Business news 21 May 2024
Auditors failed to raise alarm before 75% of UK corporate collapses. Labour’s plan for workers’ rights could overwhelm employment tribunals. AI could break cycle of low productivity growth. Summer interest rate cut possible. Apprenticeships, markets, insolvencies, housing & more business news that we thought would interest our members.
James Salmon, Operations Director.
Auditors failed to raise alarm before 75% of UK corporate collapses
A study by the Audit Reform Lab, a research centre at the University of Sheffield, has found that audit firms failed to issue warnings before three out of four major UK corporate collapses since 2010. The research looked at 250 stock market listed companies liquidated between 2010 and 2022 and found that auditors failed to include a material uncertainty notice in about 75% of cases.
EY warned of going concern risks for just 20% of companies that subsequently collapsed. PwC provided warnings in 23% of cases, Deloitte 36% and KPMG 38%. Smaller auditors performed even worse, delivering warnings in only 17% of collapses. Professor Adam Leaver, the Audit Reform Lab director, said auditors are failing to show independent judgement or professional scepticism with the sector “plagued by poor standards, a toothless regulator, conflicts of interests and weak sanctions for malpractice.”
The Audit Reform Lab said penalties issued by the Financial Reporting Council were too small to “materially affect partner pay – providing an insufficient deterrent and enabling firms to continue to be rewarded for failure.” The report added: “Until the culture of audit is reformed and a new and more effective regulator is in place, partners at audit firms will continue to reap huge financial rewards, despite continued audit failures that harm business confidence and our economy more widely.”
Begbies predicts double digit growth
Insolvency and restructuring specialists Begbies Traynor have said it will report a double-digit revenue boost this year thanks to the economic recovery. It said revenue is expected to jump by around 12 per cent to £136m over the last financial year, up from the £121.8m recorded in 2023. Executive chairman, Ric Traynor, said: “This was driven by increased activity levels in business recovery, which maintained its market-leading position by volume, and very strong growth across our property advisory and transactional services teams.”
Labour’s plan for workers’ rights could overwhelm employment tribunals, warns lawyer
Labour’s plan to grant day-one protection from unfair dismissal to millions of employees could overwhelm employment tribunals, warns lawyer Ben Smith at GQ Littler. The proposed workers’ rights overhaul by Sir Keir Starmer’s party includes the right to switch off and a ban on exploitative zero-hour contracts.
However, the plan to give protection from unfair dismissal from the first day of employment could lead to a surge in claims, exacerbating the existing backlog in the tribunal system. Labour has promised to introduce a single body to oversee the enforcement of protections, but many cases, including unfair dismissal, will still be dealt with by employment tribunals. The party aims to resolve disputes before they escalate, but the slow tribunal process and lack of resources could result in longer backlogs.
The plan has raised concerns among businesses and experts, who fear it could lead to a lose-lose situation for both employees and employers. Labour argues that the plan will raise standards and create a more level playing field in the workplace.
AI could break cycle of low productivity growth
The use of artificial intelligence (AI) in certain industries is leading to a significant increase in productivity, according to a report by PwC. The report states that productivity in professional and financial services, as well as in information technology, grew by 4.3% between 2018 and 2022, compared to gains of 0.9% in other sectors such as construction, manufacturing, retail, food, and transport. PwC suggests that the rise of AI could help break the cycle of low productivity growth, leading to economic growth, higher wages, and improved living standards.
PwC said that in the UK, one of the 15 countries covered by the report, job postings that require AI skills were growing 3.6 times faster relative to all job listings. On average, UK employers were willing to pay a 14% wage premium for jobs that require AI skills, with the legal and information technology sectors experiencing the highest premiums.
Broadbent: Summer interest rate cut possible
Deputy governor of the Bank of England, Ben Broadbent, said on Monday that a summer rate cut was looking possible following positive signals in the UK economy. “The experience of the last two or three years has made people wary. Equally, the behaviour of the economy over the last six months… is reassuring,” he said. Broadbent’s comments come ahead of figures on Wednesday that are expected to show a sharp drop in inflation. Broadbent is leaving the Bank in July after more than a decade and his vote on interest rates at the MPC’s next meeting next month will be his last.
Slump in new apprenticeships
Research by the Chartered Institute of Personnel and Development (CIPD) shows that new apprenticeships have decreased by up to 41% since the introduction of the Government’s levy system in 2017. The system requires large employers to pay into a training fund, but businesses have criticised it for being inflexible and unsuitable. Consequently, £4.4bn raised by the levy has not been spent on apprenticeships. The CIPD survey found that only 54.6% of apprenticeship courses were completed in 2021-22, and many companies have converted existing training into apprenticeships to reclaim funds. The decline in apprenticeships has disproportionately affected young people from deprived areas, with participation falling from 250,000 in 2015-16 to 150,000 in 2022-23. The CIPD also recommended an apprenticeship guarantee for young people up to 24, supported by most employers surveyed.
