Business news 12 July 2023
James Salmon, Operations Director.
Rising Insolvencies leading to rising profits for specialists. Record pay rises fuel fresh inflation fears. Households face another £2,300 hit to their finances. No pre-election giveaway. And more business news that we thought would interest our members.
Rising Insolvencies leading to rising profits for specialists
Insolvency specialist Begbies Traynor has reported a 50% increase in pretax profit, climbing to £6m from £4m the previous year. The firm raised its dividend by 9% to 3.8p. Revenue grew by 11% due to acquisitions and increased insolvency appointments. The firm is well positioned for an economic downturn as 80% of its income comes from counter-cyclical activities. Insolvencies are starting to rise again after falling during the pandemic, with a 40% increase in May compared to the previous year. Ric Traynor, executive chairman, predicted that highly indebted companies that have only managed to cling on thanks to cheap borrowing costs will fail over the next 18 months.
Record pay rises fuel fresh inflation fears
UK wages have risen at a record annual pace fuelling fears that inflation will stay high for longer. Figures from the Office for National Statistics (ONS) show regular pay growth in the private sector was 7.7%, the highest rate outside of the pandemic period, while for the public sector it was 5.8%, the highest since late 2001. Divya Sridhar, an economist at PwC, warned that “strong wage growth will continue to fuel concerns around high inflation levels”. The ONS labour market report also showed the UK’s employment rate edged up slightly in the three months to May, reaching 76%. Unemployment rose by 0.2% to 4%. In a sign that higher interest rates and economic uncertainty are starting to hit the labour market, vacancies fell for the 12th consecutive month, dropping by 85,000 in the April to June period to 1,034,000.
Households face another £2,300 hit to their finances
A report from Retail Economics and Grant Thornton forecasts that the cost of living crisis will last another ten months with the typical household £2,300 worse off by the time inflation eases, in May next year. Richard Lim, chief executive of Retail Economics, said: “The squeeze on finances has become a war of attrition for many households. While peak inflation may have passed, households still have around ten months of pain to come where cutting back spending will intensify for many.” Meanwhile, Andrew Sentance, a former member of the Bank’s Monetary Policy Committee, has said the wage growth reported yesterday shows the Bank of England has “lost control of inflation” and has no chance of hitting the 2% inflation target in the next two years or more.
No pre-election giveaway
Prime Minister Rishi Sunak said the fight against inflation trumps the need for tax cuts, in a signal that we are unlikely to see a pre-election tax giveaway. “The number one priority right now is to reduce inflation and be responsible with government borrowing, that is absolutely the overriding economic priority, and that takes precedence over everything else,” Sunak said Tuesday when asked if he would rule out tax cuts before the next general election.
IR35 reform causing talent drain
IPSE research shows that 22% of self employed contractors are ditching UK customers and looking for contracts overseas because of the burdens of IR35 reform.
Stress tested
The Bank of England announced the results of its most recent stress test. “UK banks would be resilient to a severe stress scenario that incorporated persistently higher advanced-economy inflation, increasing global interest rates, deep and simultaneous recessions in the UK and global economies with materially higher unemployment, and sharp falls in asset prices,” the BoE said. This reflects the “resilience” built up by banks in recent years, it added.
Royal Mail strikes to end
The Communication Workers Union (CWU) and Royal Mail have announced an agreement to bring to and end the Postal workers long-running pay and conditions dispute.
After their 115,000 workers held 18 days of strikes in the last year year, workers overwhelmingly backed (75%) a three-year agreement which includes a 10% salary increase, some of which was given in 2022, and a one-off lump sum of £500.”The agreement provides Royal Mail a platform for the next phase of stabilising the business whilst continuing to drive efficiencies and change,” a spokesman for Royal Mail said.”The three-year pay deal agreed provides certainty for employees and ensures Royal Mail remains the industry leader on pay, terms and conditions.”
Microsoft & Activision
Microsoft’s $69 billion purchase of Activision looks back on after it won a court fight with US regulators, the FTC, and also got an unprecedented reconsideration from the UK’s Competition and Markets Authority (CMA) after both had previously blocked the deal.
New Engine Manufacturer for the UK
French motor giant Renault and Chinese carmaker Geely are joining forces to creat a new engine manufacturer with its headquarters in the UK. The firms will invest £6bn in the venture to develop low-emission petrol, diesel and hybrid engines. It will employ about 19,000 workers at its 17 engine factories, as well as five research and development hubs. Renault and Geely said in a joint statement that the new company will use its UK headquarters to “consolidate operations, build on synergies, and define future plans.”
Cable
The US dollar slid against the pound to $1.29 as risk on sentiment returned to US markets. Overnight, the DOW rose 0.93%, the S&P 500 rose 0.67% and the NASDAQ rose 0.55%.
Two-year mortgage rates hit 15-year high
The average two-year mortgage rates have reached a 15-year high of 6.66%, surpassing the peak hit after last year’s mini-budget. Rates have been steadily climbing due to stickier-than-expected inflation, leading to fears that the Bank of England will raise interest rates higher and keep them there for longer. The average five-year rate also rose to 6.17%. More rises are expected as almost 300 lenders withdrew their products from the market. Homeowners who agreed fixed-rate deals in a time of low interest rates are set to face much heftier interest payments. Stronger-than-expected wage growth put “intense” pressure on the MPC to continue increasing rates in August, says Martin Beck, chief economic advisor to the EY ITEM Club.
