Business news 8 April 2024
Over £10bn lost in fraud and error on Covid support schemes. Workers now have a legal right to request flexible working. And more business news that we thought would interest our members.
James Salmon, Operations Director.
Over £10bn lost in fraud and error on Covid support schemes
COVID-19 support schemes have cost the British taxpayer £10bn in fraud and error, according to a report from the Public Sector Fraud Authority. Separate from pandemic support programmes, the PSFA estimated that total fraud and error in 2021-22 came to between £39.8bn and £58.5bn. The Government released the report on the final Thursday before Parliament’s Easter recess along with over 120 other documents, leading to accusations from Labour that ministers were trying to conceal bad news.
Workers now have a legal right to request flexible working
Employees in the UK now have the legal right to request flexible working from the day they enter a new job. Previously, the right was only applicable if someone had worked for their employer for 26 weeks or more. Peter Cheese, chief executive of the Chartered Institute of Personnel and Development, said the new law “stands to benefit millions of people, helping them to balance their work and life commitments and give them more say and more opportunity in where and how they work”.
The Flexible Working (Amendment) Regulations 2023 also mean that from 6 April, employers have a duty to consult with workers before they can refuse a flexible working request. According to Coodes Solicitors, some of the reasons why a demand could be rejected include the arrangement costing the business too much, a negative effect on performance and the inability for the company to hire more team members. Other changes to employment law include new protections for pregnant employees from redundancy, and new entitlements for carers to take unpaid leave.
Wage growth deteriorates, prompting call for rate cuts
The Bank of England is facing pressure to cut interest rates as the jobs market continues to deteriorate. Wages for new permanent recruits rose at the slowest pace in three years, while starting pay for temporary workers declined to its lowest point in four months, according to a report from KPMG and the Recruitment and Employment Confederation. Neil Carberry, chief executive of the REC, stated that the data supports a decision to loosen the Bank of England’s grip on growth. Jon Holt, chief executive and senior partner of KPMG in the UK, said: “There are still headwinds, but it’s time for the UK economy to get its groove back; and UK businesses will be ready when the Bank of England makes its interest rate cuts.”
Business output rises to highest level in nearly two years
Business output in the UK has reached its highest level in nearly two years, indicating a turning point for the economy. According to research, business activity has risen for the second consecutive month in March. Accountancy firm BDO reported that its output index reached 103.39, the highest since May 2022. The increase can be attributed to falling inflation. BDO partner Kaley Crossthwaite said: “Output reaching its highest point in nearly two years illustrates UK robustness. For businesses, the main mood right now is cautious optimism – with drops in the employment and optimism index showing that we’re not out of the woods just yet.”
Strike action cost London’s economy £12bn under Khan
Strike action under Labour Mayor Sadiq Khan has cost London’s economy up to £12bn, according to Tory analysis. Since 2016, there have been 139 days of industrial action, nearly three times the combined strike days of previous mayors. Investment banks and consultants estimate daily costs ranging from £24m to £90m, resulting in a potential economic hit of £12.5bn. Conservative Mayoral candidate Susan Hall said: “Let’s not forget, when he first stood to be Mayor, Sadiq Khan promised zero strikes as Mayor. But now he has overseen more than one hundred – wrecking people’s commutes and damaging London’s economy.” A spokesperson for Khan accuses the Tories of wanting strikes to continue for political gain.
IR35 tax changes contribute to economic inactivity
A survey of more than 1,300 contractors found that one in 10 contractors gave recent changes to the off payroll working rules, known as IR35, as the reason they were not currently working.
UK construction industry returns to growth
The UK construction industry has returned to growth after six months of contraction, marking the first time in two years that all three main sectors of the economy are expanding. The latest survey shows that the Chartered Institute of Procurement and Supply and S&P Global purchasing managers’ index (PMI) for the construction industry rose to 50.2 in March, driven by an increase in civil engineering and housebuilding work. This positive trend, along with growth in the services and manufacturing sectors, signals that the UK economy has exited the recession it entered in the second half of last year. Experts predict that falling interest rates and improving real wages will continue to support construction activity in the coming months.
