Business news 21 February 2022
James Salmon, Operations Director.
Insolvencies increase as pandemic support ends. Insolvency looms for some following retail rollercoaster ride. More than 17,000 stores closed in 2021. January retail sales climb 1.9%. And more business news.
Insolvencies increase as pandemic support ends
Oliver Gill in the Sunday Telegraph said that while the worst of the pandemic may be over for many people, for businesses “the worst is yet to come”. He says that Government support measures “have allowed bosses to put companies into hibernation,” while creditors were “rendered temporarily impotent” by a moratorium on demanding repayment of debts through the courts.
However, Mr Gill notes, with support initiatives ending, corporate insolvencies more than doubled year-on-year to 1,488 in January while personal insolvencies were up by just 1.8%.
Colin Haig of Azets comments: “The restraint that was placed around debt collection has been lifted and credit controllers are stuffing in winding-up petitions as a technique to get paid.”
Will Wright, managing director at Interpath Advisory – KPMG’s old restructuring business, says: “We are still in that phase of anticipation of what’s coming,” with no widespread enforcement by creditors yet. “There’s definitely an uptick in activity. But the big challenge is that a lot of these businesses do not know what the new normal will look like,” he adds.
Insolvency looms for some following retail rollercoaster ride
Sam Chambers in the Sunday Times considered the climate within the retail sector, saying the impact of the supply chain crisis on low margin e-commerce traders is acute, with higher logistics costs having a big impact on such businesses. He adds that the pandemic has been “a rollercoaster ride” for online retailers, saying that when high street rivals were forced to close, e-commerce operators struggled to keep up with surging demand. Zelf Hussain at PwC says that while larger online retailers should withstand supply chain pressures, he expects more business failures. Noting that a moratorium on winding-up petitions is set to expire soon, he says: “The prospect of insolvency looms larger for the smaller online retailers, especially with the gloves coming off for creditors next month.” Mr Chambers says that early evidence suggests that more people will be shopping online than before the pandemic, with data from the British Retail Consortium and KPMG showing that, excluding food, 41.5% of all retail purchases were made online in January, compared with 31.2% two years ago.
More than 17,000 stores closed in 2021
More than 17,000 chain store branches closed across Britain last year, according to Local Data Company research for PwC. The analysis tracked more than 200,000 outlets across high streets, shopping centres and retail parks operated by businesses with more than five shops. It was found that 17,219 branches shut, with this equating to 47 stores shutting every day – a small decline on from 48 in 2020. A fall in the number of new store openings in 2021 means there was a net loss of 10,059 outlets, with this the biggest dip since 2014. Lucy Stainton, commercial director at the Local Data Company, noted that vacancy rates have started to stabilise and that the number of empty shops is no longer increasing. Lisa Hooker, head of consumer markets at PwC, said that the last two years have been “tumultuous” for retailers but suggested that with the rate of closures slowing and more independent firms taking on space, “the worst could now be over”.
January retail sales climb 1.9%
The latest figures from the Office for National Statistics (ONS) shows that retail sales volumes were up 1.9% in January. This marks the largest monthly increase since April 2021 and follows a 4% drop recorded in December. ONS director of economic statistics Darren Morgan noted that January was “a good month for garden centres, department and household goods stores”. Supermarkets saw a drop in sales to below their pre-pandemic level for the first time, according to the ONS data, while the proportion of online sales fell to 25.3% from 27% in December. Despite the decline, the proportion of sales made online remains above the pre-pandemic level of 19.8% posted in February 2020. The ONS figures also point to a sharp increase in the value of goods, showing that over the three months to the end of January the amount sold increased by 3.1% while sales values rose by 9.9%. Paul Martin, UK head of retail at KPMG, said while the sector “started the year in relatively good health,” retailers will be “acutely aware however that the cost of living squeeze could see consumers scrutinising their spending more over the coming weeks and months, impacting trade.”
