Business news 13 July 2023
James Salmon, Operations Director.
BoE predicts mortgage pain ahead for millions. Britons set to be £25,000 poorer by 2040. GDP falls. Us inflation and the Pound and markets. xAI, WFH, and more business news that we thought would interest our members.
BoE predicts mortgage pain ahead for millions
Mortgage payments will rise by at least £500 a month for nearly one million households by the end of 2026, according to the latest Financial Stability Report from the Bank of England. Those on cheap fixed deals who remortgage by the end of 2026 will see a sharp jump in costs of at least £6,000 a year, economists at the Bank said. Of the near-million facing an increase of at least £500-a-month, around 200,000 will see their bills rise by £1,000 or more. In the shorter term, the average household coming off a fixed rate deal in the second half of 2023 will have to pay about £220 more a month if they refinanced at current rates. The proportion of households under pressure because of rising mortgage payments had risen from 1.6% in November 2022 to about 2%, the BoE said, with the figure likely to reach 2.3% by the end of the year, affecting about 650,000 households. On Wednesday, the average rate on a two-year fixed mortgage hit a fresh 15 year high of 6.7%, according to Moneyfacts.
Britons set to be £25,000 poorer by 2040
The chairman of Liz Truss’s Growth Commission, Douglas McWilliams, has claimed Britons will be £25,000 poorer by the 2040s if the stagnant growth rate continues. Speaking at the launch of the new group, McWilliams also said that, compared to people in the US, the average Briton has less than £10,000 to spend as a result of slower growth in recent decades.
GDP falls
The UK Economy shrank slightly in May, with GDP falling by 0.1% as the dominant services sector stagnated and factories contracted. The Office for National Statistics said that gross domestic product fell on the month, after growth of 0.2% in April. That’s slightly better than expected, as economists had forecast a fall of 0.3% in May. They feared that the extra bank holiday for King Charles’s coronation hit activity, while the economy continued to be held back by the cost of living squeeze, and public sector strikes.
Us inflation and the Pound and markets
The pound strengthened against the Dollar by 0.4% yesterday as the USD decline accelerated again following US inflation data that reflected a larger fall in the rate of inflation in the US with headline CPA at 3%. The USD is currently at $1.306 to the pound.
UK stocks also rose sharply, rising 1.8% and oil rose above $80. Overnight, the DOW rose 0.25%, the S&P 500 rose 0.74% and the NASDAQ rose 1.15%.
WFH and office values
McKinsey Global Institute said in a repor, looking at nine cities globally that they calculate the move to WFH following the pandemic has reduced demand for office space and will wipe $800billion off the valuation of office buildings in the global hubs.
xAI
Elon Musk, who co-launched ChatGPT creator OpenAI (before leaving in 2018 over his concerns on safety) has launched xAI, which is an artificial-intelligence company to challenge ChatGPT but with a difference. Elon Musk said the companies AI will be“maximally curious” but that is safer and “pro-humanity”.
Microsoft & Activision
Following a US judge blocking the Federal Trade Commission from stopping the merger, the FTC has now moved to appeal against a decision in a bid to block again Microsoft from proceeding with its $69bn purchase of Activision Blizzard.
Rising rates will destroy PM’s debt-cutting targets
The Office for Budget Responsibility will today report on the effect rising interest rates are having on the public finances. Stubbornly high inflation and soaring borrowing costs will make it more difficult for Rishi Sunak to fulfil his pledge to drive down Britain’s debt. At the budget in March, the OBR forecast that a one percentage point rise in interest rates would add about £20bn to borrowing in 2027-28, the key year for meeting the Chancellor’s target of getting debt falling as a percentage of GDP within five years’ time. It based its forecast on the Bank’s base rate peaking at 4.3%, and had closed its forecasting round when the yield – or interest rate – on 10-year UK government debt was 3.3%. Since then the Bank has increased rates to 5%, with financial markets anticipating further increases to a peak of 6.3% early next year. The yield on 10-year UK gilts has risen to 4.6%. Analysts at Deutsche Bank said the hit to the public purse from higher rates would be about £15bn a year. Bank of America said the figure could be as high as £30bn.
British over-55s least likely to return to work in G7
Over-55s who left their jobs during the pandemic are the least likely to return to work in the G7, PwC has found. A “great retirement” during the pandemic has left Britain with a quarter of a million more economically inactive people aged 55 to 64. France, Germany, and Japan have been more successful in getting older workers back into the job market. Factors contributing to this inactivity include NHS waiting lists and rising house prices. Barret Kupelian, PwC chief economist, said: “The UK has a really low unemployment rate and still 1m vacancies, and we have these 200,000 to 300,000 older workers who are inactive. They have 35 years of job experience. It might be of a different era, but you have got people who you can train up with relative ease to integrate them into your workforce, when someone fresh out of university has zero years of experience.”
BBB is back with plan for pension funds
The Timeshas an interview with Louis Taylor, the new chief of the British Business Bank about the state economic development agency’s plans to boost investment into UK companies. The BBB has been preoccupied over the last three years with the administration of pandemic support schemes, for which it received heavy criticism. Looking forward, Taylor talks about a new £200m South West Investment Fund, which is part of a broader network of regional funds that Taylor hopes will attract private sector partners. Taylor is also hoping to convince ministers to give the BBB greater independence by allowing it to keep and recycle the proceeds of funds it manages. “We have foresight about future funding for a few years. Some of that money has to go back to government once we get the investment return. If all of that money was made permanent, we could recycle the returns, that would be terrific.”
