Business news 10 May 2022
James Salmon, Operations Director.
Small firms struggling to keep their heads above water. Many SMEs rely on credit to pay insurance bills. Rate-setter warns of persistent inflation. Cost-of-living surge leads consumers to rein in spending. Global stocks suffer worst day since June 2020 amid slowdown fears. Morrisons wins battle for McColl’s. And more business news.
Small firms struggling to keep their heads above water.
Research by Bibby Financial Services has found just under two in five SMEs were “just about breaking even” with the economic environment causing “friction and fragility” for business owners.
In a poll of 500 companies, respondents said the war in Ukraine and supply chain problems were key concerns. More than a quarter highlighted cashflow as a worry while almost 20% said they needed short term financial support more now than before the pandemic as more companies reported issues with late payment of invoices.
Although businesses reported feeling slightly more confident than they did a year ago, “many are still struggling to keep their heads above water and [are] operating on a day-to-day basis, rather than looking ahead to growth,” said Derek Ryan, UK managing director at the lender.
“Cashflow challenges and payment issues continue to plague businesses. It’s critical they receive support from the private and public sectors, and we’d urge policymakers to look at wider tax cuts and energy grants to help SMEs.”
Many SMEs rely on credit to pay insurance bills.
A study by Premium Credit reveals that more than half of UK’s SMEs are relying on credit to pay for their insurance, borrowing on average just over £1,100. Just under one in ten (9%) claim to have borrowed over £3,000 to fund their cover. Among those firms using more credit, 43% said it is because of the ongoing impact and fallout from the pandemic followed by 30% who said it was because their business had taken on more credit for other reasons and did not have the cash to pay for insurance. Some 29% blamed rising premiums and 28% pointed to a drop in income.
Rate-setter warns of persistent inflation.
Michael Saunders, a member of the Bank of England’s rate-setting monetary policy committee, has echoed concerns recently raised by Andy Haldane, the Bank’s former chief economist, that inflation may be around for longer than expected. Saunders was among three members who called last week for a 0.5% rise in the bank rate – but the majority opted for a 0.25 percentage point hike to take the rate to a 13-year high of 1%. During a speech at the Resolution Foundation think-tank, Saunders said it would be better to ramp up borrowing costs more aggressively now to stop “the recent trend of higher inflation expectations and rising pay growth from becoming more firmly embedded.” Mr Haldane has predicted that inflation could top 10% and argued that the Bank should have acted sooner rather than waiting until November before raising interest rates.
Cost-of-living surge leads consumers to rein in spending.
The latest British Retail Consortium-KPMG retail sales monitor revealed that total sales dipped 0.3% in April after a sharp downturn in consumer confidence. It marks the first decline in 15 months. On a like-for-like basis, UK retail sales dropped by 1.7% as shoppers reduced their spending on big ticket items. Helen Dickinson, chief executive of the BRC, said: “The rising cost of living has crushed consumer confidence and put the brakes on consumer spending.” Paul Martin , UK head of retail at KPMG, added: “With interest rates and inflation rising and the Bank of England warning of a possible recession, the squeeze on disposable household income is starting to have an impact on the high street.”
Climate
The Met Office has said there is a “50-50” chance that average global temperatures will be 1.5°C above pre-industrial levels during at least one of the next five years. There is a 10% chance that the five-year mean temperature will exceed 1.5°C. Keeping global warming below that threshold was the more ambitious goal of the Paris agreement signed by 192 countries in 2015.
Global stocks suffer worst day since June 2020 amid slowdown fears.
The FTSE All-World barometer of global equities dropped 3% on Monday, its sharpest fall since June 2020, as investors grew concerned about rising rates and slowing growth in the world’s largest economies. Separate data from BlackRock show monthly allocations to global exchange traded products hit just $27.4bn of inflows in April, down from $117.4bn in the previous month. It was their worst month of flows since March 2020 as investor jitters spread amid soaring inflation and the continued turbulence of war in Ukraine. The S&P 500 dropped by 3.2%. The NASDAQ fell by 4.3%. Markets in Asia followed.
Morrisons wins battle for McColl’s.
Morrisons has won a battle to rescue convenience store and newsagent chain McColl’s, taking on all of its 1,160 stores, 16,000 staff and two pension schemes with more than 2,000 members. Morrisons will repay secured debt in full, with “a distribution also expected to unsecured creditors”.
The supermarket group beat a rival offer from EG Group, the petrol station empire, owned by the billionaire Issa brothers. PwC was formally appointed as administrators yesterday and sold the business as part of a pre-pack administration.
David Potts, chief executive of Morrisons, said: “Although we are disappointed that the business was put into administration, we believe this is a good outcome for McColl’s and all its stakeholders. This transaction offers stability and continuity for the McColl’s business and, in particular, a better outcome for its colleagues and pensioners.”
Rob Lewis, joint administrator and partner at PwC, said that “as well as saving thousands of jobs, this deal secures a platform for the trustees of the group’s pension schemes to enter into arrangements which will protect the pensions entitlements of so many people”.
Commenting on the deal, the Guardian’s Nils Pratley says Potts was right to criticise the move to put McColl’s into administration, part of initial demands from EG Group so banks could get paid in full at the expense of pensioners, and lenders would be wise to rethink this approach with a recession looming and more rescues likely on the way.
Bosses say workers lack basic education.
A poll of British businesses by PwC and The Times Education Commission found a third of businesses say their workforce is lacking basic skills in literacy and numeracy. A majority felt the education system was not preparing young people for the world of work and 50% said that their organisation would be more productive if the education system were better tailored to future employment. Almost nine in ten businesses (89%) said that it was important for young people to be assessed on more than academic skills.