Covid support measures reduced insolvencies
The Insolvency Service paid out £228.28m last year to people who lost their jobs as a result of administrations, liquidations or other insolvencies. This is down around 49.6% from the £453.37m paid during 2020 because Treasury financial support helped many firms avoid collapse. The drop reflected a 65% plunge in compulsory liquidations in 2021 compared with the previous year, while administrations dropped 48% to the lowest figure in almost 20 years. Robert Hayton, UK president of real estate advisory firm Altus Group, said: “Fiscal and other support measures that were put in place by Government, including temporary restrictions on the use of statutory demands and certain winding-up petitions, have all played their part getting businesses through the pandemic.”
A third of small firms predict growth
Analysis by specialist lender Novuna Business Finance shows that 32% of small business owners polled in Q1 are predicting organic growth this year. This is up from Q3 and Q4 2021, where 29% of small business owners forecast growth. However, Novuna, which was formerly known as Hitachi Capital, noted that the proportion of firms that think they will struggle to survive increased by 2 points to 7%. Joanna Morris, head of insight at the firm, said: “Overall confidence has now held firm for three consecutive quarters, with an important year-on-year improvement in businesses transitioning from contraction or standing still to predicting modest or organic growth. These are green shoots, a sign many are turning the corner, or planning to.”
Managers say hybrid working is here to stay
A survey for the Chartered Institute of Management (CMI) suggests working remotely for part of the week has become the norm for some employees. While more than 80% of the managers polled said their firms had adopted hybrid working, a majority said bosses are also actively encouraging employees to return to the workplace. The survey saw 84% of managers say their firms had adopted hybrid working, with two-thirds saying this had been prompted by the pandemic. Analysis of responses shows that large companies are more likely than small ones to have introduced hybrid working. The poll of 1,237 managers, with 41% from the private sector and 59% from the public and non-profit sectors, also reveals that firms tend to offer staff flexibility over which days they choose to go into the office. CMI chief executive Ann Francke commented: “We are experiencing an uptick in productivity, and an uptick in many companies results. We’re not saying everyone should work from home 100% of the time, we’re saying the best practice is to have a blend, so when you come into the office you can do those things that are very difficult to do remotely.”
More jobs become remote-only roles
Analysis by Hazlewoods shows the proportion of UK jobs advertised as “entirely remote working roles” increased by a fifth to 11% over the past month. The research also showed that 74% of remote roles paid more than the average annual salary of £31,000. “The pressure brought on by the rise of the Omicron variant, and perhaps other future variants, has forced some businesses to reconsider their working model,” Felicity Sang, a director of Hazlewoods, said. “Employers have learnt to quickly adjust to external pressures. For many businesses there is currently no set way of working, as they adapt to accommodate the changes.”
Rate rise set to follow sales rebound
The Bank of England may be set to raise rates again next month after retail sales bounced back in January. With Office for National Statistics showing that retail sales were up 1.9% last month after falling 4% in December, Neil Birrell of asset management company Premier Miton said the rebound was “likely” to help convince the Bank of England that the economic recovery “will be able to cope with more interest rate rises.”
Covid
Boris Johnson is set to announce an end to Covid-19 regulations today, just as it confirmed that the Queen has tested positive for the virus. The Cabinet will meet today to sign off on the so-called “Living with Covid” plan. The Queen’s office said on Sunday she’s experiencing mild, “cold-like” symptoms but expects to continue “light duties” at Windsor Castle over the coming week.
Small business should keep an eye on the metaverse
The Guardian reports on metaverse advances as major corporates file trademarks related to virtual worlds. Gene Marks says in the paper that small businesses will not be affected by the latest online evolution this year, but they will in five to ten years. “A lot will change in the next decade. That change will be the metaverse. And the smartest business owners I know are keeping an eye on how to profit from it.”
