Business news 3 November 2022
James Salmon, Operations Director.
Late payments hit small business. Bank targets businesses over unpaid Covid loans. Office costs up 13% in a year. Food inflation hits record high. PM prepares tax grab from energy firms. interest rates. And more business news.
Late payments hit small business
Research by the Federation of Small Businesses (FSB) shows that more than half of SMEs across the UK face cash flow issues due to late payments of invoices.
In the last 18 months to two years, almost half a million businesses have gone bust due to this issue, while one in 10 Scottish firms earlier this year warned that late payments were threatening the viability of their business.
Restructuring trade body R3 recently reported that in Scotland alone, 1.7m invoices were overdue in the third quarter of this year. While the Government’s voluntary Prompt Payment Code recommends paying SMEs within 30 days, Small Business Commissioner Liz Barclay has argued that the code does not go far enough and that the payment culture needs to change.
CPA has long been saying the same and has championed the use of late payment legislation which allows for compensation and interest to be claimed from late payers. However, the levels of compensation were set decades ago and need to be amended for inflation and index linked.
Bank targets businesses over unpaid Covid loans
Barclays, which was the biggest lender under the Government’s Bounce Back Loan Scheme (BBLS), is trying to shut down almost 100 companies over unpaid loans. The bank has sought winding up petitions against 97 businesses since September. These are legal orders that creditors can use to shut down businesses that owe money. Analysis by PwC shows that more than 2,400 petitions have passed through courts since the beginning of the year – with this around three times the total for all of 2021.
David Kelly, head of insolvency in PwC’s restructuring and forensics team, said: “Petitions by creditors to wind up companies are a key bellwether of creditor sentiment.” He added: “Many creditors are having to take a harder line as everyone is understandably in preservation mode.” The Department for Business, Energy and Industrial Strategy has estimated that around 11% of all loans issued under the BBLS were made to ineligible borrowers. Of the £10bn in BBLS loans issued by Barclays, the bank estimates that at least £250m worth were fraudulent.
Office costs up 13% in a year
Office occupation costs are at an all-time high, according to the latest Total Office Cost Survey by real estate consultants Lambert Smith Hampton (LSH). The average cost of renting and maintaining an office is now 13% higher than it was a year ago, with the increase driven largely by the cost of heating, lighting and powering buildings.
Energy bills are now almost three times higher than a year ago and in many older, less energy-efficient office blocks, energy costs outstrip business rates bills. LSH said this has resulted in a “flight to quality,” with rents for newly built offices up 6% over the past 12 months.
The report says that while changes in rent have typically been the most influential factor in determining overall occupancy costs, they are now “almost insignificant” given the jump in other outlay.
Food inflation hits record high
Figures from the British Retail Consortium / Nielsen Shop Price Index show that food inflation hit a record 11.6% in October. This marks an increase on the 10.6% year-on-year rise recorded in September and exceeds the three-month average of 9.7%. The increase in food inflation has been driven by the price of fresh food, which is 13.3% more expensive than last October – with this up from 12.1% in September. Non-food inflation at supermarkets has risen to 4.1%, compared to 3.3% in September. Overall, shops increased prices by 6.6% in the 12 months to October – the highest level since records began in 2005.
Cost concerns prompt clients to cancel cover
Almost a fifth of financial advisers have been contacted by clients about reducing or cancelling their protection policies amid the cost-of-living crisis. A poll on the current economic climate saw 18% of advisers say they had been contacted by clients wishing to reduce their cover. The survey also saw 62% say they were actively reviewing their clients’ outgoings, while only 30% said they had a strategy to convince existing clients not to cancel or reduce their premiums. When asked to identify the key concern among clients, the cost-of-living came out on top with 58%, followed by rising mortgage interest rates at 23%.
PM prepares tax grab from energy firms
The Prime Minister and Chancellor are planning to extend windfall taxes on oil and gas companies as they look to fill a £50bn hole in public finances. Rishi Sunak and Jeremy Hunt plan to increase revenues from the windfall tax by increasing the rate from 25% to 30%, extending the levy until 2028 and expanding the scheme to cover electricity generators. It has been estimated that expanding and extending the levy would increase revenues from the existing tax, which is due to end by 2026, by 50% to £40bn.
Officials have faced calls to increase the windfall tax on the back of energy firms posting huge Q3 profits, with BP’s profits doubling to £7.1bn and Shell’s more than doubling to £8.2bn. Mr Hunt is set to submit key proposals to the Office for Budget Responsibility this week, giving the official forecaster time to make its independent assessment of the plans ahead of his Autumn Statement. The Chancellor is understood to be targeting a level mix of tax rises and spending cuts as he attempts to balance the nation’s books.
NHS calls for £7bn budget boost
NHS bosses say the health service needs an extra £7bn this year, with this the equivalent of an extra 5% of its £152bn a year budget. Finance chiefs have warned that a number of services may need to scaled back unless the Treasury provides extra money, with the health service hit by inflation, pay rises and Covid-related costs. While Prime Minister Rishi Sunak and Chancellor Jeremy Hunt are looking at ways to address a £50bn black hole in public finances, the PM yesterday told a Cabinet meeting that, while other departments should expect cuts, the Government will “always support” the NHS and it will “continue to be prioritised.”
Interest rates & markets
As we await the anticipated interest rate rise today by the BOE, the US FED raised rates by 0.75% last night to a range of 3.75%-4%, the highest level since January 2008. Fed chair Jerome Powell also spooked markets by saying inflation was still too high and indicated that the central bank has more rate hiking ahead. Powell said “incoming data since our last meeting suggests that the ultimate level of interest rates will be higher than previously expected.” The dollar rose, with the pound only buying $1.245 this morning and the S&P 500 dropped -2.50% while the NASDAQ dropped 3.36%.
The Bank of England on Thursday is expected to deliver its biggest interest-rate increase in 33 years when it also raises rates by a predicted 0.75%.
BT
BT said profits fell as it feels the sting of inflation and ongoing strike action. In its half year results, BT said reported profit before tax was £0.8bn for the half year, down 18%. Revenue climbed a humble 1% to £10.4bn, due to growth in Consumer and Openreach partially offset by legacy declines in large corporate customers in Enterprise, lower equipment sales and the impact of selling BT Sport to Discovery earlier this year.
Sainsburys
Sainsbury’s has revealed a dip in profits as the supermarket group swallowed some of the impact of rising costs. The company, which also owns Argos, said underlying pre-tax profit declined by 8% to £340 million over the half-year to September 17, compared with the same period last year. It came as the retailer also revealed that sales moved higher over the period as it was buoyed by a stronger second quarter.
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?
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
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.