Business news 17 August 2022
James Salmon, Operations Director.
Insolvencies jump in July. A sixth of salaries set to go on energy bills. Breaking News – Inflation came in at 10.1%. And more business news.
Insolvencies jump in July
Company insolvencies in England and Wales surged last month, with firms hit by the impact of price rises. Statistics from the Insolvency Service show insolvencies hit 1,827 in July, with this 67% higher year-on-year and 7.5% on a monthly basis. The figures revealed there were 1,609 creditors voluntary liquidations (CVLs) in July, a 60% increase on July 2021 and 11% up on June 2022. CVLs are a procedure used for companies with no ongoing business to dispose of remaining assets, distribute available funds to creditors and dispose of the corporate entity. Christina Fitzgerald, president of insolvency and restructuring trade body R3, said: “In recent months, economic pressures have hit firms from every angle.” She warned that growing numbers of directors seemingly believe “current economic conditions make survival impossible”.
A sixth of salaries set to go on energy bills
Analysis shows that a sixth of the average person’s pay will go toward energy bills when the price cap is raised in January. While Office For National Statistics data shows that the average monthly pay is now £2,272, not including bonuses, analyst Cornwall Insight forecasts that the energy price cap is forecast to rise to £4,266 a year, or £355.50 a month, in January. This means that 16% of the average monthly pay will go on energy bills. The Telegraph’s Tom Haynes says the cost for households is likely to be lower overall as most homes have more than one person in work. Debapratim De of Deloitte says that energy could cost lower income families a quarter of their income after housing costs.
Breaking News – Inflation came in at 10.1%
Inflation is rising at its fastest rate for more than 40 years, with UK inflation passing double digits for the first time since 1982.
Inflation hit 10.1% in the 12 months to July, up from 9.4% in June. Inflation came in higher than economists expected (see below) , with food prices making the biggest contribution. . Energy, petrol and diesel costs are also contributing.
The Bank of England has said inflation – the rate at which prices rise – could peak at more than 13%.
Analysts expect inflation to hit 9.8% %
With the Office for National Statistics (ONS) publishing the latest inflation figures today, experts predict the biggest jump in the cost of living in 40 years. An average of analysts’ estimates calculated by Pantheon Macroeconomics suggests Consumer Prices Index inflation is likely to come in at 9.8%. This would be the highest level since February 1982, when it reached 10.4%. If July’s reading does hit 9.8%, it will mark an increase on the 9.4% recorded in June. The Bank of England expects inflation to peak at 13.3% later this year. While inflation in the US has started to retreat from its 40-year peaks, CMC Markets analyst Michael Hewson warns “this doesn’t seem likely here in the UK with most forecasts suggesting we could see 10% in the July numbers.”
Groceries
Kantar reported grocery inflation were rising at a 12% rate or an extra £533 per annum.
Foreign aid paused
The UK has paused non-critical aid payments over £1m saying a decision on resuming overseas aid will be made by the new government
Vacancies dip while unemployment holds at 3.8%
Office for National Statistics (ONS) data shows that quarterly job vacancies have fallen for the first time since 2020. Between May and July the number of vacancies dropped by 19,800 to 1.274m. The analysis shows that the unemployment rate held at 3.8%. The number of workers on payrolls rose by 73,000 between June and July to 29.7m, while the number of people classed as economic inactive, not in or seeking for work, was unchanged between April to June at 21.4%. The ONS highlighted that since vacancies fell to an all-time low in the early months of the pandemic, they have increased by 945,000. Neil Carberry, chief executive of the Recruitment and Employment Confederation, said the “overall picture” in the jobs market was “still positive for those looking for work or to change jobs to raise their pay.” Chancellor Nadhim Zahawi said the ONS figures show that the UK’s jobs market was in a “strong position,” adding that it “highlights the resilience of the UK economy and the fantastic businesses who are creating new jobs across the country.” Jake Finney, an economist at PwC, commented: “Though hiring efforts are slowing, we expect the unemployment rate to remain relatively stable for the rest of this year.” He added: “In the face of labour shortages, UK firms are more likely to hoard than shed labour.”