Markets
Yesterday, the FTSE 100 closed up .04% yesterday at 8424.20 and the Euro Stoxx 50 closed up .2% at 5074.34. Overnight in the US the S&P 500 rose .09% to 5308.13 & the Nasdaq rose 0.65% to 16794.88 (an all time high). The pound is currently worth $1.2716 and €1.1695. Brent is at $83, Gold is at $2416. The FTSE 100 is down 0.33% at 8396 and the Eurostoxx 50 is down 0.6% at 5044.
Stocks broadly declined as investors awaited the Nvidia earnings out tomorrow for an indication of how the AI boom was going and as central bankers repeat their higher-for-longer mantra, with the Federal Reserve’s Loretta Mester saying she’s open to tightening policy if the data warrants it.
Some 90% of UK pension funds underperform an all-share tracker fund
Nine out of ten UK pension funds have underperformed a FTSE All-Share tracker, with over a third falling short by more than 20%. The iShares UK Equity Index has produced total returns of 73.7% over the last 10 years, while some pension funds have returns of below 50%. When compared to the FTSE 100 and Wall Street’s S&P 500, UK pension funds fare worse. Just 4.2% of listed UK shares are owned by pension and insurance funds. Laith Khalaf, head of investment analysis at AJ Bell, expressed concern over the underperformance of pension funds, stating that it doesn’t look like a market serving consumers well.
LSE chief calls for end to shares tax
The boss of the London Stock Exchange, Julia Hoggett, has joined calls for the scrapping of stamp duty on share trading in the UK. Hoggett criticised the tax, which forces investors to pay 0.5% when buying British shares but nothing when investing in foreign firms. She argued that taxing domestic investors to invest in the UK economy is counterproductive and needs to be changed. Hoggett’s comments come as London’s stock market struggles to attract new companies and faces undervaluation and vulnerability to foreign takeovers. The City of London paid a record £110.2bn in tax in 2023, covering 12.3% of all UK tax receipts.
US will oppose a proposed global tax on billionaires
US Treasury Secretary Janet Yellen has confirmed that the US will oppose a proposed global tax on billionaires. The idea, pioneered by France, Brazil, and other nations, aims to ensure that the world’s billionaires pay their fair share by preventing them from shifting their money to countries with lower tax rates. Advocates argue that the tax would increase tax revenue and reduce income inequality. But Yellen is quoted in the Wall Street Journal as saying: “We believe in progressive taxation. But the notion of some common global arrangement for taxing billionaires with proceeds redistributed in some way – we’re not supportive of a process to try to achieve that. That’s something we can’t sign on to.”
How capital markets, climate change, and AI can evolve financial services
Chris Hayward, policy chairman of the City of London, explains in a piece for City AM how strengthening capital markets, green finance and artificial intelligence are key considerations for London’s financial services sector. Work with regulators and politicians is ongoing to make the UK more competitive.
Regarding London’s green finance performance, Hayward says UK-domiciled green funds have grown to £276bn and more financial and professional services firms are committed to net zero and green targets than in any other country. But more partnerships across the financial and professional services sector will help the country achieve net zero more quickly and boost the capital’s reputation in green finance.
Finally, the integration of AI in financial services can help reduce fraud, increase productivity and aid innovation. Addressing these challenges can profoundly alter financial services, bolster the City’s offering and boost the broader economic offering, Hayward concludes.
Bim Afolami: UK must engage with China on financial services
The City minister has said that Britain should not give China the cold shoulder as its banks and financial institutions were simply too large to ignore. Bim Afolami echoed calls by Lord Cameron on engaging with China, but his pro-China stance has been slammed as naïve by Lord Patten, the former governor of Hong Kong.
And only last week, Anne Keast-Butler, the head of GCHQ, said China represents a “genuine and increasing cyber risk to the UK” and warned that the country “poses a significant risk to international norms and values.” Afolami went on to argue against over-regulation and the need to ensure the UK could be competitive on the world stage.
UK Semiconductor Institute
The Government has announced £1 billion of funding to set up the UK Semiconductor Institute, an independent body designed to grow the sector by linking private sector efforts with universities and government support. Earlier today, the Department for Science, Innovation and Technology said the new body will be a” single point of contact to promote the sector to investors and attract foreign investment in British research expertise”.
