Business news 11 August 2023
James Salmon, Operations Director.
Mortgage arrears continue to rise. Higher mortgage rates the ‘new normal’. British business lacks ‘credible’ green plans. Stealth tax raids see payments jump 40%. Firms move away from WFH. And more business news that we thought would interest our members.
Breaking news: GDP unexpectedly climbed 0.2% in the last quarter (April to June) With GDP rising in June by 0.5% boosted by the warm weather (that seems a distant memory now) – Sterling has strengthened on the news – more to follow in next blog.
Mortgage arrears continue to rise
Arrears continued rising in Q2, according to figures from UK Finance, with customers coming under pressure from soaring repayment costs. The data shows that there were 81,900 homeowner mortgages in arrears of more than 2.5% in the second quarter, with this 7% higher than in Q1. Of these, 30,940 mortgages were in arrears of between 2.5% and 5% of the outstanding balance, while 28,690 homeowners had arrears in the most severe band of more than 10% of the balance.
Despite the rise in arrears, the number of repossessions fell 19% compared to the first quarter. A UK Finance spokesperson noted that while repossessions remain “close to historic lows,” they are expected to continue to rise. The UK Finance report shows that the number of buy-to-let mortgages in arrears of more than 2.5% increased by 28% compared to the first quarter. Q2 saw 440 buy-to-let properties repossessed – 7% more than in Q1. Mortgages in arrears accounted for 0.93% of homeowner mortgages outstanding in the second quarter and 0.44% of buy-to-let mortgages outstanding.
Are you worried about your customers ability to pay their invoices being affected by rising mortgage costs and the build up of mortgage arrears?
Talk to CPA about how we can help you get your invoices prioritised.
Higher mortgage rates the ‘new normal’
While a number of banks have recently reduced mortgage rates, experts have warned borrowers that there is unlikely to be a significant decline in rates, with the Bank of England expected to continue increasing its base rate in a bid to bring down inflation. Charlotte Harrison, chief executive of home financing at Skipton Building Society, said there “doesn’t look to be a silver bullet on the horizon” when it comes to higher loan rates, saying the market is pointing toward a “higher interest rate environment for a longer period of time.” Richard Donnell, Zoopla’s executive director, expects mortgages below 5% to make a return to the market later this year, with rates between 4% and 5% set to be “the new normal.” Roland McCormack, director of mortgages at TSB, believes that “the era of very cheap money is gone,” adding: “I think we will see rates hover around where they are, certainly for the rest of the year.”
British business lacks ‘credible’ green plans
A new study suggests that too few British companies have an adequate plan for switching to a clean, green future. That study found that almost two thirds of emissions by UK firms are not covered by decarbonisation targets. The study also shows that one in five who do have targets are not on course to meet them by the UN’s 2030 deadline. The study by management consultancy Bain & Co and the Carbon Disclosure Project (CDP) charity looked at 1,450 companies and their targets for Scope 1 and Scope 2 emissions – which cover business operations and energy used – as well as Scope 3 – covering emissions from the products they sell. The report says 64% of Scope 1 and 2 emissions by UK companies are not covered by a target, rising to 69% for Scope 3. Katherine Kajzer-Hughes of Bain & Company said: “Effective decarbonisation strategies are a win-win – good for the planet and good for the organisations which enact them.” Dexter Galvin, chief commercial and partnerships officer at CDP, added that companies “can truly embrace decarbonisation and add value to their business – these are not mutually exclusive.”
Stealth tax raids see payments jump 40%
A stealth tax raid has seen payments to the Exchequer surge by 40% since the pandemic, according to Organisation for Economic Cooperation and Development (OECD) analysis. The report reveals that payment of taxes on earnings and wealth – such as income tax and capital gains tax – were up by 39.2% in Q1 2023 compared with Q4 2019. While UK households paid £60.6bn in income and wealth taxes in the closing quarter of 2019, this rose to £84bn in the first quarter of 2023. Much of the increase can be attributed to freezes on income tax and capital gains thresholds. Tom Waters, of the Institute for Fiscal Studies, said: “Nominal incomes are rising quite quickly, so with frozen thresholds more people are brought into tax and higher rates of tax, and larger fractions of people’s incomes are subject to higher rates.” John O’Connell, chief executive of the Taxpayers’ Alliance, warned that UK household are “feeling the impact of out of control government spending,” adding: “Huge public sector waste and a civil service employment boom are driving high taxes on hard-pressed Brits.”
