Business news 6 July 2022
James Salmon, Operations Director.
Bank of England warns of an economic storm. Cautious consumers see services growth slow. Political storm hits Sterling . Firms warned of ‘perfect conditions’ for fraud. Directors banned over Covid loans. And more business news.
Bank of England warns of an economic storm
The Bank of England has issued a warning over the economic outlook, saying that it has “deteriorated materially” for both the UK and globally. The Bank’s latest Financial Stability Report urged banks to ramp up capital buffers but noted that lenders are well-placed to weather even a severe economic downturn and resilient to debt vulnerabilities. The report also said that while banks’ capital ratios are still strong, they are expected to decline slightly in the coming quarters. The Financial Policy Committee (FPC) warned commercial banks against making “excessive” cuts in lending to households and businesses because this would risk exacerbating an economic downturn. The FPC also confirmed that the Bank will double the counter-cyclical capital buffer rate to 2% in July next year, locking up approximately £22bn. The report also said it would begin its 2022 stress test of banks – delayed due to the war in Ukraine – in September, with the results likely to come in mid-2023. Meanwhile, Sir Jon Cunliffe, deputy governor at the Bank, has suggested that households could withstand borrowing costs as high as 5% without defaulting on their debts.
Cautious consumers see services growth slow
New order growth in the services industry slowed to a 16-month low in June, according to S&P Global/CIPS purchasing managers’ index. S&P Global attributed the slowdown to higher inflation and concerns about the economic outlook, saying these factors have led to “hesitancy in relation to new orders.” The report shows services business increased prices at the second quickest pace on record to protect margins from climbing transport and worker costs, while 68% of business said they witnessed a rise in their average cost burdens in June. The sector saw activity improve in June, with the PMI recording a rate of 54.3, up from the 53.4 reading seen in May. Any score above 50 shows growth in the sector. The composite PMI – spanning services and manufacturing firms – came in at 53.7, higher than May’s 53.1.
Political storm hits Sterling
PM Boris Johnson is facing accusations of a cover up after more details emerged on the appointment of Chris Pincher.
Nadhim Zahawi has been named Chancellor following the resignation of Rishi Sunak. Mr Sunak and Health Secretary Sajid Javid stood down last night, having questioned Boris Johnson’s leadership following questions about the Prime Minister’s role in appointing MP Chris Pincher, who is facing sexual misconduct allegations, as deputy chief whip earlier this year. In his resignation letter to Mr Johnson, Mr Sunak also highlighted differences of opinion over economic management between him and the PM. Elsewhere, Steve Barclay will be replacing Mr Javid, while Michelle Donelan will replace Mr Zahawi as Education Secretary. Both Sunak and Javid hinted that they did not consider the PM fit for leadership.
The US dollar has appreciated against major currencies rising strongly against sterling, euro and Yen as investors repatriate assets back to the USA. UK gilt yields fell sharply, the 10 year yield declining 12 basis points to 1.71%, whilst the 30 year yield fell to 2.47%.
Firms warned of ‘perfect conditions’ for fraud
The Chartered Institute of Internal Auditors says companies must do more to tackle the risk of fraud within their organisations by leaning on their internal audit teams. The trade body warned that the cost of living crisis is presenting criminals more opportunities and motivation to act, saying the economic pressure has created the “perfect conditions” for fraud to flourish, with the “temptation, motivation and opportunity for fraud” never greater.
Directors banned over Covid loans
Analysis of official data by law firm Pinsent Masons shows that more than a third of UK company directors disqualified in April and May had abused the Government’s coronavirus loan or job support schemes. The Insolvency Service banned 37 directors for fraudulent claims in the two month period, with these accounting for almost 35% of the directors struck off. In the year to the end of March, 140 directors were banned for abuse of Covid schemes, making up 17% of the total. The Government issued £79.3bn in support to businesses between March 2020 and the end of 2021. Fraudulent claims have cost at least £5bn, according to HMRC.
Employers could be sued for cutting remote workers’ salaries
Employers giving pay cuts to remote and hybrid workers could face discrimination lawsuits, employment lawyers have warned. The comments come after a survey from the Chartered Institute of Personnel Development (CIPD) showed 13% of UK employers are considering cutting pay or benefits for staff that work from home. Bettina Bender, a partner at Winckworth Sherwood, said paying remote and hybrid workers less “could raise potential discrimination issues” – particularly if the policy disadvantages women, who may choose to work from home due to childcaring responsibilities, or those with physical or mental disabilities. However, the law firm partner said employers may seek to argue that as those working from home are saving on travel costs, it is reasonable to pay them lower salaries.
Chancellor urged to scrap income tax threshold freeze
The Chancellor is being urged to scrap the freeze on the income tax threshold. Predecessor Rishi Sunak last year froze the basic rate income tax threshold at £12,570 until 2025/26, while the higher rate threshold is fixed at £50,270. Experts say that without a rethink on the freeze, the benefits of an increase in National Insurance thresholds rolled out today will be wiped out. HW Fisher tax partner Stevie Heafford said the NI move “will not solve the cost-of-living crisis, with the Bank of England predicting inflation could rise as high as 11%.” Meanwhile, Laura Suter, head of personal finance at AJ Bell, said the number of higher-rate taxpayers will jump by 44% due to the “destructive” income tax freeze. “The personal allowance would have hit £15,300 in 2026/27 if uprated in line with inflation. Due to the freeze, it will be just £12,800 instead,” she notes.
Experts flag misleading tax cut claims
Finance experts say taxpayers have been “misled” over how much they will save following the change to the National Insurance threshold. Analysis shows that the Treasury’s online tax tool does not include the first three months of the 1.25% rise in NI contributions which came into effect in April. Nimesh Shah, chief executive of Blick Rothenberg, says that while the Government measures everything in terms of income and spending on the basis of a financial year, with the savings calculator “it has decided to ignore that on this occasion, which makes the savings look greater than they are during the tax year.” He added that it is “disingenuous and misleading for the Government to claim the savings it is.” Danielle Boxall of the Taxpayer’s Alliance campaign group said: “It’s disappointing to see HMRC resort to this kind of sleight of hand.” The Prime Minister, who described increasing the threshold as “the single biggest tax cut in a decade”, claimed it will save 30m workers up to £330 a year. However, Christine Cairns, a tax advisor at PwC, said the most anyone will save will be £268 during the full tax year.
One in ten Britons have bought crypto assets
Up to one in ten adults in Britain have bought crypto assets, far exceeding previous estimates. Research commissioned by HMRC found that about 6.7m people own or have bought crypto assets. This is almost three times higher than estimates from the Financial Conduct Authority (FCA), which said that 2.3m people held crypto assets at the start of last year. The analysis shows that crypto investors in Britain are typically male, under the age of 45 and have crypto holdings worth £200. It was also found that 85% of crypto investors earn less than £50,000 a year and more than 50% of investors have holdings worth less than £1,000. Around 7% have put more than £5,000 into digital assets despite repeated warnings over potential losses from the FCA. The value of the cryptocurrency market has fallen by 60% since the start of the year amid a rapid fall in the price of leading cryptocurrencies.
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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.
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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
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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.
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Claim late payment compensation (LPC) from former business customers who paid you late in the last six years!
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.