Business news 10 January 2023
James Salmon, Operations Director.
Small Business Commissioner pulls back from Late-payment fines. Energy bill support for firms to be reduced. Satellites, Ozone, Manufacturing, persistent inflation, job vacancies, retailers, energy, rents, commercial property prices, a mortgage crisis and more business news.
Small Business Commissioner pulls back from Late-payment fines
In a disapointing move, Small Business Commissioner Liz Barclay has suggested she would not support proposals to fine companies guilty of slow and late payment of suppliers, saying such penalties would be too expensive to manage and may do little to tackle the issue.
She said: “Having thought about it over the last 18 months, what would be required in terms of resources to enforce [fines] would be prohibitive,” adding: “Where there are powers to fine, they haven’t necessarily made the degree of changes that would have been anticipated.” Citing penalties for employers not paying the minimum wage as an example, Ms Barclay said: “We still see a long list of companies fined every year.”
CPA has long argued that the only way to change late payment practices is to make late payment more expensive than other forms of funding. At present business customers can withhold payment from their small business suppliers with relative impunity and the boost to their cashflow is free,
To change that late payment culture, businesses need to recognise that late payments are potentially more expensive than funding from more traditional sources.
Fines weren’t necessary anyway. And why should the penalties go to the government?
There is already late payment compensation and interest. And the benefit of the compensation is that it goes to the supplier who suffered the late payments.
If they are not enough of a deterrent then there’s a simple solution, increase them! These could easily be increased by government from their current levels! They haven’t been amended for inflation since they were introduced decades ago and barely match the real cost of late payment to small businesses.
Very few suppliers though ask for the compensation as they are worried about losing goodwill and their customer.
However, what about when the relationship ends? A supplier can then go and claim all the compensation due on historic late payments going back six years. CPA has been helping its clients do just that with their former customers, with many claims reaching into the tens and hundreds of thousands as compensation is accrued on every single late paid invoice.
Some suppliers might even realise that troublesome late paying customers are worth more to them in compensation than future custom.
If these late payers realise that their late payment practices are building up a huge debt in compensation that they might very well have to pay in the future, they might be inclined to change their payment practices and pay on time.
CPA says hitting late payers in the pocket is the only way.
Energy bill support for firms to be reduced
The Government is to scale back energy bill support for businesses from the end of March, with the Treasury warning that the current level of help is too expensive.
James Cartlidge, the exchequer secretary to the Treasury, said it was “not sustainable” to continue what was “one of the most generous packages in Europe” at a time when the national debt stood at £2.48trn.
Under the new scheme, firms will get a discount on wholesale prices rather than costs being capped. While the current scheme was predicted to cost about £18.4bn in just six months, the Government is scaling back the energy subsidies for the next financial year to £5.5bn. Under the plan, non-domestic energy customers will automatically receive a discount of £6.97 a megawatt hour for gas and £19.61 a MWh for electricity. Businesses with energy costs below £107 a MWh for gas and £302 a MWh for electricity will not receive support.
Martin McTague, national chair of the Federation of Small Businesses, called the reform of the support measures a “huge disappointment,” warning: “Many small firms will not be able to survive on the pennies provided through the new version of the scheme.” The British Chambers of Commerce said the value of the support package was “nowhere near” enough and meant “that for some firms, energy will now be a cost too far.” Tom Thackray of the business lobby group CBI acknowledged that it was “unrealistic to think the scheme could stay affordable in its current form”.
Satellite failure
There was failure for first satellite mission launched from British soil yesterday. The mission by Virgin Orbit, sent up a rocket over the Atlantic from Cornwall. However, the rocket failed to deploy any of the nine satellites it was carrying.
Ozone
According to a report from the UN, damage to the ozone, first discovered in the 1980’s will recover for most of the world by 2040 as it has been healing since chlorofluorocarbons were banned in 1987.
Manufacturers: UK becoming less attractive for investment
A survey by PwC and manufacturing trade body Make UK suggests Britain has become less competitive and less attractive to foreign investors. The proportion of manufacturers who think Britain is a competitive location has slipped to 31% from 63% a year ago, while 43% said Britain had become less attractive to overseas investors. The survey of 235 businesses saw 53% say ongoing political instability had damaged business confidence.
Stephen Phipson, chief executive of Make UK, said: “The year ahead is going to be very challenging for manufacturers with a potent mix of factors testing their resolve,” adding: “Ongoing supply chain disruption, access to labour and high transport costs which show no sign of abating can be added to a growing sense of economic and political uncertainty in their main markets.”
BoE economist warns of persistent inflation
Bank of England chief economist Huw Pill has warned that Britain is at risk of persistent inflationary pressure and implied that further rate rises may be needed. Mr Pill, who identified Britain’s shrinking workforce as a key factor that could keep prices high, said: “The distinctive context that prevails in the UK – of higher natural gas prices with a tight labour market, adverse labour supply developments and goods market bottlenecks – creates the potential for inflation to prove more persistent.” He added that this will “strongly influence my monetary policy position in the coming months.” Mr Pill has also suggested that the Bank of England did not understand inflation “well enough” and “underestimated” the strength of a surge in prices, saying that with “the benefit of hindsight,” the central bank’s own analysis failed to foresee inflationary pressures magnified by post-pandemic supply chain pressures.
