Business news 14 July 2023
James Salmon, Operations Director.
43% of SME’s struggle with late payments. Corporate distress among SMEs rises. Mortgage rates hit 15-year high, defaults rise. UK economy contracted 0.1% in May. And more business news that we thought would interest our members.
43% of SME’s struggle with late payments
A report by FreeAgents looking at small businesses over the last 12 months found that 43% of small businesses that send invoices, are paid late. The figures show little movement since 2020 when a similar study found 46% struggling as the recovery from the pandemic has not resulted in an improvement in payment behaviour.
Indeed, with most small businesses are still trying to recover from the pandemic and are currently battling the inflation & interest rate crisis.
Late payments are the biggest cause of cashflow problems and the insolvency of small businesses.
38% of those surveyed said they wanted tougher penalties for late payers. 34% wanted to mandate the Prompt Payment Code and 31% wanted companies to get an official star rating based on how quickly they pay their suppliers.
CPA agrees that tougher penalties are needed. CPA is fighting the late payment culture with a range of services. If you struggle with late payments, please contact us
Find out how we can help you. Just call Peter Uwins, CPA’s National Sales Manager, on 020 8846 0000 (business hours) or email nsm@cpa.co.uk today.
Corporate distress among SMEs rises
Corporate distress among small and medium-sized enterprises (SMEs) in Britain and Europe has reached its highest level since mid-2020, according to law firm Weil Gotschal and Manges.
SMEs are struggling the most as higher interest rates squeeze liquidity, while large companies have the scale to access deep pools of capital, diversify their funding and hedge exposures.
The study’s broader corporate distress index, which covers large companies as well, eased slightly from February.
Britain and France experienced the most significant increase in corporate distress. Sector-wise, real estate and the financial sector were suffering most. The study predicts that distressed levels will translate into actual default rates within approximately 12 months.
Mortgage rates hit 15-year high, defaults rise
Mortgage rates in the UK have reached the highest level in 15 years, surpassing the peak seen after the mini-Budget. There are around 800,000 households with fixed-rate mortgage deals set to expire this year and experts are predicting further increases in rates as the Bank of England continues its battle against inflation. The average rate on a two-year fixed-rate mortgage is now up to 6.94%, according to Moneyfacts, while average five-year fixes have reached 6.28%. This comes as responses to the Bank of England’s Credit Conditions Survey revealed a 30% increase in mortgage defaults in the second quarter of the year, up from a 14% rise in the three months to March. Lenders expect defaults to increase again in the third quarter as rising interest rates and inflation hammer household finances.
UK economy contracted 0.1% in May
Figures from the Office for National Statistics (ONS) show the UK economy shrank by 0.1% in May, largely due to the extra bank holiday for the King’s Coronation. This is less than the 0.3% drop predicted by economists, however.
Nevertheless, the contraction, which followed a slight rise in May, confirmed “that the economy was floundering even before the impact of recent interest rate rises are fully felt,” according to Suren Thiru, economics director at the ICAEW.
Soaring inflation and high taxes are dragging on the economy. Samuel Tombs, chief UK economist at Pantheon Macroeconomics, warned that May’s figures showed growth “remains listless”. Elsewhere, Martin Beck, chief adviser to the EY Item Club, points out that the UK has seen “next to no growth since the end of 2019.”
FIT touts new open finance coalition
A new national delivery body called the Centre for Finance, Innovation and Technology, CFIT, backed by £5m of Government start-up funding and £500,000 from the City of London Corporation, aims to strengthen the UK’s position in financial technology. CFIT will work with a “coalition” of experts from finance, technology, academia and policy-making to identify and remove barriers to sector growth, create jobs, and enable firms to achieve global scale. The first coalition, called open finance was announced in April. The CFIT says this mission of this programme is to demonstrate the power of using financial data to help consumers and SMEs.
How the cost-of-living crisis is fuelling job quits
BBC Worklife examines how the cost of living crisis is driving change in the jobs market. In a June 2023 survey of 53,912 global workers by PwC, 26% said they intend to quit their job in the next year. Much of this is driven by the cost-of-living crisis, which is especially acute in the UK: 47% of UK workers said they had little to no savings left at the end of each month, with a further 15% also stating their household struggles to pay its bills. Sarah Moore, head of people and organisation at PwC UK, says more employees may consider finding a better salary through a new role than they perhaps would have done before the pandemic. “We’re still seeing elevated quit rates following COVID -19, and pay is typically the main factor for finding a new role: in a time of crisis, people may vote with their feet.”
OBR: Britain’s public finances on a “very risky” footing
The Office for Budget Responsibility (OBR) has warned that pressures from an ageing population, surging debt interest and the shift to net zero meant Britain’s £2.5tn debt pile was on course to hit 310% of GDP in 50 years. Soaring interest rates combined with high inflation and demographic change happening more swiftly than expected, together with more people leaving the workforce, mean the UK is facing more pressure on its public finances than other advanced economies. Public debt surpassed 100% of GDP in May for the first time since 1961 and the cost of servicing that debt is at a 40-year peak. The OBR said the Government would need to impose permanent tax increases and spending cuts equivalent to 4.4% of GDP in 2028-29 if it wanted to prevent debt from taking an “unsustainable” path. Key factors weighing on public finances going forward are the pensions triple lock, a surge benefits payments for those long-term sick and lost tax receipts due to hundreds of thousands of people not working due to ill health. The OBR estimated that about £327bn would be needed to meet the UK’s 2050 net zero carbon emissions target.
PM urges unions to accept “final” pay offer
The Government has offered more than one million public sector workers, including teachers, police and doctors, pay rises of between 5% and 7%. Four education unions said they would advise their members to accept the 6.5% offer made to teachers. But a 6% offer to junior doctors was not well received, with the British Medical Association (BMA) saying the offer marks another real-terms pay cut and does not address years of below-inflation pay. Junior doctors began an unprecedented five-day strike yesterday while consultants are also due to walk out on two days next week. The Prime Minister on Thursday accepted in full the recommendations of independent pay review bodies. Rishi Sunak said: “Today’s offer is final. There will be no more talks on pay. We will not negotiate again on this year’s settlements and no amount of strikes will change our decision.”
IMF: Covid will hurt education ‘for years’
Disruption to children’s education from the pandemic will have long-lasting effects on economic growth, according to the International Monetary Fund (IMF). The global economy is expected to grow by 3% per year, well below the average of 3.9% seen in previous years. School attendance rates have dropped significantly, with many students missing a substantial number of classes. Remote learning during lockdowns has had a lasting impact on child literacy and numeracy. The IMF also highlighted other factors, such as retirement, sickness, and global tensions, contributing to the weak economic outlook
FTC v ChatGPT
The US Federal Trade Commission has opened an inquiry into OpenAI’s Chat GPT over the way it handles consumer data. The FTC is concerned over the tech’s generation of false information about individuals in so-called hallucinations and how trainging the systems on personal information could be used for fraud.
More than a quarter of UK adults have used generative AI
More than a quarter of UK adults have used generative artificial intelligence such as chatbots, according to a survey by Deloitte. The survey revealed that 26% of 16- to 75-year-olds have used a generative AI tool, with one in 10 using it at least once a day. The adoption rate of generative AI systems has exceeded that of voice-assisted smart speakers, said Paul Lee, a Deloitte partner. The survey also found that approximately four million people have used generative AI for work. However, Lee warned that generative AI technology is still in its early stages and faces challenges in terms of user interfaces, regulatory environment, legal status, and accuracy. Despite its popularity, generative AI systems are prone to producing factual errors while the potential for large-scale disinformation campaigns using generative AI has also raised concerns.
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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.