Business news 2 February 2022
James Salmon, Operations Director.
CCJ increase prompts insolvency concerns. Two in three report cost-of-living squeeze. Households borrowing more and saving less. Manufacturing output growth climbs. And more business news.
CCJ increase prompts insolvency concerns
Analysis from Begbies Traynor shows that there has an 83% increase in county court judgments in the final quarter of 2021. The CCJ increase has prompted insolvency concerns. This rise, the firm warns, prompts concern as credit ratings agencies and insolvency practitioners see such judgements as an early sign of future insolvencies as they show that creditors are using courts to recover debts.
Begbies Traynor said there had been 16,282 county court judgments served between October and December, compared with 8,888 in the same period in 2020, and 13,704 in the pre-pandemic Q4 2019. Julie Palmer, a partner at Begbies Traynor, said 589,168 businesses in the UK were now showing signs of distress. She also noted that while HMRC would normally be one of the largest issuers of winding-up petitions for non-payment of tax, “at the moment their attitude seems to be that if businesses are at least keeping a line of communication open they will roll it forward by offering time-to-pay arrangements.”
Two in three report cost-of-living squeeze
Two thirds of Britons saw their cost of living rise last month, according to an Office for National Statistics (ONS) poll of nearly 4,500 people. Of the 66% experiencing a higher cost of living, 32% said they were cutting back their domestic fuel use. Of those who said their cost of living had gone up, 79% said their gas or electricity bills were higher.
The ONS said higher energy costs are disproportionately hitting lower income households, with the poorest 10% spending 7% of their disposable income on gas and electricity, compared with 2% for the richest 10% of households. Domestic fuel prices are expected to rise by 50% when a review of regulated tariffs takes effect in April.
Martin Young, an energy industry analyst at Investec, said the new limit was likely to be set at £1,924 based on wholesale energy prices – a total that is 51% above the current level. He added that the price cap could rise even further in October, estimating that it could reach £2,450.
Households borrowing more and saving less, says BoE
Bank of England data shows that households are borrowing more and saving less, with the figures suggesting that people are dipping into extra savings amassed during the pandemic as inflation drives up costs.
The Bank’s Money and Credit report shows that consumer credit – which includes borrowing on credit cards, personal loans and overdrafts – increased by 1.4% year-on-year in December, marking an increase on the 0.8% climb recorded in November. It was also found that households deposited £3.2bn into banks, building societies and NS&I accounts in December – far lower than the pre-pandemic average, with typical deposits of £5.5bn a month recoded in the year to February 2020.
RSM economist Thomas Pugh said the figures suggest consumers are “borrowing more and saving less as they try to maintain their lifestyles in the face of surging inflation.” He adds that as retail sales volumes “slumped” in December, “it seems unlikely that the £0.8bn increase in consumer credit in December was due to consumers buying more goods.”
Karim Haji, head of financial services at KPMG, comments: “From a household finances perspective, the personal loan interest rate is the measure to watch this year. Typically, unsecured loans are the ones consumers default on first and a rising rate would be a sign that banks are worried about the gloomier consumer outlook.”
Energy Bills
According to reports, the government is set to announce a plan to ease energy bills by up to £200 per household in need. The Treasury is reportedly putting the finishing touches to a £ 5 to 6 billion loan package for energy firms, enabling them to reduce bills for the those in need. The money however will have to be repaid in 3 to 5 years when wholesale prices have hopefully fallen.
Supermarket bills could climb £180
Annual shopping bills are set to rise by around £180 on average as inflation pushes up the cost of groceries. Grocery price inflation over the last four weeks stands at 3.8%, with this a 0.3 percentage point rise from December. Over a 12-month period, the 3.8% rise in prices could add an extra £180 to the average annual grocery bill.
Manufacturing output growth climbs
The IHS Markit/CIPS manufacturing purchasing managers’ index (PMI) shows UK factory output grew at its fastest pace in six months in January. Production output climbed for the third straight month to its highest since July 2021. The PMI reading, where a figure above 50 represents expansion, stood at 57.3 in January, down from 57.9 in December. Despite the dip, the sector remained in growth territory for the 12th consecutive month.
Martin Beck, chief economic adviser to the EY Item Club, said easing supply delays and capacity pressures in the manufacturing sector should continue throughout 2022. He added that some manufacturers “may have over ordered during the pandemic to guard against shortages which could now turn into a glut of inventories, putting downward pressure on prices.”
Leveling up
The government launched it’s long-awaited, election promised plan to “level up” neglected parts of the country. The strategy will look to reduce regional inequality by upgrading infrastructure and redistributing political power so decisions are made closer to those affected. It will take until 2030 to complete and involve all government departments. Labour said the plan lacked new money and fresh thinking.
Google
Alphabet (Google’s parent) reported 4th quarter sales of $$75 billion that smashed estimates (up 32% on last year) and shares soared. The company also announced a 20-1 stock split.
Vodafone
Vodafone said its Q3 revenue grew 4.3%, putting it on track to meets its annual earnings guidance. Revenue for the three months through December increased to €11.68 billion, up from €11.20 billion year-on-year. Organic services revenue rose 2.7%.
Severn Trent
Severn Trent reiterated its guidance, saying there had been no changes to its business performance or outlook since since its interim results announcement in November. The company said a ‘strong’ operational performance was evident across all areas of its business.
Economists in NI increase warning
Economists have voiced concern over plans to increase National Insurance in April, warning of the impact on households already being hit by soaring costs. Tom Clougherty from the Centre for Policy Studies told the Treasury Select Committee that it was “extremely perverse to raise taxes on ordinary earners in the middle of a cost of living crisis”, while the Resolution Foundation’s Torsten Bell said the Government should raise income tax instead of NI. He warned: “I think it’s going to be a pretty tough year and the whole country is going to feel squeezed in 2022 and lower income households are going to struggle most with that.”
10.2m people filed self-assessment by deadline
HMRC says more than 10.2m customers filed their 2020/21 tax returns by the 31 January deadline. Of these, over 630,000 customers filed on deadline day. The peak hour for filing ahead of the midnight cut-off was between 4pm and 5pm, with 52,475 people completing their self-assessment in the period. It was also found that 20,947 customers cut it fine, completing their tax return between 11pm and 11:59pm. The remaining 2.3m customers expected to file by January 31 now have until 28 February to submit their late 2020/21 tax return and avoid a late filing penalty. Myrtle Lloyd, HMRC’s director general for customer services, commented: “We’re waiving penalties this year, to give those who missed the deadline an extra month. And customers can set up a monthly payment plan online if they’re worried about paying their tax bill.”
Housing market sees strongest start to a year since 2005
Figures from Nationwide show house price growth hit 11.2% in January, with this marking the strongest opening month to a year since 2005. The year-on-year pace of growth was faster than the 10.4% seen in December and the strongest since June. Prices rose by 0.8% month-on-month, marking the sixth consecutive increase as the typical value hit £255,556. The total number of property transactions was the highest since 2007 and around 25% higher than pre-pandemic levels recorded in 2019. Nationwide’s chief economist Robert Gardner said housing demand had “remained robust” but noted: “While the outlook remains uncertain, it is likely that the housing market will slow this year.” Martin Beck, chief economic adviser to the EY Item Club, said: “A robust start to the year for house price growth probably won’t prove a taste of things to come.” He added: “Notably, the stamp duty holiday, which supported housing demand and prices last year, is now in the past. To the extent the tax holiday brought forward purchases, its after-effects may drag on housing market activity in the near term.”
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