Real pay falls at a record pace
The gap between pay growth and inflation is the biggest since records began, the latest figures from the Office for National Statistics (ONS) show. While average wages rose 4.7% between April and June, this was outpaced by soaring prices, with inflation at a 40-year high of 9.4%. This means the real value of pay fell by 3% in Q2. Growth in average total pay including bonuses was 5.1%, but with inflation taken into account, in real terms it fell by 2.5%. The ONS report also reveals a gap between public and private sector wage growth, with private sector wages up by 5.9% while pay in the public sector saw growth of 1.8%. Reflecting on the ONS data, Yael Selfin, chief economist at KPMG UK, commented that pay packets are being “dwarfed by inflation,” adding that real pay growth “is unlikely to return to positive figures for some time.” Martin Beck, chief economic adviser to the EY Item Club, said: “The average worker continuing to see their pay fall in real terms is at odds with concerns about the possibility of a wage-price spiral.” Thomas Pugh, an economist at RSM UK, notes that pay growth rising rapidly in every industry except for the public sector and employment increasing “paints a picture of a very tight labour market.” He adds that combining this with soaring inflation means the Bank of England is likely to increase the interest rate by 50bps next month.
The conversation on pay is changing
Lucy Burton and Szu Ping Chan in the Telegraph say that with impending double-digit inflation set to eat into pay packets and wage growth being hit by fears of recession and soaring costs for businesses, chief executives are noticing a nervousness that “has changed the conversation on pay, as employees start to worry about the future of their jobs.” They note that as average weekly earnings rose by 5.1% before inflation in the three months to June, year-on-year, much of this is being driven by bonuses. Xiaowei Xu, senior economist at the Institute for Fiscal Studies, says average bonuses as a share of total pay was 6.8% in Q2, up from 5.7% in Q3 2019. Job search engine Adzuna says the number of job ads offering a bonus rose from 13.6% in January 2021 to 16% this July. Neil Carberry, chief executive of the Recruitment and Employment Confederation, says employers are becoming more careful when it comes to offering bumper pay rises, while more workers “are sitting tight because they’re thinking about the economic outlook.” Martin Beck, chief economic adviser to the EY Item Club, says: “Every recession we have had since the 1990s has seen a shock where pay trends down and has stayed lower permanently.” He adds that recessions “shock people and they never get their confidence back to demand pre-recession pay growth.”
HMRC hikes interest on unpaid tax to 4.25%
HMRC is increasing interest rates on unpaid tax to a 13-year high of 4.25%. This is six times the rate paid on money it owes and marks a 1.5% increase since the start of 2022. While the Bank of England has raised the base rate from 1.25% to 1.75%, HMRC has increased the rate it pays on repayments by 0.25% to 0.75%. Reflecting on the hike in late-payment interest, Blick Rothenberg chief executive Nimesh Shah said: “It sets a worrying trend for taxpayers who are struggling to pay outstanding taxes, against the backdrop of other rising costs.” An HMRC spokesperson said: “The interest we charge and pay ensures we do not encourage people to overpay their tax to secure a higher interest rate than available commercially, and that those paying their tax late do not get an unfair financial advantage over those paying on time.”
Whistleblowers play key role in furlough fraud fight
Analysis by law firm Pinsent Masons shows that HMRC has received 13,775 whistleblower reports over furlough scheme fraud as people report their employers and ex-employers. While the sheer number of furlough claims at the height of the pandemic – and the need to make the payments immediately – made it difficult for HMRC to spot fraudulent claims, it has since added a significant amount of resource to its investigation teams. HMRC is now stepping up its enforcement activity with a view to recovery, issuing penalties and pursuing prosecution or directors disqualifications where appropriate.
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 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
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.