Business news 10 August 2023
James Salmon, Operations Director.
Law firms hit as clients delay payments. Late payment interest hike ‘increases the challenges faced by taxpayers’. FCA begins probe into debanking. And more business news that we thought would interest our members.
Law firms hit as clients delay payments
UK law firms are facing potential cash flow issues as clients are taking over four months to pay their bills, according to research from Lubbock Fine. The average waiting time for payment among the UK’s top 100 law firms is 124 days, with smaller firms waiting an average of 133 days. It is noted that lawyers often hesitate to pursue outstanding bills for fear of damaging client relationships. Mark Turner, head of professional services at Lubbock Fine, says weak cash flow “can significantly increase the risk of financial distress, especially in a weak economy.” He added that if the economy worsens, clients “may be even more careful about sitting on their cash and delaying payments to law firms.”
Late payment interest hike ‘increases the challenges faced by taxpayers’
A hike in the interest rate charged for late payment of taxes means that customers who fail to pay their taxes on time will face a 7.75% late payment fee, up from the current rate of 7.5%. For quarterly instalment payments, the change comes into effect on August 14, while for non-quarterly instalment payments, the new rate applies from August 22. The late payment interest rate is the Bank of England’s base rate plus 2.5%. Robert Salter, a tax consultant at Blick Rothenberg, said: “With the recent increase in the Bank of England’s official base rate, it should come as no surprise that HMRC has increased the interest rate on late payments,” adding: “But the increase simply increases the challenges faced by taxpayers at a time of real financial stress.”
FCA begins probe into debanking
The Financial Conduct Authority (FCA) is to look into account closures and hopes to ascertain how many customers have been debanked by UK banks. This comes in the wake of a scandal which saw Coutts decide to close the account of prominent Brexiteer Nigel Farage and resulted in the resignations of the bosses of Coutts and its owner, NatWest. Chancellor Jeremy Hunt last week wrote to the FCA urging the regulator to investigate the issue of debanking and share the information it gathers with the Treasury. The FCA has issued a questionnaire to the UK’s largest banks and building societies, asking for information on the number of customers who have had their accounts terminated or suspended, or been denied banking services, and the reasons why – including whether there were any issues around freedom of expression. Banks and building societies are being told to respond to the FCA by August 25.
Restaurant chains serve up higher profit margins
Research by UHY Hacker Young shows that the UK’s top 100 restaurant groups increased their profit margins from 0.5% to 3% in the six months to March. In total, the chains made a combined profit of £241.8m in this period, up from £19.9m in the previous half-year. Peter Kubik, a partner at the firm, said closures of loss-making outlets had helped chains return to profitability, adding: “That restaurant groups have done as well as they have underscores the value of the restructuring many of them have undertaken in recent years.”
Britain faces soaring retirement bill
Britain will spend more on old-age pensions in two years’ time than on education, policing and defence combined, official figures show. Pension costs have risen sharply for years because of the Government’s triple lock, the mechanism by which pensions rise by whichever is higher of the annual increase in average earnings, inflation or 2.5%. Last year, pension costs increased by £6bn to £110bn. By 2025, they are expected to have ballooned to £135bn, a figure £2bn more than the combined day-to-day budgets for the Department for Education, the Home Office, and the Ministry of Defence. The number of people receiving a state pension has risen by 130,000 to 12.6m.
Global insurers see $50bn natural disasters bill
Global insured losses from natural disasters hit $50bn in the first six months of the year, according to data from Swiss Re. This is the second highest half-year global insured losses from natural disasters since 2011. The analysis shows that severe storms in the US account for almost 70% of these costs. Around $34bn of costs – 68% of the total – were linked to severe thunderstorms in the US. Noting the impact of increasingly extreme weather events, Jean Haegeli, Swiss Re’s chief economist, said: “The effects of climate change can already be seen in certain perils like heatwaves, droughts, floods and extreme precipitation.”
High loan rates drive ‘sharp downturn’ in demand
A survey of agents and surveyors suggests that high mortgage rates have hit property sales, with a net 44% saying they saw a decline in sales agreed in July. The Royal Institution of Chartered Surveyors poll saw a net 45% of estate agents and surveyors say inquiries from new buyers fell last month, with the report declaring this a “sharp downturn in buyer demand.” Simon Rubinsohn, the institution’s chief economist, said: “The continued weak reading for the new-buyer inquiries metric is indicative of the challenges facing prospective purchasers against a backdrop of economic uncertainty, rising interest rates and a tougher credit environment.” The poll found that near-term sales expectations “have turned increasingly subdued of late”, while a net 53% of respondents reported a drop in prices last month.
Brokers predict mortgage price war
With lenders hopeful that inflation is starting to fall, brokers believe there could be a mortgage price war as firms continue to reduce rates. This comes with Nationwide reducing prices on some of its fixed products by up to 0.55 percentage points, while HSBC has reduced rates by up to 0.2 percentage points and TSB has lowered rates by up to 0.4 percentage points. Halifax, the UK’s biggest lender, will be cutting fixed rates on various products by as much as 0.71 percentage points. Chris Sykes of Private Finance said: “More lenders are likely to follow this trend, and we may even see further rate reductions from those lenders who have already lowered rates.” He went on to note that while rates are coming down, lenders are slower to decrease rates than they were to increase them. Meanwhile, Rob Gill, managing director at mortgage broker Altura Mortgage Finance, said that if official data due next week shows a further fall in inflation, there could be a “mortgage price war” in September. Nick Mendes of broker John Charcol believes it will take a few months before the market sees any “substantial” decreases in fixed rate pricing.
Investors’ expectations of eurozone inflation hit 13-year high
A gauge of long-term inflation expectations in the eurozone has reached 2.66%. This marks its highest level since 2010 and is above the European Central Bank’s 2% target.
Tui
Tui reported a swing to a third quarter profit as revenue growth outpaced costs, driven by more people going on holidays. The Hanover-based holiday operator said pretax profit in the three months to June 30 was €47.0 million, swung from a loss of €161.6 million a year prior. Revenue grew 19% to €5.29 billion from €4.43 billion. Cost of sales increased 16% to €5.02 billion from €4.31 billion, while administrative expenses were 34% higher at €253.1 million compared to €189.6 million.
Savers face tax hit due to rising rates and frozen thresholds
Almost 1m more savers will be dragged into paying tax on their savings income this year as a result of rising interest rates and frozen thresholds, official figures show. About 2.7m savers are expected to pay tax on their savings in the current tax year, compared with about 1.8m in 2022/23. Nearly 1.4m of those who will have to pay tax this year are basic-rate taxpayers, a figure that has quadrupled in just four years. AJ Bell is calling on the Chancellor to end the freeze on the personal savings allowance, which has been set at the same level since 2016. Doubling the personal savings allowance to £2,000 would ensure savers were not taxed on savings of less than £20,000. Laura Suter of AJ Bell comments: “Rising rates and a frozen personal savings allowance mean some individuals are being taxed despite having relatively modest pots of cash set aside. To add insult to injury, because inflation is so high they aren’t even making a real return on their money – yet they are still being taxed.”
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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.