Business news 3 August 2022

James Salmon, Operations Director.

Insolvency news –  Company failures up 81%. Thousands of small firms go bust with bounce back loan debt. Small businesses pull back on hiring plans. Experts weigh rate rise options.  And more business news.

Insolvency news –  Company failures up 81%

Insolvency Service data shows that the number of companies going bust increased by 81% year-on-year in the three months to June.

On a monthly basis, company failures were up 13% on Q1. The 5,629 insolvencies recorded in Q2 marks the biggest total in almost 13 years. The highest level since the financial crash.

The total included 4,908 creditors’ voluntary liquidations, with this the highest quarterly figure since records began in 1960. The Insolvency Service also recorded 368 compulsory liquidations, 320 administrations and 32 CVAs.

Samantha Keen, UK turnaround and restructuring strategy partner at EY-Parthenon, said: “The record levels of creditors’ voluntary liquidations are the first tranche of insolvencies we expected to see involving companies that have struggled to stay viable without the lifeline of government support provided over the pandemic.”

John Cullen at Menzies said the rise in insolvencies was “an indication of the severe cash flow pressures that many businesses were facing, which are exacerbated by soaring energy and fuel costs.”

Christina Fitzgerald, president of insolvency and restructuring trade body R3, said: “Many directors are opting to close their businesses as they lack confidence in their trading prospects in the current climate

Thousands of small firms go bust with bounce back loan debt

A BBC investigation has found that more than 16,000 businesses which took out bounce back loans have gone bust without paying the money back.

Analysis suggests the cost to the taxpayer of these insolvencies could be as much as £500m.

As part of Government efforts to support businesses through the pandemic, 1.5m loans worth a combined £47bn were handed out, with the money supposed to be paid back within 10 years. With the scheme accelerated to protect the economy, checks on borrowers were limited and firms applying for loans up to £50,000 depending on their turnover were allowed to “self-certify” the figures.

Sir David Green QC, chairman of the Fraud Advisory Panel, said the checks banks were required to do on bounce back loan applicants were “hopelessly inadequate.” He added: “You wouldn’t send an army into battle without assessing the risks. And just the same in this situation, the risks, which were obvious, should have been assessed and addressed.”

Ministers have tasked several agencies with investigating Covid loans and getting back the money, including the Insolvency Service and National Investigation Service.

Small businesses pull back on hiring plans

Analysis by the Association of Chartered Certified Accountants (ACCA) shows that just 12% of SMEs are currently looking to recruit new staff, marking a steep decline on the 37% recorded in March.

It was also found that 75% of UK SMEs are currently seeking to grow their businesses, compared to 94% in April. While 20% said their growth had slowed over the past two months, 7% predict they will run out of cash completely over the next 12 months.

ACCA head Glenn Collins said: “Businesses are having to deal with soaring costs as well as supply chain bottlenecks which are having a huge impact on how they conduct business in a timely manner – as well as their ability to make capital investments.” He added: “Our businesses need some certainty in these uncertain times.”

Experts weigh rate rise options

With the Bank of England set to make its latest decision on interest rates this week, City AM asks a selection of financial services professionals what they believe the Bank should do.

Adrian Murphy, CEO of wealth manager Murphy Wealth, says the Bank has “the unenviable task of taming inflation through interest rate rises, without choking off the fragile growth in the UK economy.” He says it “isn’t a bad thing” that the UK is likely to follow the US in taking action against rampant inflation.

Imran Hussain, director at Harmony Financial Services, says rate-setters have little option but to increase rates but warns that “rate rises in themselves won’t be enough in the battle against rampaging inflation so there will have to be government intervention, too.”

Lewis Shaw, founder of Shaw Financial Services, suggests that if the Bank does not increase rates, “there’s a risk politicians will scapegoat them for further adding to the current inflationary problems.”

Samuel Mather-Holgate of Mather and Murray Financial says raising rates “isn’t going to combat inflation that we import in terms of the global oil price or commodity prices,” while Rob Peters, director of Simple Fast Mortgage, argues: “While the Bank of England’s remit is clear, namely to ‘control inflation’, they simply don’t have the right tools for the job.”

Business bodies to seal post-Brexit mutual recognition deals

The Government is set to pay business bodies to broker deals in foreign countries to allow City workers to more easily work overseas post-Brexit. The new Recognition Arrangements Grants Programme will see payments of up to £75,000 given to professional bodies and regulators to pursue mutual recognition of qualifications deals.

With the UK losing its wide-ranging access to EU financial markets post-Brexit, ministers want bodies like the ICAEW to further overseas access for UK firms by brokering mutual recognition of professional qualification deals with their equivalent overseas bodies. Business minister Lord Callanan said the scheme will support regulators to build on a “well-deserved reputation for excellence by agreeing recognition of professional qualifications with countries across the EU.”

House prices up 11% year-on-year in July

Property prices in the UK have hit an average of £271,209, according to data from Nationwide. Prices were up 11% year-on-year in July, exceeding the 10.7% annual growth recorded in June. The increase means values have risen for 12 consecutive months. Month-on-month, prices climbed 0.1% last month, with this the smallest level of growth in a year. First-timer buyer mortgage completions remain around 5% above pre-pandemic levels, according to the Nationwide, despite the rising affordability pressures caused by the cost of living crisis.

Tory tribes argue over tax

Senior minister Jacob Rees-Mogg has described Conservative leadership candidate Rishi Sunak’s plans to cut income tax as a “fantasy.” Mr Sunak, the former Chancellor, has promised to cut the basic rate of income tax from 20p to 16p before the end of the next parliament. Mr Rees-Mogg told Sky News said: “If you’re going to talk about fairy-tale economics, I think suggesting there will be income tax cuts many, many years into the future is the finest fantasy.” He went on to suggest that Mr Sunak’s leadership rival Liz Truss has put forward a more realistic plan, with the Foreign Secretary saying she will immediately cut about £30bn in tax if elected Prime Minister. Meanwhile, former Cabinet minister Liam Fox has defended Mr Sunak’s approach to public finances, telling GB News: “You don’t borrow for tax cuts, you don’t max out on the country’s credit card today and leave it to the next generation, you make sure you’ve got the public finances sorted and then you give tax cuts,” adding that these “have to be earned, not given.”

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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.


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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.