Business news 17 January 2022

James Salmon, Operations Director.

Barclays urges late-payers to settle up. UK economy hit pre-pandemic levels in November. News on Inflation, interest rates, imports & exports, employment entrepreneurs, manufacturing, restaurants and energy bills.  And more business news.

Barclays urges late-payers to settle up

Barclays has called on large businesses to settle bills to SME suppliers on time, warning that the late payments are damaging cashflow; preventing new hiring and investment opportunities; and potentially putting suppliers at risk of collapse.

Analysis by the bank shows that more than nine in ten medium-sized companies are waiting on overdue invoices to be paid, with the rate at three in five across all SMEs. Four in five of the 500 SMEs quizzed said that they would refuse a job with a potential customer if they were known for paying late.

Hannah Bernard, head of business banking at Barclays, said: “We want to unite the small business community in tackling this issue and raise the social conscience of larger businesses who don’t pay on time.”  She added: “Having a constant cycle of late payments will hamper the future growth of the economy.” Liz Barclay, the Small Business Commissioner, commented: “We need to see potential investors refusing to invest in firms that don’t treat small suppliers well . . . A change in payment culture is decades overdue.”

UK economy hit pre-pandemic levels in November
Figures from the Office for National Statistics show that the UK economy surpassed pre-Covid levels for the first time in November. While GDP was up by 0.9% between October and November, exceeding the level recorded in February 2020 and outdoing the 0.1% rise seen in October, there is concern growth has since slowed again due to the impact of the Omicron variant and resulting restrictions.

On a quarterly basis, the ONS said that the UK economy will reach or surpass Q4 2019’s pre-Covid levels if GDP grows by at least 0.2% in December and there are no downward revisions to figures for October and November.

Chancellor Rishi Sunak said the stronger growth was “a testament to the grit and determination of the British people”.

Looking ahead, Yael Selfin, chief economist at KPMG, said growth is expected to slow in 2022 as there will be no coronavirus “rebound effect to propel it”. She added that rising taxes and borrowing costs, alongside elevated inflation, “will squeeze households’ purchasing power”, while the impact of supply chain bottlenecks and labour shortages could restrict production.

Jonathan Gillham, chief economist at PwC, warned that the “rapid” acceleration of the Omicron variant throughout December and January “may well put the brakes on the recovery”.

Martin Beck, economic adviser to the EY Item Club, says “activity should rebound strongly” as the impact of the latest coronavirus variant wanes, with GDP “rising convincingly above pre-Omicron levels in early spring.”

3% GDP growth could clear the deficit in five years
Richard Hughes, chair of the Office for Budget Responsibility, says economic growth returning to its previous long-term pattern would allow the Government to clear the deficit almost completely within five years. Under the GDP growth of 1.6% per year currently forecast, the Treasury will still be borrowing £44bn annually by 2026/27 – but Mr Hughes says that increasing growth to 3% would cut the deficit by £38.7bn because of higher tax receipts. However, he warned that if higher economic growth drove inflation, the outlook for the public finances might prove less positive.

He also noted the possibility of “downside surprises” in the form of growth falling short of current forecasts. His analysis came in a letter to shadow Chancellor Rachel Reeves, who believes Chancellor Rishi Sunak is wrong to focus on balancing the books in the short term ahead of growing the economy. Reflecting on Mr Hughes’ estimate, Ms Reeves said: “The UK economy suffered the worst economic crisis of any major economy, and these figures confirm that without urgent action the UK risks being stuck in a cycle of low growth and high taxes.” Warning that the Conservative government “are trapping the UK in a pattern of low prosperity with working people paying the price in higher taxes,” Ms Reeves said Labour would “create a more secure economy by spending wisely, taxing fairly, and getting the economy firing on all cylinders.”

Inflation set to add to squeeze on finances
Office for National Statistics (ONS) data set to be released this week is expected to show that average earnings over the three months to November grew 4.2%, down from 4.9% the previous month, while a separate ONS report is set to say consumer price index inflation edged up 0.1 points in December to 5.2%. Geoff Ho in the Sunday Express says the slowdown in wage growth and increase in inflation means household finances are being “increasingly squeezed.” Martin Beck, chief economic adviser to the EY Item Club, comments: “This week we will have more evidence of the squeeze. Things got off to a good start in the fourth quarter but have been knocked off course by Omicron and inflation.”

