Business news 1 August 2022
James Salmon, Operations Director.
Half of small firms hit by late payment. UK businesses expect zero growth in the next quarter. Cost-of-living crisis leaves workers exhausted. British workers fall behind in office returns. Consumer credit jumps in June. And more business news.
Half of small firms hit by late payment
Federation of Small Businesses (FSB) research shows that between April and June, half of the 1,300 small business owners and sole traders polled reported being paid late, while one in five said the issue was getting worse.
Craig Beaumont, chief of external affairs at the FSB, said: “There must be a mix of positive and negative actions, carrot and the stick, to make a real difference to the UK’s poor payment culture. Otherwise we will continue as we are, with half of small businesses not getting paid and many saying the situation is deteriorating.”
Phil Hall, head of public policy at the Association of Accounting Technicians, believes the Government should legislate for all companies to pay at least 95% of their suppliers within 30 days. Liz Barclay, the Small Business Commissioner, says she is determined to speed up payments for small suppliers, adding: “If we get a complaint, investigate and find that publishing a report is appropriate, we will do so.”
If you have late payments talk to us about how we can help. 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.
UK businesses expect zero growth in the next quarter – CBI
British businesses do not expect any growth over the next three months, according to the Confederation of British Industry (CBI). While CBI members reported above-average growth in the three months to the end of July – slightly faster than in the three months to June – they expect this to decline in the months ahead. Manufacturers expect current slow growth to persist, while consumer services and retail businesses see a fall in sales, and business services expect growth to slow. The CBI said its monthly output balance, based on surveys of manufacturers, services companies and retailers, rose to +8 for the three months to July from +5 for the three months to June. July’s expected balance for the next three months was zero, up from -3 in June. CBI economist Alpesh Paleja said: “As firms and consumers continue to be buffeted by rising prices, private-sector activity has slowed to a near standstill.”
Cost-of-living crisis leaves workers exhausted
With the cost of living crisis putting pressure on household finances, analysis suggests that people are increasingly concerned about their debts and are working harder than ever to earn additional income. A survey for Totaljobs earlier this year found that three in 10 UK workers were taking on extra shifts, with 76% concerned about the rising cost of living. Despite being employed, 37% said their earnings did not offer them a good quality of life. It was also found that 78% of respondents were suffering burnout symptoms, with six in 10 feeling tired or drained, while more than a third said they felt overwhelmed or had a cynical, negative outlook. Meanwhile, a poll by recruitment firm Indeed Flex found that half of the 2,000 people it questioned were either already doing temporary work or were planning to as a direct result of the surging cost of living. While 11% were planning to take on a few more shifts, 8% were intend to do a lot more shifts.
Firms struggling to hire and retain staff
A poll from BDO shows that firms are struggling to hire and retain staff, with one in five mid-sized businesses saying recruitment and retention problems are the biggest threat they face. Almost half of firms say they are offering new benefits to staff, such as childcare support, free meals or shopping vouchers. More than four in 10 are providing one-off bonuses as prices soar ahead of wages. More than half are raising pay by between 4% and 8%, while more than a quarter are boosting pay by 9% or more. BDO found that some businesses have been forced to pause hiring and growth plans, with 21% reducing headcount and a fifth freezing all new investment. It was also found that a quarter are taking on more debt. Kaley Crossthwaite of BDO commented: “With warnings that inflation could reach 11% or higher by the end of the year and the competition for talent, businesses are going the extra mile to offer real support for employees grappling with the cost of living crisis.”
British workers fall behind in office returns
Fewer British workers have returned to the office than European peers, with figures showing that of Europe’s biggest economies, the UK has fewer employees traveling to work than Spain, France, Italy and Germany. Google mobility data shows that commuter numbers in the UK are still 35% below pre-pandemic levels. In Italy, there is only a 19% decline in people traveling to work. Germany followed with a 22% drop in commuters, ahead of Spain (24%), and France (27%). Further afield, commuting in the US is 29% down on pre-pandemic levels, while in Australia the number of people travelling to work is down just 7%. Jane Parry, associate professor in work and employment at the University of Southampton, said: “The UK has relatively lengthy commuting patterns, around 46 minutes a day – the longest in Europe according to a recent survey.” She added: “The geographies of many UK cities, served by poorly-ventilated public transport, also might have caused a lag in employers compelling people to return to the office.”
