Business news 10 November 2023
James Salmon, Operations Director.
High street banks reluctant to lend to SMEs. Recession warning over money supply. ‘Crucial’ rates stay at 5.25%. Mortgage arrears rise. And more business news that we thought would interest our members.
Update: Breaking News – GDP figures came in showing the country avoided recession as GDP was unchanged in the 3rd Quarter compared with the 2nd quarter, having risen by 0.2% in September. In annual terms, Britain’s third-quarter GDP was 0.6% higher than in the same period in 2022. More on Monday.
High street banks reluctant to lend to SMEs
High street banks are pulling back from lending to SMEs, while demand for capital is set to rise, according to a survey of more than 100 brokers by fintech firm iwoca. The survey found that 83% of SME finance experts believed major banks were becoming more reluctant to fund small firms, while 82% said SME demand for capital would rise in the next six months. Three quarters of experts predict that major banks will continue to reduce SME access to working capital over the next year. It was found that 51% of brokers surveyed hold a negative opinion of high street banks.
“Sticky inflation means SMEs are focused on short-term funding to help them through this period. Against this backdrop, high street banks are reducing their appetite to lend to the UK’s 5.5m SMEs – so the funding gap is widening,” said Colin Goldstein, commercial growth director at iwoca. It is noted that the Treasury Committee has launched an inquiry into SME lending to scrutinise access to funding, regulation and whether the Government could do more to support business growth.
If you are looking for extra capital, talk to CPA about recovering Late payment compensation due from businesses that have paid you late in the past – a source of capital untapped by most B2B businesses.
Or talk to us about how our overdue account recovery service can help speed up your cash flow.
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.
Recession warning over money supply
With Bank of England data showing that the flow of broad money – notes, coins, bank deposits, and other financial instruments – contracted 4.2% annually in September, analysts have warned that the UK is facing a “severe recession.” Damian Pudner, director of the Institute of International Monetary Research, said this marks an “alarming monetary squeeze,” adding that a recession in 2024 is “all but inevitable.”
“The money supply has consistently proven itself to be a crucial indicator for forecasting economic growth and inflationary trends, and one that our policymakers can ill afford to neglect,” Mr Pudner warned. Julian Jessop, economics fellow at the Institute of Economic Affairs, said: “You do not have to be a die-hard ‘monetarist’ to worry that money and credit growth are collapsing.” He added: “At best, this means that inflation is set to fall much more sharply. At worst, it is signalling a severe recession.”
BoE chief economist: ‘Crucial’ rates stay at 5.25%
Bank of England chief economist Huw Pill says it is essential that interest rates stay at their current level in order to tame inflation. With the Bank forecasting that inflation will not dip to its 2% target for another two years, Mr Pill, in a presentation to the ICAEW, said: “We do seem to have persistence there … That’s what, for me, makes it crucial that the restrictive stance of monetary policy, as reflected in Bank Rate being at 5.25%, that that restrictive response also has to be persistent, in order to squeeze the inflationary situation out of the system.”
Mortgage arrears rise in Q3
The number of people falling behind on their mortgage payments rose by 18% year-on-year in Q3, according to figures from UK Finance. The data shows that of the UK’s 8.8m outstanding mortgages, 87,930 mortgage holders were in arrears in the July to September quarter. The number of homeowners in arrears was up 7% in Q3 compared with Q2. The analysis also shows that the number of buy-to-let mortgages in arrears in Q3 was 11,540, with this up 29% on Q2 and double the level seen in the third quarter of 2022. The UK Finance report said: “The increases in arrears are driven by the combined impact of both cost-of-living pressures and higher interest rates,” adding: “In particular, interest rate pressures are felt more acutely in the buy-to-let sector, where landlords may not be able to raise rents to cover the increases in their payments.”
Markets.
The US dollar is strengthening after a rebound in the US 10 year treasury, as markets await the UK GDP figures due out today with the pound falling to close to $1.22 and the FTSE has dropped over 1% in early trading. Over in the US overnight, the DOW dropped -0.65%, the S&P 500 dropped -0.81% and the NASDAQ dropped -0.94%.
US treasuries rose after Federal Reserve Chairman Jerome Powell said Thursday that he and his fellow policymakers are encouraged by the slowing pace of inflation but are unsure whether they’ve done enough to keep the momentum going. Speaking a little more than a week after the central bank voted to hold benchmark policy rates steady, Powell said in remarks for an International Monetary Fund audience in Washington, D.C., that more work could be ahead in the battle against high prices.
