Business news 7 July 2023
James Salmon, Operations Director.
Annual inspections show continued improvement at largest audit firms. Households face years of food price pain . UK housing activity contracts. And more business news that we thought would interest our members.
Annual inspections show continued improvement at largest audit firms
When looking at a credit report, how much faith can you have in the audited published accounts?
The Financial Reporting Council (FRC) has published its annual inspection and supervision results of the largest audit firms, revealing further improvement. Overall, 77% of audits inspected were deemed good or required limited improvement – a 10% increase compared to the 67% recorded in 2020. The UK’s largest audit firms are: Deloitte, EY, Grant Thornton, KPMG, PwC, Mazars and BDO. Five of the largest firms had no audits requiring significant improvements and the overall number of such audits has reduced from 7% in 2021/22 to 3% of audits inspected this year.
The FRC’s deputy Chief Executive, Sarah Rapson said: “It is encouraging to see the ongoing and consistent improvement in audit quality at the largest audit firms. It is also encouraging to see progress at both Mazars and BDO. It is, however, disappointing that there are still significant areas of their work that need to be addressed and the FRC will continue its increased level of supervision, requiring them to take further action to raise the quality of their audits in certain areas. Improving audit quality is at the heart of our purpose to promote integrity and choice in the audit market, which plays a vital role in ensuring confidence in the UK economy.”
When looking at a credit report check whether the accounts were audited or unaudited. If they were audited it can add an extra layer of trust.
Households face years of food price pain
Food prices will continue to rise for another two years, according to the OECD. Prices have started to come down in wholesale markets, but are not set to return to their pre-Covid level in real terms until 2025 at the earliest. Meanwhile, a survey by the Bank of England found CFOs at UK companies expect to increase prices by 5.3% over the next year, down just 0.1% on a poll for the three months to May. Finance chiefs also expect workers’ wages to grow by 5.3% in the year to come, while actual wage growth increased to 7.1% in June, from 6.7% in May.
Worlds largest companies make $1 trillion in windfall profits
The 722 biggest companies in the world collectively made more than $1 trillion a year or £780 billion in windfall profits on the back of soaring energy prices and rising interest rates, according to research and analysis by charities Oxfam and ActionAid pf Forbes data.
The companies made $1.08tn this way in 2021 and $1.09tn last year. That’s collectively 89% higher than the previous four-year average covering 2017-2020.
UK housing activity contracts
The S&P Global/CIPS UK construction purchasing managers’ index fell to 48.9 in June, from 51.6 the previous month. Tim Moore, economics director at S&P Global Market Intelligence, said “weaker housing market conditions in the wake of higher borrowing costs acted as a major constraint on UK construction output in June.” Matthew Pointon, senior property economist at Capital Economics, said the drop in housebuilding suggests that housebuilders anticipated “a severe pull back in demand due to higher mortgage rates.”
Ideal World shopping channel suspends trading
Peterborough-based TV shopping channel Ideal World has suspended broadcasting and will make the “majority” of its staff redundant after hiring insolvency experts. Administrators Kroll Advisory UK said it would fulfil existing customer orders where possible. Michael Lennon, managing director of restructuring at Kroll, said: “Over the last few years, the Direct Response TV sector globally has suffered a decline in viewer and customer numbers as consumer spending habits changed. Whilst Ideal World TV had brought in a significant number of new brands and retail partners to the channel over the last year, overall trading was not strong enough for the business to continue in its present format.”
Shell CEO warns cutting production ‘dangerous’
The boss of Shell has said the company could move its headquarters and listing to the US as the UK lacks stability on energy policy and taxation. Wael Sawan explained that while this was not a priority in the next three years, the move could not be ruled out. He also argued that cutting the world’s oil and gas production would be dangerous and irresponsible as it would lead to a worsening of the cost of living crisis by limiting global energy supplies and pushing up bills. His claims elicited a furious response from climate campaigners. But Sawan pointed out that last year’s record high global gas market prices meant poorer countries, such as Pakistan and Bangladesh, were unable to afford liquefied natural gas shipments, which were instead diverted to northern Europe. “They took away LNG from those countries, and children had to work and study [by] the light of candles,” he said. “If we’re going to have a transition it needs to be a just transition that doesn’t just work for one part of the world.”