Experts expect inflation to remain near 5%
With the Office for National Statistics (ONS) set to publish its latest inflation data this week, experts have predicted that it will remain at historically high levels. The ONS said inflation hit 5.1% in November, the highest rate in over a decade, and analysts believe it will hold close to this rate in Q1 before jumping when energy price caps are adjusted in April. Ruth Gregory of Capital Economics said: “We think that CPI inflation will tread water for a couple of months until a leap in utility prices pushes it up all the way to 6.9% in April.” With data on jobs and wages also released this week, economists have forecast an increase in payroll numbers and a possible 4.1% rise in earnings. Jack Barnett of City A.M. says strong wage pressures will strengthen the case for the Bank of England to increase interest rates for the second time in as many months.

Banks predict BoE rate rises
US banks believe the Bank of England will increase interest rates in an effort to tackle rising inflation. JPMorgan expects the Bank to raise the base rate as soon as February, foreseeing an increase from 0.25% to 0.5%. Robert Wood, an analyst at Bank of America, is expecting a rates hike in February and another in November – and believes inflation is set to peak at 6.2% in April. Goldman Sachs, which expects inflation to peak near 7%, forecasts interest rate rises of 0.25% in February and May.

London leads the way on young entrepreneurs
Analysis of Forbes’ 30 Under 30 lists by business comparison platform Bionic shows that London hosts the highest number of young entrepreneurs. The capital houses 115 of Forbes’ list of top young business persons, ahead of New York with 106 and San Francisco at 88. On a country-by-country basis, the US leads the way with 428 young entrepreneurs listed. This represents 41% of the list, while the UK’s 145 young entrepreneurs account for 14%. Reflecting on the research, Catherine McGuinness, policy chair at the City of London Corporation, notes that fears Brexit would hit business in the capital have not come to pass. She said: “While some business has inevitably relocated to the continent, predictions of tens of thousands jobs leaving the City have not come to fruition.” She added: “At the same time, many more thousands of jobs have been created as EU firms have shifted some of their operations to the City to continue to operate in the UK market.” EY analysis shows that the number of finance jobs shifting from Britain to the EU due to Brexit is less than initially expected.

ONS: Imports up while exports dip
Imports into the UK rose 4.9% to £42.7bn in November, while exports dropped 1% to £27bn, according to the Office for National Statistics. Imports from EU countries were lower than those from the rest of the world for the 11th month in a row.

US bosses eye UK market for revenue growth
A poll by PwC shows that Britain is the favourite market for US chief executives seeking revenue growth. Analysis of responses shows that 37% of US CEOs named Britain as one of the three countries or territories that would be most important for their companies’ revenue growth prospects over the next 12 months. This saw the UK overtake China (26%) and Germany (24%). Worldwide, 17% of chief executives selected Britain as a top three growth target, up from 11% in 2021. The survey of more than 4,400 chief executives from 89 countries also shows that confidence is at the highest level in a decade, with 77% expecting global economic growth to accelerate this year. The rate was even higher among UK-based CEOs, with 82% expecting increased growth. PwC UK chairman Kevin Ellis said: “It’s not hard to see why US businesses have their sights on the UK”  saying that alongside “longstanding draws” such as a trusted legal and business environment, factors such as the successful vaccine rollout and significant government funding “have given us a head start on recovery” and make the UK “ripe for investment now”. Reflecting on the findings, Business Secretary Kwasi Kwarteng noted the UK’s skilled workforce, competitive tax environment and stable regulatory approach, adding: “To have this confirmed by some of the world’s leading chief executives is welcome as we seek to strengthen the UK’s pro-enterprise reputation globally.”

Mature workers could ease the staffing crisis
The Times’ Hannah Prevett considered on Saturday how mature workers could help meet demand for staff, with data from the Department for Work and Pensions showing that more than 790,000 people aged between 50 and 64 are actively seeking work or are inactive but would like to find work. Ms Prevett says businesses in all sectors are reporting difficulties attracting the staff they need, pointing to Office for National Statistics figures showing that in the three months to November, UK job vacancies hit an all-time high of more than 1.2m. Looking at the employers “already tapping into” an underutilised part of the workforce and harnessing Britain’s ageing population, she notes that Azets last year embarked on an initiative to fill 10% of its vacant roles with people who were retired or on career breaks. Since September its scheme to target more mature workers had resulted in 107 applications that the firm otherwise would not have received.

