Business news 16 November 2022
James Salmon, Operations Director.
Insolvencies hit six-month high. Inflation hits 41 year high. Unemployment increases in Q3. Real terms wages slip by 2.7%. And more business news.
Insolvencies hit six-month high
Insolvency Service data shows that the number of corporate insolvencies increased by 38% year-on-year in October, rising from 1,410 in October 2021 to hit a six-month high of 1,948. October’s total also marks a jump on the 1,684 insolvencies recorded in September.
Chris Tate, restructuring and insolvency partner at Azets, said a proportion of the liquidations relate to businesses that would have failed sooner were it not for Government support measures during the pandemic. He added that while the initiatives were instrumental in providing businesses much needed support, they “inadvertently propped up ailing businesses which were likely destined to fail.”
Nick Fisher, vice president of insolvency and restructuring trade body R3, said economic pressures have hit firms and the supply chains, with “more directors choosing to close their businesses and more creditors calling in debts as a means of balancing their own books.”
Considering the climate for businesses, David Hudson, restructuring partner at FRP Advisory, said: “Inflation is devastating margins and throwing into doubt historically sound business models, which is eating away at confidence, undermining recovery plans and, crucially, testing the resolve of lenders.”
Inflation hits 41 year high
UK Inflation jumped to a 41-year high of 11.1% in October, exceeding expectations as food, transport and energy prices continued to squeeze households and businesses. Economists had projected an annual increase in the consumer price index of 10.7%, and October’s print marks an increase from the 40-year high of 10.1% seen in September.
Unemployment increases in Q3
Office for National Statistics (ONS) data shows that the rate of UK unemployment rose to 3.6% in Q3, with this up from 3.5% in the second quarter. This came as more people dropped out of the workforce, with a rise in the proportion of people not in work or seeking employment. The ONS also noted that more than half a million working days were lost to strikes in August and September. This marks the highest two-month total in more than a decade.
Darren Morgan, director of labour and economic statistics at the ONS, said: “With real earnings continuing to fall, it’s not surprising that employers we survey are telling us most disputes are about pay.”
Commenting on the latest data, Neil Carberry of the Recruitment and Employment Confederation said that while the “exceptional growth” in demand for new workers is at an end, “vacancies are still at historically high levels – it is still a good time to be looking for work.” Yael Selfin, chief economist at KPMG UK, commented: “It is only a matter of time before the recessionary environment spills into the labour market as employers increasingly consider the weakening demand and rising labour costs.”
Real terms wages slip by 2.7%
Regular pay rose by 5.7% in the year to September, according to Office for National Statistics (ONS) figures. However, when adjusted for inflation, wages fell by 2.7%. The report shows private sector pay growth of 6.6% in the period, compared to 2.2% in the public sector. The Resolution Foundation think-tank said this gap is “unsustainable” as it made it harder to recruit and retain public sector staff. The report also shows that pay excluding bonuses dropped 2.7% in Q3.
Commenting on the latest figures, Chancellor Jeremy Hunt, who will reportedly announce a significant rise in the national living wage in his Autumn Statement, said he understood that “people’s hard-earned money isn’t going as far as it should.” He added: “Tackling inflation is my absolute priority,” saying that this “guides the difficult decisions on tax and spending” the Government will make when setting out the Budget. Martin Beck, chief economic advisor to the EY Item Club, said workers’ bargaining power “still looks a long way from being able to generate a sustainable wage-price spiral,” while RSM UK economist Thomas Pugh said wage expansion of around 3% is needed to ensure the Bank of England hits its 2% inflation target.
Over-50s head back to work
Nine in ten economically inactive over-50s are considering returning to work due to the soaring cost-of-living. Data from online jobs website CV-Library shows that 91% of inactive workers in the age bracket are considering re-entering the workforce due to record inflation, pension worries and higher energy bills. The report shows that since the beginning of the pandemic, the number of people aged 50 to 64 classed as economically inactive has risen by 3.6m, or 10%. Meanwhile, a report from Reed says an increasing number of pensioners are coming out of retirement having reassessed their finances due to soaring inflation and warnings of a looming recession. The firm has recorded an 8% rise in the number of applications since the start of September and says the increase has been partly driven by people coming out of retirement.
Hunt plans windfall tax on electricity generators
Jeremy Hunt is reportedly preparing a 40% windfall tax on “excess returns” at electricity generation companies. The Chancellor is also said to be planning to expand the existing windfall tax on North Sea oil and gas operators, raising the tax from 25% to 35% and extending it by two years until 2028. The two windfall taxes are expected to generate £45bn over six years.
Tax squeeze leaves UK shareholders worse off
Analysis by Goldman Sachs suggests that the Chancellor’s tax raid on British businesses will leave UK shareholders worse off than those in France, Germany, Italy and the US. Dividend taxes and an increase in corporation tax to 25% will mean shareholders see a smaller share of company pre-tax profits. The report shows that the Government will take around 55% of “pre-tax distributed profits” when the corporation tax rate climbs next year, up from the 51% currently levied. Sharon Bell, a strategist at Goldman Sachs, said that in the medium-term higher taxes on shareholder returns “could discourage investments”, adding that dividend taxes are already “relatively high in the UK.”
Pertemps tycoon faces huge tax-avoidance bill
Timothy Watts, the chairman and president of the recruitment firm Pertemps, is facing a tax bill of close to £1m after being found to have taken part in an avoidance scheme. He faces a bill of £530,000 plus £370,000 in interest after taking part in the scheme marketed by Grant Thornton.
Mortgage rates could fall below 4% in 2023
Rates on fixed mortgage deals are expected to fall below 4% as soon as next year, with several lenders having already started to reduce their rates. These banks have opted to pull back on loan rates having seen the cost of financing reduce, with the gilt crisis easing and confidence in the economy increasing. While the Bank of England has increased the base rate by 0.75 percentage points to 3%, many lenders had priced in a steeper hike in the wake of the controversial mini-Budget. Markets are expecting the Bank to raise the central rate to a peak of 4.5% next year, far below previous forecasts of around 6%.
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.