Fit notes
The government are looking to get some of the 8.7 million inactive adults aged 16 to 64 back to work by reforming the fit note system which includes 2.6 million who are long term sick. A government spokesperson said: “We are committed to working with the professional medical bodies to implement changes to improve the fit note and support better health and work conversations.”
Health care professionals have the option of declaring an individual as either “not fit for work” or “may be fit for work,” with adjustments that could allow a staggered or supported return to employment. However, the concern is that fit notes are too binary with a recommendation that someone may be fit for work made in just 6% of cases.
Once someone is signed off as sick, they are likely to stay there for the long term. Reform would look to encourage people to either stay in work with support or move back into work as soon as possible, signposting specific health care support and advice on how to do so.
Sainsburys
Sainsbury Isn’t a ‘Rip-Off Retailer,’ Says Chair amid prices row
WFH
Bank of England orders staff to work two days a week in offices
Thames Water
The UK Government Believes Thames Water Can Avoid State Takeover
Inflation & interest rates
Money markets are fully pricing an expected rise to a 6.5% interest rate by February and attribute an one-in-three chance of an even higher 6.75% peak. That would be the highest rate since 1998 and compares with the 5% peak predicted just a couple of months ago.
Meanwhile the BOE’s monthly decision maker panel survey shows UK businesses expect inflation to still be 3.7% in 3 years, almost double the 2% target. They also predicted 5.7% inflation persisting in a years time
Regulation
Chancellor of the Exchequer Jeremy Hunt is apparently planning to roll back a piece of EUlegislation that forced financial firms to separate the cost of investment research from trading expenses, in part of his efforts to boost the attractiveness of the UK’s financial services sector. The move was a key recommendation of the review into rules around investment research, and Hunt is reportedly going to announce the plan in his Mansion House speech on Monday. The Chancellor is also due to reveal a pledge by insurers to invest billions of pounds into startups and infrastructure projects.
Tube Strikes
The RMT union has announced a week of action on the London Underground from 23rd July to the 28th. The action is the latest in long-running dispute with Transport for London “over jobs, cuts, and attacks on pensions and working conditions,” a statement from the union said. “This week of action will shut down the London Underground and show just how important the work of our members is,” said Mick Lynch, general secretary of the RMT.
House Prices
UK house prices fell at their fastest annual pace since 2011 according to Halifax. The average cost of a home declined 2.6% in June from a year earlier to £285,932. Prices fell 0.1% last month alone, the third consecutive decline.
Twitter v Threads
Twitter’s Elon Musk said “competition is fine, cheating is not”. Twitter threatened legal action against Meta, accusing the firm of stealing “trade secrets” by hiring its former employees to work on Threads. Meta responded that it was simply untrue that any former twitter employees were on the Threads engineering team. On Thursday, Meta said it had drawn 30m sign-ups in the first day following its launch. Twitter has 300m users.
US jobs
US Private Payrolls jumped in June, with job growth totaling 497,000 on the month, according to a report from payrolls processing firm ADP. The total was more than double the 220,000 estimate and was boosted by growth of 232,000 in the pivotal leisure and hospitality sector. Construction added 97,000 while trade, transportation and utilities grew by 90,000. Job openings in May remained high, at 9.8m, down from 10.3m in the previous month, according to data from the Labour Department.
The strong labor data fueled fresh bets that the Federal Reserve would need to raise rates again, sending two-year Treasury yields Thursday to levels last seen in 2007. The 10-year rate jumped above 4%, retesting last year’s highs.
Markets are firmly entrenched in a risk-off mode as focus shifts to impending US Non-Farm Payroll data. Overnight, the DOW dropped -1.07%, the S&P 500 dropped -0.79% and the NASDAQ dropped -0.82%.
Samsung
The South Korean tech giant said it expects operating profit to drop by 96% year-on-year in the second quarter of 2023, as a the result of a glut of memory chips. The world’s largest memory chip-maker cut production in April after reporting its lowest profit in 14 years in the first quarter of 2023. Samsung beleives the memory-chip industry may however be through the worst of the sector’s recent downturn.
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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 offer our members a fixed annual subscription regardless of how high the debt value maybe!
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
Check our compensation calculator to see how much your business could be owed!
Discover NOW the potential value of late payment compensation hidden in your sales ledger!
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.