SMEs weigh the need for subscription services
SMEs are having to consider which subscriptions for services such as accounting, inventory and staff management to keep amid the cost of living crisis. Analysis by Barclaycard Payments shows that 49% of small and medium-sized firms in the UK currently use some sort of subscription service that helps them to run their business, spending an average of £183 per month. However, almost half are reviewing what they are receiving, with the report showing that 38% are actively looking to decrease the number they use, with reducing costs the most common reason. Harshna Cayley, Barclaycard Payments’ online head, said: “The battle for subscribers is likely to get even tougher in the coming months as many businesses look to cut costs, and become more selective about what they pay for going forward.”
FSB: Small firms facing rising insurance premiums
Analysis by the Federation of Small Businesses (FSB) has found that two-thirds of small firms have seen their insurance premiums rise in the last year. Of the businesses whose premium costs had risen, 52% said that they went up by 11% or more. FSB national chair Martin McTague said: “Rising cover prices leave firms caught between a rock and a hard place, forced to pass on higher costs to customers, or to cut back on investment and expansion – or even to risk opting for a lower level of cover, which may leave them painfully exposed if the worst should happen.” The FSB says the Financial Conduct Authority should be required to intervene if there are businesses that are unable to obtain insurance. It also believes that the FCA should carry out a market study of professional indemnity insurance given recent price increases.
Consumer credit jumps in June
Bank of England figures show that people borrowed an extra £1.8bn in June, up from £900m in May. The data shows that consumer credit growth accelerated at the fastest rate in three years last month. Households placed an extra £1bn on their credit cards, with another £800m on car dealership finance, personal loans and other consumer credit. The annual growth rate for all consumer credit increased to 6.5% in June, the highest rate since May 2019, while credit card borrowing surged 12.5%, the highest rate since November 2005. Martin Beck, chief economic adviser to the EY Item Club, said the rise in credit card balances indicates that borrowers are increasingly unable to clear their debts at the end of the month. He added: “What’s more, the squeeze on household finances is likely to intensify, particularly if the latest pickup in energy futures prices is sustained and inflation rises even further.” Karim Haji, UK head of financial services at KPMG, commented: “Major UK banks have this week reported no huge deterioration in credit quality but they are mindful of the need to support the most vulnerable customers through what will be a hugely challenging second half of the year.”
Eurozone inflation hits record high
Inflation across the Eurozone has hit a record high, with consumer prices climbing 8.9% in July. Annual inflation across the 19 countries using the euro had risen to 8.6% in June. Amid concerns over the impact of inflation, the European Central Bank recently increased interest rates for the first time in 11 years in an effort to bring down prices. Bert Colijn, senior eurozone economist for ING bank, described the data as “another ugly inflation reading,” adding that there was “no imminent sign of relief.” While inflation continues to climb, the euro-area economy managed to expand by 0.7% in Q2.
Bank of England expected to hike rates
City economists expect the Bank of England to increase interest rates 50 basis points this week, marking the Monetary Policy Committee’s (MPC) biggest rise in rates since the Bank was made independent 25 years ago. An increase in rates this week would also mark the first time the MPC has upped rates at six consecutive meetings. This comes with inflation hitting 9.4% and speculation that the Bank could hike its forecast to nearly 12%. Sanjay Raja, senior economist at Deutsche Bank, believes “lingering price pressures” are likely to push the Bank’s inflation projections up further over the near and medium term. Paul Dales, chief UK economist at Capital Economics, said that higher inflation could mean 50 basis point rate hikes at the MPC’s September and/or November meetings are possible.
Rate rises set to bring an end to soaring house prices
Larry Elliott in the Guardian says interest rate rises designed to tackle soaring inflation are set to bring an era of “ever-rising” house prices to an end. He says that while prices across major economies are dropping, Britain appears to be bucking the trend, with data from Halifax showing house prices are rising at an annual rate of 13%. However, he says “the picture is changing” and points to Office for National Statistics data on housing affordability based on the ratio of property prices to average earnings. Mr Elliott says: “There comes a point where housing simply becomes too expensive for potential buyers, but a prolonged period of ultra-low interest rates means it has taken time to arrive at this reality checkpoint.” Central banks, he says, “have made the unaffordable affordable by ensuring monthly mortgage repayments remain low.”
Small businesses sceptical of cutting carbon footprint
A poll of 1,000 businesses by the British Business Bank shows that 40% of Britain’s 5.3m micro-businesses — those with up to nine employees — do not believe that reducing their own emissions will have an impact on targets for a net zero economy. While two-thirds have never sought information on how to reduce their carbon footprint, half want information to help them to assess whether reducing their carbon footprint would make financial sense. The research also reveals that 78% do not fully understand the term ‘net zero’ and 72% do not fully understand the term ‘carbon-neutral’.
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 charge our members a fixed annual subscription irrespective of how high the debt value is!
It takes less than 17 minutes to see how you would benefit, do you have the time now?
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
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.