Pay data shows gulf in growth
Analysis of Office for National Statistics data shows that while December saw annual pay growth of 4.9%, there is a gulf between the uptick in earnings for public sector workers and those in the private sector. Private sector wage growth including bonuses was up to 5.4% in December, more than double the 2.5% growth rate seen across the public sector. Workers in the finance and insurance sector saw annual wage growth, including bonuses, of 21.6% in December. This is quadruple the rate of inflation, which hit 5,4% in the closing month of 2021.
Frances O’Grady, the general secretary of the TUC, commented: “The good times may be back for the City. But it’s a different story for everyone else,” adding that with many households seeing a squeeze on real wages, there is no justification for “bumper payouts” to financial sector executives. Christina McAnea, general secretary of Unison, said: “It’s depressing, but not surprising, that City wages are way ahead of public sector pay in the race against rising prices.”
HMRC slammed over rate rise
HMRC has been accused of imposing an unfair interest rate rise on late payments while the rate paid when it refunds miscalculated and overpaid tax has remained frozen at just 0.5%. Interest on late payments will increase from 2.75% to 3% following the Bank of England’s rate rise earlier this month. Phil Kinzett-Evans of UHY Hacker Young told the Sunday Telegraph the Government was “taking advantage” of hard-hit freelancers. Meanwhile, an estimated 2.3m taxpayers missed the self-assessment tax returns deadline and now will now be accruing interest on the outstanding balances. Zena Hanks, a partner at Saffery Champness, said: “HMRC increased its interest rate for late payments at the start of this year. This is likely to be a smaller financial hit than facing an outright fine, but anyone who is yet to file their self-assessment return and pay any outstanding tax balances is advised to do so as soon as possible.”
Storm Eunice losses could hit £350m
Analysis by PwC suggest Storm Eunice is likely to have caused insurance losses of £200m to £350m, with property damage, business and travel disruption prompting claims. PwC’s general insurance leader Mohammad Khan said: “As with Storm Dudley, insurance losses will mainly be in respect of damage to homes, commercial properties and vehicles from falling trees and flying debris.”
Credit Suisse
Credit Suisse has denied claims it has lax due diligence systems after a data leak revealed accounts opened with the bank had been used by clients involved in an assortment of serious crimes. A whistleblower leaked data on more than 18,000 bank accounts, holding more than $100bn, to the German daily Süddeutsche Zeitung over a year ago. The newspaper has been working with the Organized Crime and Corruption Reporting Project and several media partners to evaluate the data. It said the information points to the bank having accepted “corrupt autocrats, suspected war criminals and human traffickers, drug dealers and other criminals” as customers. A spokesman for the bank said: “Credit Suisse strongly rejects the allegations and insinuations about the bank’s purported business practices,” adding that 90% of the accounts were either closed or in the process of being closed. The whistleblower source said in a statement: “I believe that Swiss banking secrecy laws are immoral. The pretext of protecting financial privacy is merely a fig leaf covering the shameful role of Swiss banks as collaborators of tax evaders.”
Anglo American
Anglo American reported record annual profitability as revenue surged on rising production and commodity prices. For the year ended 31 December 2021, adjusted earning before interest, taxes, depreciation, and amortisation, or EBITDA, grew 161% to ZAR108,438 million as sales climbed 99% to ZAR214,568 million
France wants global tax deal implemented by early 2023
A global corporate tax deal needs to be implemented by early 2023, French Finance Minister Bruno Le Maire has told his G20 counterparts. Nearly 140 countries last year reached a deal on a minimum tax rate of 15% on multinationals and agreed to make it harder for companies like Google, Amazon and Facebook to avoid taxation by booking profits in low-tax jurisdictions. The Organisation for Economic Cooperation and Development is weighing the technical details so that countries can put the new rules into their law books by next year. While the deadline is considered to be highly ambitious, Mr Le Maire said he is “asking for a swift implementation of the OECD agreement … no later than the beginning 2023.” He told his G20 counterparts: “There is no turning back, we need to move on.”
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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.
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.