Business news 14 January 2022
James Salmon, Operations Director.
Small firms’ loan defaults increase. Half of Business have 3 or less months of cash reserves. Global growth to slow in 2022. Breaking GDP news. Covid absences jump in December. Commercial landlords struggling to find office tenants. And more business news.
Small firms’ loan defaults increase
A survey of lenders by the Bank of England shows that the number of small businesses falling behind on their loan repayments rose in the three months to the end of November. The analysis shows that fewer medium-sized businesses defaulted on corporate debt repayments in the period, while the number of large companies defaulting remained steady.
Lenders expect defaults to increase for SMEs in Q1, while default rates for large businesses are expected to remain unchanged.
Half of Business have 3 or less months of cash reserves
The analysis from the Office for National Statistics shows that 11% of businesses have no cash reserves, while 7% have low or no confidence that they will survive the next three months.
Another 40% have a maximum of three months’ worth of cash reserves.
Martin Beck, of the EY Item Club, said that the impact of the Omicron variant would be reflected in growth, commenting: “Some consumers appear to have cut back on social consumption while the significant number of infections will have disrupted the ability of some companies to operate. So it’s looking more likely that GDP fell in December.”
UN: Global growth to slow in 2022
The global economy is set to grow by 4% in 2022 – down from 5.5% last year – and expand 3.5% in 2023, according to a new UN report. The World Economic Situation and Prospects 2022 report said growth seen in 2021 after a contraction of 3.4% in 2020 started to slow by the end of last year as pandemic-related support measures were withdrawn and supply-chain disruptions arose. The analysis, from the UN Department of Economic and Social Affairs, said that alongside the pandemic, “rising inflationary pressures in major developed economies and a number of large developing countries present additional risks to recovery.” The report also warned of the impact of the coronavirus crisis on inequality, saying that while GDP per capita in developed economies is expected to almost fully recover by 2023, relative to pre-pandemic projections, for “the vast majority of developing countries, a full recovery of GDP per capita will remain elusive.”
Breaking – GDP
UK GDP expanded by 0.9% between October and November, a reading that was above economists forecasts. The data indicates the UK economy was above its pre-pandemic size by 0.7% in November before Omicron reared its head.
Covid absences jump in December
Figures from the Office for National Statistics show that absences related to Covid-19 hit a 19-month high at the end of last year, with around 3% of the workforce absent in late December.
Quarantine reduction welcomed
Businesses have welcomed the Government’s decision to cut the number of self-isolation days down to five. Health Secretary Sajid Javid said that as of Monday, people in England who test positive will not need to quarantine from the sixth day – as long as they test negative on a lateral flow on days five and six.
The move comes as officials look to ease pressure on businesses and services being hit by staff absences. Hannah Essex, co-executive director of the British Chambers of Commerce, commented: “Businesses are continuing to tell us they are struggling with high levels of absence due to Covid and will welcome the news it is judged safe to further reduce the isolation period.” However, she warned that firms are finding it difficult to get the lateral flow tests they need to prove they can return to work, adding: “This new change will only help if urgent action is taken to ramp up the supply of tests, so employees are not isolating unnecessarily.”
Matthew Taylor, chief executive of the NHS Confederation, said: “This is a pragmatic move which leaders will welcome if it can mean more health and care workers who are well enough can return to the frontline.”
Commercial landlords struggling to find office tenants
Research from flexible workspace provider infinitSpace shows that more than three fifths of commercial landlords are struggling to attract tenants to traditional offices. The study shows that 64% have seen a “notable shift” in tenants’ demands during the pandemic. While commercial landlords currently dedicate an average of 33% of their office portfolio to some form of flexible or co-working spaces, by 2026 this is forecast to rise to 44%.
Wybo Wijnbergen, CEO of infinitSpace, said: “What businesses want and need from their office has been steadily evolving over the past decade, but the pandemic has kicked the pace of change into overdrive … As hybrid working becomes commonplace and businesses look for more collaborative and engaging workspaces, many landlords are struggling to attract tenants if they don’t have flexible offerings.” He added that most office landlords are “responding to this challenge”, saying commercial landlords are “looking to transform their buildings to fit the ‘new normal’.”
Remortgage demand surges
While Bank of England data suggests demand for mortgages fell back in the three months to the end of November, lenders expect the availability of home finance to rise in Q1, with this set to be driven by a significant uplift in demand from existing homeowners wanting to remortgage. Andrew Montlake, managing director of independent mortgage broker Coreco, said: “Remortgages were definitely on fire in the closing stages of 2021 as rumours of a rate rise grew stronger and stronger,” while Ross Boyd, chief executive of mortgage switching platform Dashly, said the prospect of higher inflation in 2022 is prompting homeowners to lock into lower rates before lenders start to charge more on the back of further base rate increases from the Bank.
Which? warns over tax rebate firms
Using a company to help claim a tax rebate could end up costing people extra according to Which?, with the consumer group saying people are much better off going straight to HMRC themselves to avoid “unnecessary bills”. While tax rebates are free to claim via HMRC, with Which? saying the process is “relatively simple”, analysis shows that some third-party firms charge between a quarter and half of the final tax payment received in return for their services.
Which? has identified 208 firms with “tax reclaim”, “tax refund”, “tax claim” and “tax rebate” in their names, noting that some use similar branding and language to the HMRC. A survey of more than 4,000 people found that one in five had been contacted by a tax refund company, heard of one by word of mouth, or come across one online.
Commenting on the findings, Which? money editor Jenny Ross said: “For most people with a rebate to claim, HMRC is the best port of call. Go to its website directly to ensure you aren’t left footing any unnecessary bills.” A spokesman for HMRC said: “We don’t accredit or in any way approve agents and take firm action against any not complying with the law.”
Starling tops customer experience ranking
Starling Bank has topped a list of the UK’s best customer experience companies in analysis compiled by KPMG. The Customer Experience Excellence Report considered the views of 9,995 consumers across 282 organisations. Meanwhile, a separate report from KPMG found that a fifth of people have not visited a bank branch since the pandemic began, while just 22% have visited a branch within the previous six months.
Gove closes tax loophole on second homes
Levelling Up Secretary Michael Gove has pledged to crack down on second home owners who abuse the tax system, saying measures on tax relief for holiday rents would target second home owners who pretended to let out their property but actually leave them empty. Under new rules, second home owners will only be able to register for business rates if they can prove they let their properties for at least 70 days in a year. At present they are allowed to pay business rates if they make their property available for letting for 140 days a year. However, there is no requirement for evidence that the property has been commercially let. Mr Gove said: “The Government backs small businesses, including responsible short-term letting … However, we will not stand by and allow people in privileged positions to abuse the system by unfairly claiming tax relief and leaving local people counting the cost.”
Experian
Credit Information specialists Experian reported Q3 revenue growth at the upper end of expectations at 14% and strong margin improvement. North America was the source of 67% of group revenue delivering organic growth of 16%.
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