repayments – business news 1 June 2021.
James Salmon, Operations Director.
SMEs begin Bounce Back loan repayments, OECD Forecast up, Brexit shrank UK services exports by £110bn, Recovery kicks in as economy is switched back on, Retailers face ‘tsunami of closures’ over unpaid rent and lots more business news
Regulation call as SMEs begin Bounce Back loan repayments
The first tranche of Bounce Back Loan Scheme repayments are due this week, with 1.5m small businesses set to repay £47bn.
While banks have vowed to treat customers fairly, campaigners have voiced concerns that pressure to recover taxpayer cash may put lenders in a difficult position. Noting that lending to businesses is unregulated in the UK, leaving borrowers unprotected by law or the Financial Conduct Authority, Kalyeena Makortoff in the Observer says the pandemic-related debt boom is driving calls to regulate the sector.
MPs on the All-Party Parliamentary Group on fair business banking are calling on ministers to introduce laws that would protect SME owners and give them leverage in a court or tribunal.
Small firms want support loans converted into employee shares
A report from the Federation of Small Businesses (FSB) and think-tank Ownership at Work suggests small firms that that took out state-backed loans amid the pandemic should be allowed to convert the loan into shares for employees and write off the debt.
Figures show that around 1.5m loans worth a combined £46.5bn were approved under the Bounce Back Loans Scheme, with the Office for Budget Responsibility warning that up to 40% of borrowers could default.
Martin McTague, the FSB’s national vice chairman, has warned that leaving banks to enforce collection of loans risks the destruction of a number of ultimately viable companies. He suggests that allowing struggling firms to swap debt for employee equity could “protect livelihoods, spur productivity and pave the way for a small business-led recovery”.
OECD Forecast up
The Organisation for Economic Co-operation and Development (OECD) has upgraded its forecast for UK growth, citing the success of the coronavirus vaccination programme.
The think-tank expects UK GDP will rise by 7.2% in 2021, the fastest growth since 1941, after a 9.8% contraction in 2020. In March, the OECD predicted that GDP would rise by 5.1% this year.
It also raised its forecast for global growth to 5.8%, having previously predicted growth of 4.2% in December.
The report says global growth will be led by the US, where GDP is forecast to reach 6.9% this year, before easing to 3.6% in 2022.
The OECD has warned that the UK could suffer more longer-term economic damage than other G7 nations, with the impact of Brexit adding to disruption brought about by the pandemic. It points to a potential fall in economic output and warns that “increased border costs following the exit from the EU single market will continue to weigh on foreign trade”.
Brexit shrank UK services exports by £110bn
Research from Aston University shows that Britain’s decision to leave the EU shrank UK services exports by more than £110bn over a four-year period, with exports down £113bn between 2016 to 2019 on what they would have been without the Brexit vote.
The researchers compared projections on how industries including IT, finance and business services would have grown if they had continued on their previous paths with how they had actually progressed since the 2016 referendum.
Jun Du, professor of economics at Aston Business School, said the analysis “raises serious concerns about the damage to the UK’s services trade position and the likely spillovers to the economy and jobs related to the services sectors”.
Recovery kicks in as economy is switched back on
David Smith in the Sunday Times considered the economic climate and budget deficit, saying that while some analysts have spoken of a “roaring twenties” as the recovery gathers strength, the reality is that there is “nothing more remarkable happening than an economy that was turned off being turned on again”.
He says a decline in the budget deficit is “a product of the economy firing up and returning to growth”. Mr Smith notes that compared to April 2020, tax receipts last month were “sharply” higher, with income and CGT revenues up by 31% and VAT up by nearly 9%.
Reflecting that some commentators have suggested the Chancellor may be able to cancel tax increases outlined in his Budget – a freeze on personal income tax allowances and thresholds in 2022 and a rise in corporation tax in 2023 – Mr Smith says “hold your horses”, arguing that public finances have been through “an enormous shock, from which they will take years to recover”.
Brewery boss: Extending lockdown will hamper the recovery
Jonathan Neame, chairman of brewery and pub company Shepherd Neame, has warned that delaying the easing of coronavirus restrictions in England beyond June 21 could hit the country’s economic recovery. Arguing that extending lockdown measures beyond that point “will really undermine consumer and business confidence”, he said a further week would leave a “marginal impact” but five additional weeks of uncertainty and data reviews “will put a real damper on the recovery”.