Firms move away from WFH
Tim Sigsworth in the Telegraph says that while the pandemic drove a surge in remote and hybrid working, “the working from home bubble has burst” amid concerns over lower levels of productivity. He highlights data from Adzuna showing that while in January 2021, as many as 14% of all vacancies advertised in Britain were for fully remote work, this has now fallen to just 6%. The proportion of hybrid vacancies has risen from 2% to 19% in the same period, with firms cutting the number of employees allowed to work entirely remotely. Mr Sigsworth notes that while firms including Goldman Sachs and JPMorgan are demanding staff return to the office full-time others, including Apple and Blackrock, ask staff to be in the office at least three or four times a week. He goes on to warn that working from home can be isolating and lonely, highlighting that remote staff often miss out on the opportunity to interact with colleagues. Stressing the importance of face-to-face interaction, he notes that PwC and Deloitte have given their youngest employees additional communication and teamwork training. Mr Sigsworth concludes: “Working from home, it appears, is hardly working.”
Gen Z opts for less stress
The UK’s Gen Z (born 1997 to 2012) workers are increasingly opting for less stressful jobs that still pay a reasonable salary as they prioritize their work-life balance over a hustle culture that previous generations embraced. Job site Adzuna reports a surge in clicks on postings for positions such as office administrators, account managers and marketing associates, which are associated with more flexibility and less stress. Gen Z is especially keen on roles with adjustable hours and out of office work — and without the responsibilities of managing a team or regular overtime. The appetite for these kinds of jobs follows the anti-work movement that has also seen Gen Z’ers or zoomers lead the “quiet quitting” trend, which involves doing no more than the bare minimum of what their role description requires.
China
Biden critised China at a political fundraiser, calling it’s economy and aging population a ticking time bomb .
News Corp
Rupert Murdoch’s media conglomerate recorded a 75% drop in profit in the year to July. The firm was hit by lower print and digital-advertising revenues in Australia and Britain.
One in three workers fear end of state pension
A poll of 3,000 working age people shows that a third do not believe the state pension will still exist in 30 years. The survey by Abrdn Financial Fairness Trust and the Institute for Fiscal Studies saw 11% of respondents say the state pension will ‘definitely exist’ in 30 years’ time, while 33% do not think it will and 25% are unsure. The report also shows that while 41% of workers expect a ‘bad’ income in retirement, 15% do not expect to retire until their 70s and 13% say they will never retire. On the size of state pension payouts in the future, 11% think the state pension will increase faster than inflation over the next ten years, compared with 38% who believe it will rise more slowly. Just 14% of those polled said the state pension provides a reasonable standard of living, with three-quarters (73%) saying it does not. It was also found that only 20% of respondents know roughly how much the full rate currently is.
Record discount on UK stocks
UK stocks are trading at the biggest discount on record, according to data from Panmure Gordon. Simon French, chief economist and head of research at the investment bank, noted that it is more expensive for companies to raise capital through London’s stock market, driving concern of an exodus of British companies to Wall Street, where valuations are typically higher. Analysis shows that listings on the London Stock Exchange slumped during H1, with data from EY showing that listings dropped by nearly a third between January and June compared to the same period last year. Scott McCubbin, head of IPOs at EY, recently said the London IPO market “continues to experience challenges with macroeconomic and geopolitical pressures having an adverse impact on businesses looking to list in the UK.” He warned that “these headwinds will need to abate to enable real growth,” before noting that “with some larger IPOs expected in 2024 and a strong pipeline, the long-term outlook looks more positive.”
Car Insurance
Car insurance rises to £500 for the average motorist.
Wilko goes into administration
Homeware retailer Wilko has collapsed into administration after failing to secure a rescue deal. PwC has been appointed as administrator and will continue to look for a buyer for all or part of the group. Stores are set to remain open in the meantime, with no immediate job losses. Wilko chief executive Mark Jackson, said management had “left no stone unturned” in its attempts to save the company but “must concede that with regret, we’ve no choice but to take the difficult decision to enter into administration.” Wilko has 400 shops and employs 12,500 workers.
Latest Insolvencies
Petitions to wind up (Companies) – BURLAM HOUSE LIMITED
Petitions to wind up (Companies) – CHRISTIAN CHARLES LTD
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Petitions to wind up (Companies) – WORLD TRAVEL LOUNGE RETAIL LIMITED
Petitions to wind up (Companies) – THORNHAM CAR SALES LIMITED
Appointment of Liquidators – GERARD KELM LIMITED
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Appointment of Liquidators – SB & AB HOLDINGS 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!
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.