Self Driving Cars
We could see Self-driving cars on our roads as soon as 2026, according to the UK’s Transport Secretary Mark Harper, as the government starts crafting a legal framework for technology it hopes will create jobs and lure investment. The Automated Vehicles Bill, announced as part of the legislative agenda in the King’s Speech on Tuesday, will create a legal safety threshold for companies building self-driving vehicles and place liability for the vehicle’s behavior on the manufacturer. It also will prohibit misleading marketing, including using ambiguous language as to whether vehicles are fully self-driving.
Auto Trader
Auto Trader reported higher profit as it hailed changes in the new car market that are providing opportunities. The Manchester-based automotive marketplace said revenue in first-half ended September 30 rose 12% to £280.5 million from £249.8 million. Its pretax profit was 10% higher at £162.8 million from £148.0 million.
Quarter of FTSE 100 CFOs exit in 2023
A quarter of FTSE 100 finance chiefs have left their jobs in 2023, the highest rate in five years and almost double the same period in 2022. Depressed bonuses, the broadening role of chief financial officers, and the temptation of working in a private equity owned business were cited as reasons for the churn. Globally, 200 CFOs of large, listed companies left their jobs in the first three quarters of 2023, with 61% of departing CFOs retiring. The research also revealed that 39% of the FTSE 100 CFOs appointed this year were women.
Chancellor urged to cut taxes
The Chancellor is facing increasing pressure to cut taxes as the number of people paying income tax is set to rise sharply. Figures from the Office for Budget Responsibility show that 38.2m people will pay income tax by 2027/28, up from 31.2m a decade earlier. The freeze on tax allowances and thresholds until 2028 means that 7m more people will have to pay income tax in 2028 compared to 2018, with rising inflation and wage growth pushing more people over the tax threshold. The tax burden is now at its highest level since the Second World War, leading to calls for urgent action in the Chancellor’s Autumn Statement. Darwin Friend of the TaxPayers’ Alliance argues: “Stealth taxes are placing a mounting burden on hardworking Brits,” adding that the Chancellor “should give taxpayers some much-needed breathing room by cutting spending and raising thresholds.”
Tax warning for the self-employed
HMRC has issued a warning to self-employed workers, urging them to pay their taxes or face fines. The deadline for self-employed taxpayers to file their tax returns and pay any taxes owed is midnight on January 31. Failure to do so could result in fines starting at £100, with interest of 7.75% added to late payments.
FSCS levy set to increase
The Financial Services Compensation Scheme (FSCS) has forecast that its levy will rise to £415m in 2024/25, with advisers set to contribute £140m – up from £101.1m in 2023/24. The £39m increase is due to lower expected surpluses being carried forward from 2023/24 than were carried forward the year before. The FSCS also confirmed this year’s levy would remain at £270m, as forecasted in May, with no additional levy from firms for the rest of the financial year. Total compensation costs for the year are now forecast at £435m – £36m less than forecast in May.
US Unemployment
US Unemployment Claims edged down last week, signaling that layoffs remain low even as the still-strong job market shows some signs of cooling. Initial claims for state unemployment benefits fell 3,000 to a seasonally adjusted 217,000 for the week ended Nov. 4 from an upwardly revised 220,000 in the prior week, the Labor Department said on Thursday. Economists polled by Reuters had forecast 218,000 claims for the latest week
Apple should pay €13bn Irish tax
A legal adviser to the European Court of Justice has argued that a ruling allowing Apple to avoid paying €13bn (£11bn) in back taxes should be overturned. While a European Commission ruling that said Apple had been given illegal tax breaks by the Irish government was overturned three years ago, advocate general Giovanni Pitruzzella said the case should be reviewed again. An Apple spokesman said that the initial ruling allowing the firm to avoid paying back taxes was “very clear that Apple received no selective advantage and no state aid,” adding: “We believe that should be upheld.” Ireland’s finance minister, Michael McGrath, said the country remained confident it did not breach any EU laws. Although corporation tax rates for businesses are set nationally and not subject to the EU’s jurisdiction, the bloc does have extensive powers to regulate state aid.
Allianz
Allianz took its biggest hit from natural disasters in a decade in the third quarter of 2023 but still confirmed its full-year outlook. Munich-based Allianz reported net income attributable to shareholders of EUR2.02 billion in the three months that ended September 30, down 30% from EUR2.87 billion a year before. Core earnings per share declined by 28% to EUR5.22 from EUR7.23. This was despite total business volume rising by 4.5% to EUR36.5 billion from EUR34.9 billion.
Diageo
Diageo has warned of slower growth in the second half of this year after a “materially” weaker sales performance in Latin America and the Caribbean. The spirits manufacturer said organic sales in Latin America and Caribbean, which represent nearly 11% of Diageo’s net sales value, are now expected to decline by more than 20% year on year in the first half of financial year 2024. In Europe and Asia Pacific, it sees continued momentum, albeit slower than in the second half of financial 2023.
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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.