Retail
Wet weather dampened UK shoppers desire to go shopping in March as the reduced footfall seen over recent months continued. The total number of shoppers visiting UK stores fell 1.3% in March, although this was almost a positive, compared with the 6.2% year-on-year decline seen in the previous month of February, according to a British Retail Consortium report on Friday.
Retail insolvencies rise 19%
The number of retail insolvencies has risen by 19% in the past year, with a total of 2,195 retailers collapsing. Mazars, the audit, tax, and advisory firm, attributes the rise to increased costs, cautious consumer spending, and higher interest rates. Retail sales have also dropped, with total in-store and online sales falling 2.2% in March. E-commerce insolvencies have reached their highest level in five years, with 615 reported in the past year. Despite inflation starting to moderate, retailers continue to face challenges such as high interest rates and rising staff costs. The rise in the national living wage and business rates are also concerns.
Economic rebound growing?
The UK economy’s rebound appeared to gather momentum in March, with PMIs showing growth across all three main sectors for the first time in almost two years. The construction index also ended a six-month period of falling output, climbing from 49.7 to 50.2.
US jobs
Markets were surprised on Friday as the US economy added 303,000 jobs in March, smashing estimates (mean 214,000) and denting any notion of a Fed interest rate pivot before the summer. The unemployment rate in the US was in line at 3.8%.
UK capital markets a bad place to raise money
Sir John Bell has warned that British biotech businesses “are all going to pack up and go somewhere else” if the UK’s equity markets do not become a better place to raise money. Speaking just days after two British drug discovery companies announced they were quitting London’s junior market, the life sciences veteran added: “The London public markets are just too light on investment capital. In general terms, they are a bad place to raise money.” He agrees that one solution would be to persuade pension funds to invest into the UK market, but others say money isn’t the only problem. Clive Dix, chief executive of C4X Discovery, said: “The problem is that there aren’t sophisticated healthcare funds and analysts that analyse the sector here either.”
The Mail on Sunday talkED to the boss of British investment platform and stockbroking giant AJ Bell Michael Summersgill about how the Government can revive interest in investing. “I would propose three things to boost UK investment. One, simplify Isas to make them less complicated. Two, remove stamp duty on shares. And three, provide more support to help people make investment decisions,” says Summersgill. “If you do that, it will create a fundamentally different environment for retail investors in the UK. And it won’t cost a fortune.”
AI
The AI demand for data centers over the next 5 years is being “grossly” underestimated according to CoreWeave. But the pressure on electric grids won’t be nearly as bad as feared, according to Princeton academic Jesse Jenkins. As the latest generationlpd of chips has cut their energy usage.
Thames Water
Kemble Water Finance Limited, the holding company of Thames Water Ltd said on Friday it defaulted on £400 million of bonds after failing to make some interest payments due on the debt.
Millions of workers to enjoy national insurance cut
The main rate of employee national insurance will be cut from 10% to 8% as the 2024/25 tax year begins. The cut will save the average worker over £900 a year, benefiting about 27m workers. Self-employed workers will also see a reduction in their national insurance rates. Despite the cuts, some thresholds may act as a “stealth tax” and make people feel worse off. Prime Minister Rishi Sunak said: “Hard work is one of my core values, and the progress we have made on the economy means we can reward work with a tax cut worth £900 for the average earner. But Rachel Reeves, the shadow chancellor, said: “Every time Rishi Sunak goes on the television claiming he is cutting taxes, he is insulting the intelligence of hard-working families.”
