Business news 1 February 2023
James Salmon, Operations Director.
How late payments really effect small business owners. Company insolvencies hit 13-year high. Consumer credit down in December. Bank could be near the end of rate hiking cycle. And more business news.
How late payments really effect small business owners
A survey by the debt collection industry has revealed the true effects of late payment on the UK’s local Small Business owners.
Rising late payments have dded to the woes caused by the energy crisis, inflation and worker shortages as we emerge from the pandemic.
The survey found that 79% of the Small Business owners said their mental health suffered as a result of Business late payment. And those businesses employing less than 5 employees said they are constantly worrying about not being paid at all.
41% said that late payment had caused them issues outside of work. These owners complained of stress from financial worries leading to insomnia, depression and adverse effects on their personal relationships because of late payments.
The depth of the problem was shown by 48% of the surveyed Small Business owners saying they are not sure whether their businesses will still be trading this time next year.
Company insolvencies hit 13-year high
Insolvency Service data shows that 22,109 company insolvencies were registered in England and Wales in 2022, with this 57% up on the 14,000 recorded in 2021 and the highest total since 2009.
Christina Fitzgerald, president of insolvency and restructuring trade body R3, said: “2022 was the year the insolvency dam burst. After two years of being suppressed by Government support programmes, corporate insolvency numbers hit a 13-year high last year.” She added: “After nearly three years of trading through a pandemic, and in the face of the end of government support, rising costs and a cost-of-living crisis, many directors simply ran out of road this year and chose to close their businesses before the choice was taken away from them.”
Catherine Atkinson, director in PwC’s restructuring and forensics practice, said “creditors appear nervous”, noting that 2022 saw a fourfold increase in winding up petitions.
Looking ahead, John Cullen, business recovery partner at Menzies, said: “It seems likely that corporate insolvencies will remain high and increase further in Q1 2023 and beyond.”
Consumer credit down in December
Bank of England data shows that consumers borrowed an additional £500m in consumer credit in December, with this a steep drop on the £1.5bn borrowed in November and below the previous six-month average of £1.2bn. Net credit card repayments came in at £0.5bn, while £1bn of borrowing came through other forms of consumer credit – such as personal loans and car finance.
Households deposited an additional £3.9bn with banks and building societies in December, compared with a rise of £5.7bn in November. Business borrowing rose to £1.9bn in December compared with £1.5bn in November.
RSM UK economist Thomas Pugh said the fall in borrowing “suggests that after a period of resilience, consumer spending may have weakened at the end of the year”, adding: “This raises the chances that the economy contracted in the fourth quarter and fell into recession.”
Karim Haji, head of financial services at KPMG, said: “The reality for everyone is that real disposable incomes have dropped, and after two years of high volatility in expenditure, rates and inflation, we can expect to see personal balance sheets going through a period of consolidation.”
Bank could be near the end of rate hiking cycle
The Bank of England is expected to increase the base rate by 0.5% tomorrow, taking it from 3.5% to 4%. Some analysts believe that following the expected rise, the end of the bank’s hiking cycle could be in sight, forecasting that the Bank will deliver a final 25 basis point increase next month that takes the interest rate to 4.25%.
Looking ahead to the Monetary Policy Committee’s (MPC) decision, analysts at UBS said they expect that after a 50bps hike on Thursday, the Bank will add a 25bps rate rise on March 23. They said: “We view the risk to our call as balanced and dependent on incoming inflation and labour market data and inflation expectations,” adding that they will be “closely watching for signals” that the MPC is getting closer to the end of the hiking cycle.
ING analysts said that while the MPC’s December meeting “appeared to open the door to a potential downshift to a 25bp move in February … if we get a 50bps hike on Thursday then it’s likely to be the last.”
Strikes
With almost half a million workers on strike today – Millions are said to have been forced to work from home as strikes closed schools, and froze the rail network with coordinated strike action set to one of the most severe in years. Meanwhile strikes in the fourth quarter of 2022 said to have caused a 0.2% drag on the economy.
Brexit
Britain marked three years since leaving the European Union as the only major industrial nation forecast by the IMF to be in recession in 2023, doing worse than sanctions hit Russia, as Bloomberg Economics calculated that Brexit is costing the UK economy £100 billion a year and it is 4% smaller than it would have been had we stayed in due to the fall in business investment, shortages in workers and frictions in trade.
Adani
The Indian conglomerate has lost a third of its value in the war of words between it and hedge fund Hindenburg Research who has accused it of fraud.
Tesco buys Paperchase brand
Tesco has bought the brand and intellectual property of stationery chain Paperchase but has not acquired its 106 shops in the UK and Ireland. Paperchase’s administrators, Begbies Traynor, said Paperchase’s stores would remain open for now and it would issue an update in due course. Paperchase recently put itself up for sale, with PwC running a sales process, and had said that a number of buyers were interested in the business. However, it yesterday appointed administrators after receiving “no viable offers” for the company or its assets.
Chancellor urged to bring forward tax cuts
Conservative MPs have urged the Chancellor to cut taxes in the Budget, with Jeremy Hunt under pressure following an International Monetary Fund (IMF) forecast which said Britain will be the only major industrialised country to see its economy shrink this year. Backbenchers have called on Mr Hunt to bring forward tax cuts to help boost incomes. At a meeting of the 1922 Committee of Conservative backbenchers, Sir Edward Leigh warned Mr Hunt that he cannot wait until next year to offer tax cuts which could stimulate the economy. He suggested that with voters feeling depressed, “we’ve got to give them hope … you’ve got to give them something.” “You’ve got to say, ‘We made the right decisions in September, therefore that’s given me room in this Budget to cut taxes’,” he added. MP John Redwood said that to prove the IMF forecast wrong, the Treasury “needs to go for growth and cut some taxes.” Meanwhile, former Business Secretary Jacob Rees-Mogg has also suggested cuts are required, telling Sky News that the “highest tax burden in 70 years” is “not good for economic growth.” Elsewhere, former Conservative leader Sir Iain Duncan Smith commented: “I have said for some time we need growth or our debts will get bigger. Targeted tax reductions will help achieve that.” Despite calls for lower taxes, the Chancellor insisted: “The best tax cut right now is a cut in inflation.”
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.