Retailers face ‘tsunami of closures’ over unpaid rent
The British Retail Consortium (BRC) has warned that the retail sector will endure a “tsunami of closures” if the Government does not extend a moratorium on debt enforcement rolled out amid the pandemic.
This comes after a poll found that two-thirds of retailers have been told by landlords they could face legal action once a ban on evictions and debt collection from commercial tenants is lifted.
The BRC survey saw 80% of retailers say they have been given less than a year to pay back rent arrears accrued during the pandemic. While rent debt for UK retailers currently stands at £2.9bn, the BRC expects the figure to climb. Helen Dickinson, chief executive of the BRC, says that many retailers “have taken a battering over the pandemic” and warned that the unpaid rents are a “ball and chain that hold back growth and investment and could result in a tsunami of closures”.
Shoppers still look local despite online offerings
Research from Deloitte shows that 46% of Scottish consumers are willing to pay more to shop at their local high street rather than online. While 30% of respondents said their online shopping experience was not good enough, 23% of those in Scotland said online services had not met their needs. It was shown that 63% of Scots are willing to pay more for local products and services, with 60% now more likely to spend money at independent or local businesses.
Scottish SMEs more concerned over Brexit impact
A new report suggests that SMEs north of the Border fear the impact of Brexit on their businesses more than the UK average. The study by Newable, a firm providing finance and workspace to SMEs, found that 57% of Scottish respondents to a survey cited Brexit as the biggest challenge faced alongside the continuing impact of the coronavirus pandemic.
Across the UK as a whole, 30% of firms cited Brexit as the key area of concern. It was also found that 70% of Scottish SMEs believe the economy will take over 24 months to recover from the pandemic. Across the UK, 65% of smaller firms think it will recover in less than 24 months. The report also looks at the impact of the pandemic on working practices, with 43% of Scottish SMEs saying they are prepared for hybrid working, compared to 66% nationally.
Mid-tier firms expect hybrid working when restrictions end
Research from BDO shows that medium-sized companies expect staff to spend half their time working from home after restrictions are lifted, with two fifths anticipating that staff will spend three or more days a week at home.
The survey of 500 mid-sized companies found that many are developing plans for new flexible working patterns. The poll also shows that less than half of mid-tier businesses think revenues will return to pre-pandemic levels in the next 12 months. BDO’s Ed Dwan said challenges still lie ahead but that the pandemic had demonstrated the “agility” of businesses.
Elsewhere, research by the Association of Practising Accountants has found that 15% of owner-managed companies are still in “survival mode”, with around one in ten expecting to make redundancies in the next three to six months.
Office return raises working wardrobe questions
Rebecca Myers in the Sunday Times looked at how a shift toward working from home amid the pandemic may influence people’s choice of attire as they return to the office. She notes that PwC has had a “dress for your day” policy for several years, “putting the power in workers’ hands”.
Well-being concern over WFH
British Chambers of Commerce (BCC) research suggests that while most firms were able to offer remote working during the pandemic, concerns over staff morale and mental wellbeing may prevent some making the change permanent.
The BCC poll saw 66% of businesses say they were offering remote working to employees, with almost three-quarters expecting to have at least one employee working remotely over the coming year and around half saying they expect more than half of their workforce to continue working from home.
The poll found that among firms in sectors like finance and law, around 80% could offer remote working, compared to 61% of manufacturers and 54% in hospitality and retail.
On what may prevent long term implementation of remote working, 55% of firms pointed to issues related to staff morale or mental health and wellbeing, while a third voiced concern over fairness to those whose roles cannot be performed remotely.
Enforcement in Wales
The Ministry of Justice have announced that from today, Wales will also now permit enforcement agents to enter residential properties to take control of goods. This follows the earlier news that the same was happening in England.
Oil
OPEC+ is meeting in Vienna today, where the oil producers are expected to agree an output increase in July. Markets are watching for any indication of production will be watched closely by inflation forecasters who see rising oil prices driven by rising demand as a major contributor
Ageism claims climb amid the pandemic
Age discrimination claims by older workers who have lost their jobs rose by 74% during the pandemic, with concern that the rate could climb further once the furlough scheme winds down.
Ministry of Justice data for employment tribunals show age discrimination claims reached 3,668 in 2020, up from 2,112 in 2019. In the last quarter of 2021 claims rose to 1,500, double the previous quarter’s 750.
