Business news 14 December 2021
James Salmon, Operations Director.
Insolvency warning as Begbies Traynor revenue leaps 39%. Full lockdown would see economy slip below pre-pandemic size. Half of families £110 a year worse off since 2019. IoD: 1 in 3 UK importers not ready for full customs checks. And more.
Insolvency warning as Begbies Traynor revenue leaps 39%
Major insolvency specialists Begbies Traynor have released strong financial statements for the first half of the year with revenue and profits rising.
As a bell weather for failing companies, the insolvency specialist saw revenue climb by 39% year-on-year from £37.5m in 2020 to £52.3m while profit before tax was lifted from £0.5m to £2.7m in the six months to 31 October.
Bebgies Traynor expects to perform in line with market expectations for the full year and said a wave of insolvencies was likely to boost demand for the company’s services following the removal of government pandemic support measures.
Chief executive Ric Traynor said “I am pleased to report a strong financial performance in the period, which is a testament to the benefit and integration of our recent acquisitions and maintains our track record of growth in revenue and adjusted earnings. This strong performance, and an anticipated increase in national insolvency numbers following the removal of the Government’s pandemic support measures, leaves us confident of delivering market expectations for the full year”
Full lockdown would see economy slip below pre-pandemic size
A full lockdown designed to reduce the spread of new coronavirus variants would derail the UK’s post-pandemic economic recovery, according to Pantheon Macroeconomics. The economists believe a renewed shutdown of the retail, leisure and hospitality sectors would cause the economy to shrink to 6% below its pre-pandemic level. Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “In a plausible worst-case scenario, in which retail and consumer services businesses are forced to close again, GDP would revert to being about 6% below its January 2020 level while the restrictions were in place.”
Half of families £110 a year worse off since 2019
Analysis from the New Economics Foundation (NEF) shows that half of UK families have seen their disposable incomes shrink in the last two years, with the poorest half of the population seeing their incomes squeezed by £110. The report also shows that the richest 5% are £3,300 a year better off. The NEF analysis found that since 2019, the poorest half of the population in every region apart from London and the east of England have seen their incomes squeezed by an average of £110 per year, after accounting for increases in the cost of living. Alfie Stirling, director of research and chief economist at the NEF, commented: “With prices expected to continue increasing, the threat of a rise in interest rates and ongoing effects of Brexit, things could get a lot tougher for families that have already suffered most.”
IoD: 1 in 3 UK importers not ready for full customs checks
Almost a third of British companies that import goods from the EU are not prepared for full post-Brexit customs checks, according to a survey by the Institute of Directors (IoD). The poll saw 37% of small businesses and nearly a quarter of large firms say they were not ready for the end of a six-month grace period allowing them to delay making customs declarations to HMRC and paying any tariffs due. As of January 1, they will have to do so immediately. Kitty Ussher, chief economist at the IoD, said that while “significant changes” to customs arrangements are going to be introduced, “a large portion of businesses are either unprepared or simply unaware.” This, she added, “will exacerbate existing supply chain problems, leading to further congestion at ports, as well as extra costs from accidental non-compliance for many businesses.”
Investors increasingly take on directors
A study by Thomson Reuters shows investor rebellions against company directors have risen this year, with 42 directors of companies in the FTSE 100 and FTSE 250 facing big votes against their re-election at annual meetings, with this up from 30 last year. The analysis found that 33 companies suffered votes of 20% or more against their annual remuneration reports, compared with 17 a year ago. There were 16 climate-related shareholder resolutions seen in 2021, compared to only five in 2020 and just three in 2019. Hilary Owens Gray, a director at Thomson Reuters’ practical law business, comments: “Shareholders are becoming more vocal in making sure companies set sensible remuneration targets for directors and address how they are going to play their part in tackling climate change.”
Housing market set to be busy but less frantic in 2022
Rightmove expects the housing market to stay busy but return to more normal levels of activity in 2022, saying it believes that following a “frenzied” 18 months, the market is heading for a “less frenetic” period. The property platform noted that one sign of a return to more traditional conditions was the appearance of the usual “December dip”, with the average asking price falling by 0.7% over the past month. Rightmove’s Tim Bannister said that an interest rate rise was likely next year, and that while a rate rise was often regarded as unhelpful to the market, “a slowing of the fast pace of sales, and associated pace of price rises, will help the return to more normality that will suit many movers”. Rightmove data shows that the average asking price of a UK home is now £340,167 compared with £342,401 a month ago, with the annual rate of price growth static at 6.3%. It has predicted that house prices will rise by 5% next year, with buyer demand and market momentum “remain strong going into 2022”.
Biggest banks pass BoE stress test
The Bank of England (BoE) says Britain’s financial system is healthy enough to withstand a deep recession, saying major UK banks “are strong enough to keep supporting households and businesses, even in severe scenarios”. The Bank’s annual stress test found that the country’s eight biggest lenders would not see their levels of capital drop to dangerous levels, even in a scenario where unemployment climbed to 12% and house prices crashed by 33%. Releasing the findings, the BoE said it would raise the capital requirements for UK banks next year, with the Bank also consulting on loosening affordability limits on mortgages. It also warned that it was monitoring the increasing use and popularity of cryptocurrencies. Noting that the “direct risks to the stability of the UK financial system from cryptoassets are currently limited,” the Financial Policy Committee added: “However, at the current rapid pace of growth, and as these assets become more interconnected with the wider financial system, cryptoassets will present a number of financial stability risks.” Reflecting on the stress test report, BoE governor Andrew Bailey said the “system can withstand a stress that’s much larger than the stress we’ve seen so far”. However, the Bank warned that the pandemic could still have “a greater impact” on the economy, especially in light of new variants.
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