Kevin Ellis, chairman and senior partner at PwC UK, who is speaking at the commission’s summit in London today, said: “Basic numeracy and literacy should be a given. We also need other skills that stand the test of time, such as empathy, resilience and agility. You can’t predict all the jobs that will exist in the future, but you can predict the mindset needed to adapt and be ready.”
In a separate piece for the Times, Ellis emphasises how businesses like PwC need diversity above all else – “diversity of skills and diversity of thought. This will come from diversity of background and learning. We need to broaden education options and pathways to work rather than shutting any down.”
PwC execs mock Lord Sugar for “lazy gits” jibe.
Lord Sugar’s criticism of PwC staff working from home – calling them “lazy gits” – has elicited a string of responses from PwC executives online. The Apprentice host complained about the firm’s new working hours policy, which allows employees to take Friday afternoons off all summer, stating on Twitter: “Call me old fashioned but all this work from home BS is a total joke.”
In a post on LinkedIn, Maria Jennings, PwC’s marketing director, thanked Lord Sugar “for the free publicity” and encouraged prospective employees to “come and join us lazy lot at PwC”. She added: “I could add some commentary to this but given we are so lazy at PwC UK I figured I’d spend my time elsewhere.”
Richard Osborne, a senior executive at the firm, said on the same platform that Lord Sugar’s response showed how “out of touch” he is with the “modern working world”. Omair Qureshi, a senior associate at PwC, added: “I’m sorry that the pandemic has raised the importance of a long forgotten critical area in businesses – staff wellbeing and productivity.”
But Lord Sugar defended his position in a piece for the Mail, stating that “the interaction between people – colleagues, customers and clients – is key” to a business’s success. He goes on to argue that “the pandemic has unleashed a workshy, entitled culture” which “is bad news for business, for employees – and for the sandwich shops, cafes and taxi drivers who rely on people going into the office.”
Sales of second-hand electric cars surge amid high fuel costs.
Figures from the Society of Motor Manufacturers and Traders (SMMT) show sales of second-hand electric cars have surged to a new record as motorists shift away from petrol vehicles amid soaring fuel costs.
Richard Peberdy, UK head of auto motive at KPMG, said global parts shortages were also pushing up the prices of new cars. Mr Peberdy said: “The increasing cost of living is cooling the used-car market slightly, but demand still remains high and is likely to continue until the issues impacting new car production are resolved and more supply enters the used-car market. That is unlikely to be this year. For now demand is greater than supply, including for the emerging used battery-electric vehicle market.”
Insolvency related activity soars in Yorkshire
Research from insolvency and restructuring trade body R3 has found that more than 600 businesses in Yorkshire experienced insolvency-related activity in March 2022 – a rise of over 100% since the previous month. Eleanor Temple, chairwoman of R3 in Yorkshire, said: “Given the increasingly challenging economic picture with soaring fuel and energy costs as well as global turmoil due to the Ukraine crisis, I would urge any firms in the region which are experiencing the early signs of financial distress, such as finding it difficult to meet their bills on time, to seek professional advice about how their problems can be mitigated before they spiral out of control.”
Heathrow
Heathrow Airport has posted strong results for April but continued to warn about the uncertainties that loom ahead. The London hub reported that 5 million passengers traveled through its terminals in April, with outbound leisure travel driving demand and prompting the airport to increase its passenger forecast for the year by 16 per cent.
Centrica
Centrica said its performance has been “strong” in the first four months of 2022. As a result, the British Gas-owner said 2022 adjusted earnings per share will be around the top end of market expectations, which range from 6.7 pence to 10.8p.
BCC: Reverse NICs hike to relieve costs burden.
The British Chambers of Commerce (BCC) has called for an “emergency budget” and the reversal of the recent increase to National Insurance Contributions to help reduce cost pressures on businesses. Shevaun Haviland, BCC director general, said: “The costs crises facing firms and people in the street are two sides of the same coin. If we can ease the pressure on businesses then they can keep a lid on the price rises being driven by surging energy bills, staff shortages and higher taxes.” He explained: “Firms will then have the breathing space they need to raise productivity and strengthen the economy. But a change of course is needed now, if the Government does not act immediately then rising costs will put our economic recovery in a stranglehold that will have repercussions for years to come.”
‘Ghost dom’ tax loophole a national security threat.
A tax loophole that allows someone to claim both non-domicile status and that they have no UK income – known as “ghost dom” – means investigators are being hampered in their efforts to prevent sanctioned Russian money flowing into the UK. The provision also means they do not have to submit any tax return, even if they live permanently in Britain. One official working on British sanctions policy told the Independent the UK’s tax system “severely limited” their ability to track and trace individuals’ income streams. Rachel Reeves, Labour’s shadow chancellor, said the ghost dom revelation raised serious issues. “This is extremely concerning – and not just because of how a few at the top are taking advantage while working people and businesses in Britain are hit with the biggest tax burden in 70 years. This is a matter of national security and must be urgently addressed to ensure it isn’t hampering our efforts to come down hard on dirty money linked to Russia, as Putin’s horrifying invasion of Ukraine continues.”
Takeaway owner jailed for fake tax claims.
A takeaway owner has been jailed for lying about how much income he received from his tandoori business in Leeds. Rownock Sekar Talukdar submitted false tax returns and claimed tax credits he was not entitled to, fraudulently claiming about £171,000. The Crown Prosecution Service said he was charged with fraudulent evasion of VAT and income tax and fraudulent claims for tax credits. He admitted the offences and was jailed for 18 months at Leeds Crown Court.
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.
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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.
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!
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.