PageGroup says people reluctant to change jobs
FTSE 250 recruitment PageGroup is being forced to cut staff after demand wavered and candidates became increasingly reluctant to change jobs. Temporary recruitment had outperformed demand for permanent jobs as clients sought more flexible options, the firm said. PageGroup is best known for its accountancy recruitment, which makes up about 40% of its business. Profit fell by 6.5% in the second quarter. Robert Walters also saw revenues shrink in Q2 amid dwindling confidence.
UK’s largest banks would be ‘resilient’ in an economic crisis
The Bank of England’s annual stress tests of the UK’s largest banks found they have enough capital to ride out a potential economic crisis. Britain’s eight biggest banks had enough capital to weather theoretical shocks under a scenario which the BoE said was more severe than the global financial turmoil of 2008. “The UK economy and financial system have so far been resilient to interest rate risk,” BoE Governor Andrew Bailey said, though he noted the full impact of higher interest rates had yet to be felt. Bailey also pointed out that banks could afford to pay customers a higher return on their deposits and were in a “strong position to support customers who are facing payment difficulties.”
Barclays wins UK Supreme Court case over push payment fraud
Barclays has won a landmark legal ruling that banks are not liable for fraudulent transactions that have been requested by account holders. Fiona Philipp, a music teacher, and her husband, brought a claim against Barclays after they were conned into sending £700,000 in an Authorised Push Payment or “APP” scam to a fraudster’s bank in the United Arab Emirates. Supreme Court Judge George Leggatt said requiring banks to block payments expressly requested by customers themselves, even in cases where fraud was suspected, was “inconsistent with first principles of banking law”. The ruling comes as the Payment Systems Regulator is set to bring in new rules requiring banks and payment companies to reimburse victims of APP, which cost victims nearly £500m last year, according to the latest figures from UK Finance.
Six restaurants declared insolvent every day in Q1
Six restaurants were declared insolvent every day between January and March, according to data from the Insolvency Service. The Bank of England warns that other sectors are likely to experience a rise in insolvencies. Rising interest rates and a subdued economic outlook are contributing to the financial difficulties faced by restaurants. The share of medium-sized companies facing repayment difficulties is expected to reach its highest level since 2009. Small and medium-sized businesses in the hospitality sector have accumulated significant debt during the pandemic, making it challenging for them to remain viable. Matt Howard, head of insolvency and recovery at Price Bailey, says that a small increase in interest rates can be an “awful lot of money” for a business with a large amount of debt.
Latest Insolvencies
Appointment of Liquidators – CARBON (AI) LIMITED
Appointment of Administrator – SALTEES PROPERTIES LIMITED
Appointment of Administrator – BURY CATHOLIC PREPARATORY SCHOOL LIMITED
Appointment of Liquidators – MCD VENTURES LIMITED
Appointment of Liquidators – GLA999 LIMITED
Appointment of Administrator – Q.A. (WELD TECH) LIMITED
Appointment of Liquidators – LINKSPEED LIMITED
Appointment of Liquidators – MARATHORN LIMITED
Appointment of Liquidators – GOODMAN UK HOLDINGS LIMITED
Appointment of Liquidators – PEMLI SOLUTIONS LTD
Appointment of Liquidators – RED KEEP PROPERTIES LIMITED
Appointment of Liquidators – THE UNCLE’S HOSPITALITY LTD
Appointment of Liquidators – EUROPEAN TRADING PARTNER LIMITED
Appointment of Liquidators – BAPP GROUP CONTRACTS LIMITED
Appointment of Liquidators – PALOMA GLOBAL LTD
Appointment of Liquidators – BENSON TURNER LIMITED
Appointment of Liquidators – NNM CONSULTANCY LIMITED
Appointment of Liquidators – ICS HOLDINGS LTD
Appointment of Liquidators – UYU LTD
Appointment of Liquidators – CROWNSHIELD TRAVEL LIMITED
Appointment of Liquidators – KAMSTRUP INSTRUMENTATION LIMITED
Appointment of Liquidators – MITCHELL FINANCIAL PLANNING LTD
Appointment of Liquidators – NETRONOME LIMITED
Appointment of Liquidators – TNKC (UK) LIMITED
Appointment of Liquidators – SJR DYNAMICS LIMITED
Appointment of Liquidators – SDS ANALYSIS LTD
Appointment of Liquidators – BLUE CROW ENGINEERING LTD
Appointment of Liquidators – SW4 DEVELOPMENTS LIMITED
Appointment of Liquidators – WILL CARTER CONSULTING LIMITED
Appointment of Administrator – T4051 LIMITED
Appointment of Liquidators – LET TWO LTD
Appointment of Liquidators – DIGITAL PATH SOLUTIONS LTD
Appointment of Liquidators – MURPHY PHILIPPS ARCHITECTS LIMITED
Appointment of Liquidators – DECD LTD
Petitions to wind up (Companies) – SEALION PROPERTIES & INVESTMENTS: WORLDWIDE LTD
Appointment of Administrator – J. TOMLINSON LIMITED
Appointment of Liquidators – PERUDA LEASING LIMITED
Petitions to wind up (Companies) – LLOYD FRASER LOGISTICS LIMITED
Appointment of Liquidators – STAR SPIKE 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.
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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!
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Check our compensation calculator to see how much your business could be owed!
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.