Business news 15 December 2022
James Salmon, Operations Director.
Compulsory liquidations soar 21% in November. SME finance demand declines as Bank expected to increase interest rates. Inflation dips to 10.7%. 4m homes face mortgage increase in 2023. And more business news.
Compulsory liquidations soar 21% in November
Company insolvencies in November were 21% up on the same month last year and 35% higher than in 2019 – the last pre-pandemic November.
The Insolvency Service data shows that there were 2,029 registered company insolvencies last month. Of these, 1,595 were creditor voluntary liquidations. The analysis also reveals that there were five times as many compulsory liquidations last month than in November 2021, with a 7% increase on November 2019.
The Insolvency Service said compulsory liquidations had increased from historic lows during the pandemic, partly as a result of an increase in winding-up petitions presented by HMRC.
Christina Fitzgerald, president of insolvency and restructuring trade body R3, said: “What we’re seeing here is a perfect storm of creditors pursuing unpaid debts and directors choosing to close down their businesses — either before this choice is taken away from them or because they have simply run out of road.”
David Kelly, Head of Insolvency at PwC said: “This is a sobering reminder that rising interest rates, energy costs and supply chain issues are starting to bite as we head into 2023.”
Nick O’Reilly, director of restructuring and recovery at MHA, warned: “With businesses no longer able to rely on pandemic support measures such as bounceback loans, coupled with high energy prices and crippling inflation, many more will likely face the wall early next year.”
Are any of your customers likely to go bust? Do you monitor and credit check your customers before fulfilling an order?
Are any of your customers who owe you money, at risk of going bust or closing down before they pay you?
At CPA we can help you monitor and credit check your customers as part of your membership. We can also chase overdue accounts and prompt payments so you are among the creditors that get paid while others don’t. We can’t magic money out of nothing, but if your customer has the ability to pay, we have the means to encourage that payment happen.
SME finance demand declines
UK Finance data shows that a decline in applications for finance from SMEs continued in Q3. Gross lending through loans and overdrafts to SMEs fell to £4.5bn from £5.1bn in the previous quarter. UK Finance said that while overdraft applications “continued to trend up” in the third quarter, demand for loans fell. With overdraft applications among SME’s rising, UK Finance said: “This points to cashflow management and working capital requirements rather than business development.”
Bank expected to increase interest rates
The Bank of England is expected to increase interest rates, despite inflation falling to 10.7% in November from 11.1% in October. Economists expect the Bank’s Monetary Policy Committee (MPC) to raise the base interest rate from 3% to 3.5% in December in what would be the ninth consecutive increase. This would mark a less severe hike than the 0.75% increase the MPC voted for last month. Deutsche Bank has suggested that rates could push as high as 4.5% next year, while experts at ING and Investec predict that the rate will peak at 4% in 2023.
On cue, the US Federal Reserve on Wednesday raised its benchmark interest rate to the highest level in 15 years, indicating the fight against inflation is not over despite some promising signs lately. Keeping with expectations, the rate-setting Federal Open Market Committee voted to boost the overnight borrowing rate half a percentage point, taking it to a targeted range between 4.25% and 4.5%.
Overnight, the DOW dropped -0.42%, the S&P 500 dropped -0.61%. and the NASDAQ dropped -0.76%.
Inflation dips to 10.7%
Office for National Statistics (ONS) data shows that inflation eased last month, falling to 10.7% in the year to November from a 41-year high of 11.1% in October. The decline was driven by petrol prices easing from record highs. However, the cost of drinking alcohol in pubs, eating in restaurants and getting takeaways increased, while grocery bills also continued to climb. Chancellor Jeremy Hunt said tackling inflation remained his “top priority”, adding: “I know it is tough for many right now, but it is vital that we take the tough decisions needed to tackle inflation – the number one enemy that makes everyone poorer. If we make the wrong choices now, high prices will persist and prolong the pain for millions.”
While economists including Paul Dales of Capital Economics and Samuel Tombs of Pantheon Macroeconomics said November’s figure showed inflation had peaked and price rises would continue to slow, Grant Fitzner, chief economist at the ONS, told the BBC’s Today programme that it was “too early” to tell. Yael Selfin, chief economist at KPMG, commented: “While we expect inflation to continue on its downwards trajectory and return to the Bank of England’s target of 2% in the first half of 2024, there is a risk it may prove more persistent as higher costs are passed on more widely.”
Tech investments hit by recession and skills shortage
A poll by software firm Studio Graphene shows that 44% of business leaders believe their digital platforms do not do justice to the quality of the product or service they offer, with almost half ready to invest in making improvements in the coming year. However, respondents also detailed a series of significant hurdles and concerns, with the recession and a shortage of digital skills the main issues. While almost half of business leaders polled said their business plans to update, refresh or completely recreate its digital platforms in 2023, two-thirds cited a “damaging” lack of digital skills within their business. Nearly as many respondents voiced concern that the recession, high inflation and rising interest rates will prevent them from investing in customer-facing tech next year.
Are any of your customers affected?
4m homes face mortgage increase in 2023
About 4m UK households will face higher mortgage payments next year, the Bank of England has warned, with the typical payment up by £250. The average monthly mortgage bill would go up from £750 to £1,000, according to the Bank’s Financial Stability Report. A further 2m would see higher costs by 2025. Within three years, 70% of mortgage holders would see their payments increase. The rising cost would cause severe financial difficulties for another 220,000 households, the Bank said. It added that buy-to-let investors were particularly vulnerable, as about 85% of mortgages to landlords were interest only, making them highly sensitive to rising borrowing costs. It warned that landlords would either raise rents for tenants or sell off their properties, causing a deeper fall in house prices.
Are any of your customers going to see their ability to pay hit?
London house prices down £5k in a month
London house prices fell £5,000 between September and October after demand from buyers slumped due to soaring mortgage rates. Office for National Statistics figures show that the average house price in the capital fell by 0.9% to £541,720. Across the country, house prices grew by 0.3% between September and October. House prices grew 12.6% in the year to October, up from 9.9% the previous month. Jamie Durham of PwC said a delay between someone agreeing to purchase a property and it being counted in the ONS data meant the figures “reflected a point before economic conditions tightened.” Average mortgage rates surged above 6% following September’s mini-Budget, but have since slipped back below 6%.
Loophole helps wealthy avoid IHT, says IFS
The Institute for Fiscal Studies (IFS) says wealthy families are increasingly using pensions to avoid inheritance tax. The think-tank said pensions risk becoming “a vehicle for the wealthiest households” to slash their inheritance tax bill as they use other investments to provide income in retirement. The issue stems from a rule that says money remaining in a pension is not subject to inheritance tax, with this incentivising people to use other investments to fund retirement and leave pension pots for their families.
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.