Starbucks pays “derisorily low” UK tax
Starbucks paid just £7.2m in UK corporation tax last year, despite making a gross profit of £149m on sales of £548m in Britain. Starbucks’ UK division paid more than five times the amount in royalty and licensing payments compared to tax paid to HM Revenue and Customs. Starbucks EMEA, the company that collects royalty payments from the UK and 42 other countries, paid a $325m dividend to its parent company in Seattle, contributing to Starbucks HQ’s global profit of $5.8bn. Claire Ralph, the director of Taxwatch, a thinktank that investigates tax compliance, said: “The UK corporation tax Starbucks paid is derisorily low – depressed by continued high royalty and licensing payments to offshore owners – our tax regime is failing to secure a fair share of the profits generated from the British market.”
House prices fall slightly in March
The average house price in the UK fell by 1% in March, marking the first monthly decline since September last year. According to Halifax, the average home now costs £288,430, down £2,900 from the previous month. The drop in prices may be attributed to a resurgence in mortgage rates. Experts believe that prices are more likely to rise than fall going forward, as mortgage approvals increase and wages rise. However, affordability constraints remain a challenge for prospective buyers. Regional differences in prices present buying opportunities, but overall, house price growth is expected to be limited this year.
Body Shop administrators plan CVA
Administrators of The Body Shop are planning a company voluntary arrangement (CVA) to secure the future of the collapsed business, whose total debts add up to more than £276m. The CVA would involve property owners accepting lower payments, allowing the beauty chain to continue trading without selling its remaining assets. Landlords including Land Securities Group, Network Rail, Nuveen Real Estate, and Hammerson would be asked to agree to rent cuts. If a CVA cannot be reached, insolvency experts at FRP Advisory will explore a sale of the business. The Body Shop was put into administration in February by its owner, private equity firm Aurelius, just weeks after being acquired for £207m. Over 80 stores have closed since then, resulting in job losses. The chain currently has 116 sites open in the UK.
The Body Shop’s unsecured creditors are at risk of receiving only 15% of what they are owed, according to insolvency experts. The company’s liabilities to unsecured creditors are valued at £269.9m, while the assets available for recovery are estimated at £47.6m. This would leave approximately £40.9m for unsecured creditors, resulting in a return of 15p in the pound. However, ongoing administration costs and expenses could significantly reduce the amount that unsecured creditors receive. FRP, the administrator, has proposed a compulsory voluntary arrangement (CVA) to save The Body Shop, which will be put to creditors this month. If a CVA is not possible, the company and its assets will be sold. FRP has closed 81 stores since the company fell into administration in February.
Latest Insolvencies
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Appointment of Liquidators – RUBICON TRANSFORMATION PARTNERS LTD
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Petitions to wind up (Companies) – VRS RETAIL LTD
Appointment of Liquidators – MARION SMITH CONSULTING LTD.
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Petitions to wind up (Companies) – IMF ENTERPRISE LTD
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Petitions to wind up (Companies) – FUSIONEX LIMITED
Petitions to wind up (Companies) – BSGSB LTD
Petitions to wind up (Companies) – MAHEERA ENTERPRISE LTD
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Appointment of Administrator – WINNERSH FILM STUDIOS LTD
Appointment of Liquidators – AKMOR LTD
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Petitions to wind up (Companies) – ADV FUSIONEX LIMITED
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Petitions to wind up (Companies) – FLAMINGO YACHT CHARTERS LIMITED
Appointment of Liquidators – CONNIS PROPERTY SERVICES LTD
Appointment of Liquidators – MOORE CONSTRUCTION LIMITED
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Petitions to wind up (Companies) – VENTURE GROUP LTD
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Petitions to wind up (Companies) – FOREPOD LIMITED
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Petitions to wind up (Companies) – EVOLVE PAYROLL SOLUTIONS LIMITED
Appointment of Administrator – P.N. SHARPE LIMITED
Petitions to wind up (Companies) – FPABL LIMITED
Appointment of Administrator – CARLTON FOREST 3PL LIMITED
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Appointment of Liquidators – ERM ASSOCIATES LIMITED
Petitions to wind up (Companies) – FAN`S WIN LTD
Petitions to wind up (Companies) – PLANET S K PROPERTIES LTD
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Appointment of Liquidators – DAYTONA JV LIMITED
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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!
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.