Stuart Lewis, founder of Rest Less, comments: “Unemployment levels soared by 48% year-on-year and redundancies amongst the over-50s hit an all-time high in 2020. Additionally, with more than one million workers over the age of 50 still on furlough and business concerns around the potential for new virus variants to delay reopening, we fear a new wave of redundancies may be on the horizon.”
Patrick Thomson, a senior programme manager at the Centre for Ageing Better, said: “We know that age is often the last unspoken and accepted form of discrimination in the workplace. Our research with employers finds that while many said diversity and inclusion were important to them, few had strategies or approaches to make their workplaces age inclusive.”
Labour vows to outlaw redundancy for pregnant women
Labour says it would make it illegal to make women redundant during pregnancy and for six months after their return to work. The party has also urged ministers to review the country’s shared parental leave policy. Among other measures designed to protect and promote gender equality, Labour has called for the introduction of ethnicity pay gap reporting and says it would update equal pay laws to give women the right to know what their male colleagues earn. Shadow Women and Equalities Secretary Marsha de Cordova said urgent action is needed to prevent a “two-tier recovery” from the pandemic, adding: “Labour want to see data on the number of jobs created, the impact of the pandemic on the gender and ethnicity pay gaps, and an urgent review of the failing shared parental leave system”. A Government spokesperson said: “Pregnancy and maternity discrimination is unlawful and has no place in the workplace”, noting that ministers plan to extend existing redundancy protections to pregnant women and for six months after a mother has returned to work.
House prices surge by the seaside
The average price of a home on the coast has increased by £24,055 over the past 12 months. Analysis from Halifax found the average price of a home by the sea leapt 10% to £265,978. Salcombe in Devon was named Britain’s most expensive seaside town, with property prices around £950,325. St Mawes in Cornwall had the largest jump in average house prices of any seaside town, with prices up 48% to £501,638. Meanwhile Scotland dominates the list of least expensive resorts, with Millport on the Isle of Cumbrae in North Ayrshire offering the most affordable properties at a typical £74,148. Over the past 10 years the average house price by the coast jumped 36%, or £71,046, from an average of £194,932 in 2011.
Tech giants inflate stated tax payments
Six of the biggest US tech firms have been accused of inflating their stated tax payments by almost $100bn over the past decade. A report by the campaign group Fair Tax Foundation says Amazon, Facebook, Google, Netflix, Apple and Microsoft paid $96bn less in tax between 2011 and 2020 than the notional taxation figures carried in their annual financial reports. The report says the firms have paid $219bn in income tax over a decade, 3.6% of their total revenue of more than $6tn. The Fair Tax Foundation calculates that the firms handed over $149bn less to global tax authorities than would be expected if they had paid the headline rates where they operated. Foundation chief executive Paul Monaghan said the analysis provides “solid evidence that substantive tax avoidance is still embedded within many large multinationals and nothing less than a root and branch reform of international tax rules will remedy the situation”. He added that US President Joe Biden’s proposed 15% minimum corporation tax rate could help put an end to big companies “profit-shifting to tax havens”, adding that the mooted reform has “lit a fire” beneath international debate on taxation.
G7 to back minimum global corporate tax
With G7 finance ministers and central bankers set to meet in London this week, a draft communique shows that the group are set to vow to keep supporting their economies as they emerge from the pandemic and to reach an “ambitious” deal on a minimum global corporate tax in July.
Ferry firm fights to stay afloat
P&O Ferries, which has seen lockdowns drive down passenger numbers and reduced cross-Channel trade during the Brexit transition, says there is uncertainty over its future unless it gets fresh capital from its owner and can negotiate further concessions from its creditors. In a recent Companies House filing by a subsidiary, auditor KPMG said that there was “a material uncertainty that may cast doubt on the company’s ability to continue as a going concern”. It said the company had been forced to apply to its owner, DP World, for a bridging loan of £10m in March, having already borrowed £30m in November. It also has hired an advisory firm specialising in restructurings
Rebound drives up luxury car sales
The Telegraph says luxury car sales are climbing amid the economic rebound from the pandemic, with Felipe Munoz of market research firm Jato Dynamics saying a lack of access to dealers rather than a lack of cash slowed sales in 2020, with purchases “merely postponed”. Reflecting on the sector, Deloitte’s Guillaume Crunelle says: “The luxury market still has very specific rules and customers. Behaviour is much more linked to personal situations, how their wealth is developing, rather than market trends.”
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