UK Aviation Council
Ryanair has resigned from the UK Aviation Council and branded it as a “talking shop” which does not deliver benefits or reform for the sector or passengers. Ryanair’s chief executive Michael O’Leary accused the organisation, led by Parliamentary Under-Secretary of State in the Department for Transport Charlotte Vere, of being “useless and ineffective” on a range of issues in recent months.
Arm
The FT reports that Arm is in talks with Nvidia to join a group of potential investors to anchor its IPO
Nasdaq
The Nasdaq cut the weighting of its big six – Microsoft, Apple, Alphabet, Nvidia, Amazon and Tesla – to help the index regain balance and encourage diversification.
Pension reforms could leave savers worse off
High fees charged by private equity firms could erase returns for pension savers, according to the Government’s own modelling. The Treasury has proposed pension reforms that would require pension funds to invest 5% of their assets in start-ups and private equity. However, internal modelling has shown that the high fees charged by private equity firms could negate any potential returns. The average scenario estimates that a worker saving into a pension for 30 years would have a pot worth £283,800 if 5% of the money were invested in private equity. However, after fees are taken into account, a saver who did not invest in private equity would be £1,300 better off.
Financial firms must boost defence against AI risks
Nikhil Rathi, the chief executive of the Financial Conduct Authority (FCA), will today warn that although artificial intelligence (AI) promises a range of opportunities, such as improving financial models, increasing productivity in customer support and enhancing fraud and money-laundering detection, it also poses potential risks for financial markets. “The use of AI can both benefit markets and can also cause imbalances and risks that affect the integrity, price discovery and transparency and fairness of markets if unleashed unfettered.” Rathi is also expected to say: “As AI is further adopted, the investment in fraud prevention and operational and cyber resilience will have to accelerate simultaneously. We will take a robust line on this – full support for beneficial innovation alongside proportionate protections.” The Times points out that KPMG announced a multibillion-dollar tie-up with Microsoft on Tuesday night to expand its AI capabilities in audit, tax and advisory services while in April, PwC announced plans to invest $1bn in the technology to automate parts of its audit, tax and consulting services in its American business over three years.
Hedge funds grow more cautious over crypto assets
Global hedge funds not specializing in crypto assets have become skittish due to recent industry turmoil, leading to an exit from the sector. According to a report by PwC and the Alternative Investment Management Association (AIMA), the proportion of traditional hedge funds investing in crypto-assets has dropped to 29% this year from 37% in 2022. Increased uncertainty over U.S. regulation of the sector may lead a quarter of current investors to reconsider the asset class altogether. Last year’s market events affected investing decisions for over 70% of the surveyed hedge funds, which oversaw a combined $280bn in assets. “The digital assets space has had to reckon with short-comings in its fundamental operations, including risk management, as well as allegations of corporate malfeasance,” AIMA CEO Jack Inglis said in the report.
Latest insolvencies
Appointment of Liquidators – JEN BOOTH CONSULTING LTD
Appointment of Administrator – RAPID PRODUCT DEVELOPMENT LTD
Appointment of Liquidators – STEPHEN GREW CONSTRUCTION CO LIMITED
Appointment of Liquidators – VENTRA LTD
Appointment of Liquidators – KW ADVISORY LTD
Appointment of Liquidators – AXE ASSOCIATES LIMITED
Appointment of Liquidators – T & D SOMERSET LIMITED
Appointment of Liquidators – K STROUD PROPERTIES LTD
Appointment of Liquidators – RAVEN & LACK LIMITED
Appointment of Liquidators – OPTIMAL PROPERTY SOLUTIONS LIMITED
Appointment of Liquidators – LG HOLDINGS UK LTD
Appointment of Liquidators – ZINGARI LIMITED
Appointment of Liquidators – K & K GLOBAL CONSULTING LIMITED
Petitions to wind up (Companies) – I & E STEAK LTD
Appointment of Administrator – DONCASTER ENTERPRISE PARK LIMITED
Appointment of Liquidators – FSB DEVELOPMENTS LTD
Petitions to wind up (Companies) – HOUSE & HOME SERVICES LIMITED
Appointment of Liquidators – DARCIE ENGINEERING LIMITED
Petitions to wind up (Companies) – DALEBRAE CONSTRUCTION LIMITED
Appointment of Liquidators – SPECTRUM CAPITAL MANAGEMENT LIMITED
Appointment of Administrator – HIGH WYCOMBE CINEMA NUMBER TWO 2 LIMITED
Appointment of Administrator – CLYDEBANK CINEMA 2 LIMITED
Petitions to wind up (Companies) – RIDGEMERE DEVELOPMENTS LTD
Appointment of Administrator – MAJESTIC BINGO LIMITED
Appointment of Liquidators – ICF FINANCIAL SERVICES LIMITED
Petitions to wind up (Companies) – MILREC UK LIMITED
Petitions to wind up (Companies) – COSTAL AND COUNTRY DEVONSHIRE ARMS LIMITED
Appointment of Administrator – L S ENTERPRISES LTD
Petitions to wind up (Companies) – LORENTZ BUILD LTD
Appointment of Liquidators – MARTIN BROTHERS MOTOR COMPANY LTD
Petitions to wind up (Companies) – LONDON SKYLINE INTERNATIONAL LIMITED
Appointment of Liquidators – S K HILL DEVELOPMENTS LTD
Appointment of Liquidators – CHEERHEALTH HOLDINGS LIMITED
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.