Job vacancies and wages dipped in December
The number of job vacancies rose by the slowest pace since February 2021 in December, a report by KPMG and the Recruitment and Employment Confederation (REC) shows. Wages continued to rise in response to soaring living costs, but the rate of pay growth fell to its slowest level since the summer of 2021, according to the survey of 400 recruiters. Neil Carberry, chief executive of the REC, said: “A slowdown in permanent placements is not unusual in December, but this one comes as part of a wider softening trend in the permanent market.” He added: “Recruiters tell us that this was enhanced by firms pushing hiring activity back into January in the face of high inflation and economic uncertainty.”
Retailers see sales soar 6.9%
British Retail Consortium (BRC) data shows that retail sales were 6.9% higher in December than a year earlier and recorded more than double the average 3.1% growth seen throughout the year. The figures showed a 7.9% jump in food sales in December from a year earlier, while non-food sales rose by 1.5%. BRC chief executive Helen Dickinson said: “After an exceptionally challenging year which saw inflation climb and consumer confidence plummet, the uptick in spending over Christmas gave many retailers cause for cheer.” KPMG said December’s sales growth was driven by higher prices, with the actual amount of goods sold falling. The firm’s head of UK retail, Paul Martin, said retailers face a “challenging few months,” adding: “The strong demand across certain categories that has protected some retailers will undoubtedly fall away, so we can expect High Street casualties as we head into the spring.”
Households cut energy use in December
Households in the UK were able to reduce their gas consumption in December more than expected as high prices hit consumption. Gas use by residential and small properties was measured at 63.6 terawatt-hours in December, about 8.8% lower than what would normally be the case, given the the month’s temperature pattern, according to research by the BFY Group. The figures show how British consumers are able to make energy savings in response to prices.
Commercial property values fall by £130bn
The value of commercial properties in Britain fell by £130bn last year, according to real estate and investment company CBRE, with values down by 3% in December alone. Commercial properties lost 13.3% of their value in 2022, wiping about £130bn from the value of Britain’s £1trn estate of commercial warehouses, shopping centres and offices. The buildings affected most severely in December were industrial units, which lost 4.4% in value, while office values were 3% down. Retail capital values fell by 2.5%. Experts say higher interest rates have pushed up the cost of borrowing and reduced the appeal of property to investors.
Rents rise at fastest rate in seven years
Office for National Statistics (ONS) figures shows that tenants renting from private landlords have seen the highest rise in rents since comparable records began seven years ago. Rents rose 4% last year as landlords passed on the costs of higher mortgage rates. A poll of tenants surveyed in December saw a quarter say their rent had risen in the past six months. On average, renters pay 24% of their weekly expenditure on housing compared with 16% by those with a mortgage, according to the ONS.
1.4m UK households face a mortgage crisis
More than 1.4m households in the UK are facing a steep increase in their monthly outgoings when they are forced to renew their fixed rate mortgages this year. Office for National Statistics (ONS) analysis shows that the 57% of fixed rate mortgages coming up for renewal in 2023 are fixed at interest rates below 2%. However, Moneyfacts data shows that the current average two-year fixed rate mortgage has an interest rate of 5.75%, while the average five-year fixed stands at 5.57%. According to the ONS, 353,000 fixed rate mortgages will have to be renewed in the first three months of this year, while the number of fixed rate deals coming to an end in 2023 will peak between April and June at 371,000. Gary Smith, financial planning director at wealth manager Evelyn Partners, says: “Those who have deals expiring this year face a difficult choice as to whether to fix again or risk a variable-rate deal.” He added that the former “could mean locking in at a relatively high interest rate in order to achieve certainty,” while the latter “could mean rising payments in the short-term but possibly lower payments in the medium-term as benchmark interest rates plateau or even start to come down.”
Markets
Global markets responded positively yesterday to China reopening. Euro stoxx were up 1.26% and the FTSE 100 rose 0.33% Oil rose over 1.5% and Gold hit an eight month high. meanwhile the dollar fell with cable reaching $1.22. However European stocks are set for losses today after hawkish comments from the US FED killed of a rally in US shares overnight and the pound fell against the dollar back to $1.215 ( A FED official said rates could go to 5%-5.25% and hold there for a while). Overnight, the S&P 500 dropped -0.08% while the NASDAQ rose 0.63%.
Number of new non-doms drops by 40%
HMRC data shows that the number of new UK non-doms has fallen by 40% in the past year. UK residents who opted to take advantage of the tax status fell from 14,200 to 8,500 in the 2020/2021 tax year. In the same period, net migration figures saw a decline of less than 10% to 260,000. While Labour leader Keir Starmer said he would include a measure to abolish the non-dom tax status in the party’s forthcoming election manifesto, some experts have defended the existence of the tax arrangement. Sophie Warren, tax investigations expert at Pinsent Masons, said that if the status were scrapped, it could have a significant impact on the UK economy and tax revenues. She said: “Many non-doms are highly successful entrepreneurs which have established or invested in UK companies. The availability of non-dom status gives the UK a competitive advantage in attracting talented and wealthy individuals.”
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.