Poll points to employee exodus
A survey of 2,000 adults commissioned by employee experience platform Edenred has found that almost a fifth had left their job out of choice in the last 12 months, with a further 22% having done so in the past five years. One in 10 of those have quit in the last six months, while an additional 16% plan to leave in the upcoming year. Some of the key reasons cited for leaving roles include management not being interested in staff wellbeing; a lack of motivation and progression; being overworked; the commute; and rude bosses. The poll shows that around 42% raised their concerns with employers before choosing to leave, with 30% saying nothing changed as a result. On factors that make staff want to stay in a job, respondents pointed to manageable workloads, flexible hours and supportive line managers who appreciate their work.

Wages climb as workers call the shots
A “red-hot” jobs market has been one of the unexpected side-effects of the pandemic, writes the Sunday Times’ Jill Treanor, saying that while there had been concerns of a surge in unemployment as the coronavirus crisis unfolded, employers are reporting labour shortages. This, she adds, means workers “can call the shots – and, it seems, push up wages”. She notes that data this week is expected to show that the unemployment rate in the three months to November held steady at 4.2%, while average weekly wage growth will be about 4%. Reflecting on what bigger pay packets could mean for the economy, Roger Barker, director of policy at the Institute of Directors, says: “Wage rises could mean that inflation becomes increasingly embedded, rather than transitory, with businesses being forced to pass on the increased costs through higher prices.”

Manufacturers in ‘survival’ mode
Industry bodies have warned that UK manufacturers are in “survival” mode, with businesses under pressure from soaring energy bills that could see energy-intensive firms across a number of industries facing the prospect of plant closures and job cuts. Dave Dalton, chief executive at industry body British Glass, said energy cost hikes have left firms facing “death by 1,000 paper cuts”. British Glass has written to ministers, warning that officials are yet to “appreciate the severity” of the situation as companies are being left in an “impossible position”. “We are beyond the margins, we are not making money. We can survive but survival is no mechanism for life and business,” the letter warned. Stephen Elliot, chief executive of the Chemical Industries Association, has urged ministers to deliver support, saying: “We don’t want Government to leave it until we have a closure.”

Restaurants served huge losses
Analysis shows that the ten biggest restaurant chains in Britain lost £673m in 2021, exceeding the £246m combined loss recorded the year before. The report says that while many went bust or had to shut branches despite receiving support, more could collapse as they struggle to repay loans. Reflecting on the findings, UHY Hacker Young said the Omicron variant “is the latest setback for an industry hit hard in the last two years.”

Poll reveals support for windfall tax on oil and gas firms
A new Savanta ComRes poll shows that 75% of Conservative voters would support a new windfall tax on oil and gas companies, exceeding the 71% of the general population that would back a levy designed to fund households struggling to afford rising energy prices. With opposition parties pushing for such a move, Liberal Democrat leader Ed Davey said: “A Robin Hood tax on the super-profits of oil and gas firms would fund a substantial package of support now for struggling to get by.” His party says the levy would raise £5bn to help families cope with soaring energy costs. Labour has also called for additional levies tax on oil and gas firms, suggesting a £1.2bn temporary increase in corporation tax. However, the Government has rejected the calls, with Cabinet Minister Nadhim Zahawi saying: “A windfall tax on oil and gas companies that are already struggling in the North Sea is never going to cut it.”

Rising energy bills ‘unaffordable’ for a quarter of households
Millions of families in England will be dragged into fuel poverty when energy bills soar this April, according to the Resolution Foundation, with the number of households who will find rates unaffordable set to treble to 6.3m when the price cap lifts. The report says the percentage of households suffering “fuel stress” – having to spend at least 10% of their budgets on energy bills – will climb from 9% now to 27% if Ofgem increases the price cap by more than half on April 1 as expected.

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.

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It takes less than 17 minutes to see how you would benefit, do you have the time now?

No face-to-face meeting required – just call Peter Uwins, CPA’s National Sales Manager, on 020 8846 0000 (business hours) or email 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

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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.