Taiwan
Semiconductor giants ASML and TSMC reassured US officials they have ways to disable the world’s most sophisticated chipmaking machines remotely should China invade Taiwan. The Dutch manufacturer of the machines, ASML can activate a shut-off that would act as a kill switch for the machines used by TSMC.
Ai
Scarlett Johansson has instructed lawyers to demand OpenAI remove a voice that she said sounded too much like her. The actress, who played an AI assistant in Her, had turned down an offer from Sam Altman to voice the audio feature in ChatGPT. ChatGPT has suspended use of the voice.
AstraZeneca
AstraZeneca has set out its ambition to deliver $80 billion in annual revenue by the end of the decade, boosted by the launch of 20 new drugs from its pipeline. This would almost double the level of sales, having generated $45.8 billion in 2023. It believes this growth can come from its existing oncology, biopharmaceuticals and rare disease portfolio and the flow from its pipeline. As for profits, it is targeting a mid-30s percentage core operating margin by 2026, then “at least” that same range after that.
UK business flights fall by nearly a third
Analysis by the New Economics Foundation reveals that some 3.9m fewer business trips were made last year compared with 2019 – a 29% drop – as environmental scrutiny of big corporations grows. It is noted that air travel emissions at KPMG UK fell around 80% between 2018 and 2022 while rival EY has brought in measures to cut carbon emissions from air travel by 36% by 2025.
House asking prices rise by 0.8% in May
House asking prices have risen by £2,807 in May, according to Rightmove, reaching a new record of £375,131. This is the fifth consecutive month of price increases, although prices are only 0.6% higher than a year ago. The increase in sales agreed is partly due to buyers returning to the market after pausing their plans last year. However, mortgage rates remain high, affecting affordability for many home-buyers. The time it takes to complete a sale has also increased, with an average of 154 days between agreeing a sale and legal completion. Large family homes have seen the highest increase in asking prices, rising by 1.6% to £682,661. The South East has experienced the biggest uptick in asking prices, while the North East has seen the largest annual rise of 5.8%.
Number of rental homes on the market drops by 40%
The number of rental properties in Britain has dropped by almost half as landlords sell up due to soaring interest rates and uncertainty over the Renters Reform Bill. A report by estate agents Hamptons reveals a 40% decrease in rental homes on the market compared to April 2019. The shortage of housing stock has driven up rents, with tenants seeing an 8.3% increase in rental payments last year. The gap between market rates and what tenants are paying is discouraging them from moving. Responsible landlords need confidence to stay in the market and sustain tenancies, according to Ben Beadle of the National Residential Landlords Association.
DWP trial finds 63,000 benefit claimants breaking rules
The Department for Work and Pensions (DWP) conducted a trial of its new bank monitoring powers and discovered that tens of thousands of claimants were breaking benefit rules. The trial, called “Third Party Data Gathering” or “data sharing”, required banks to provide relevant information to the DWP to identify claimants who do not meet the eligibility criteria for benefits. Over a three-month period, one bank found that 8% of the accounts held by individuals claiming benefits had balances exceeding the limit. The DWP reported positive outcomes in cases of potential fraud, taking actions such as compliance interviews, criminal investigations, and benefit suspensions. The new measures are part of the Data Protection and Digital Information Bill, which is currently under review in the House of Lords. If passed, it will come into effect in 2025 and be fully implemented by 2030/2031.
Latest Insolvencies
Appointment of Administrator – NATIONAL FITNESS AND LEISURE GROUP LIMITED
Appointment of Administrator – CELLOGLAS LIMITED
Appointment of Administrator – THE HOW DEVELOPMENT 2 LIMITED
Appointment of Administrator – HORIZONTE MINERALS PLC
Appointment of Liquidators – FREEDOM STREET PRODUCTIONS LIMITED
Appointment of Liquidators – GIBRALTAR NOMINEES LIMITED
Appointment of Liquidators – CERISE LIMITED
Appointment of Liquidators – HOSTIFIER LTD
Appointment of Liquidators – SEVENCOMMS LIMITED
Appointment of Liquidators – LOGI ANALYTICS INTERNATIONAL LIMITED
Appointment of Liquidators – GIBRALTAR GENERAL PARTNER LIMITED
Appointment of Liquidators – IXCHELSIS LIMITED
Petitions to wind up (Companies) – EXCELSIOR CONTRACTS LIMITED
Appointment of Liquidators – R F PROPERTIES (ABERDEEN) LIMITED
Appointment of Liquidators – SARACAT LIMITED
Appointment of Liquidators – BREAGHA CONSULTING LIMITED
Appointment of Liquidators – JC COMMERCIAL INVESTMENTS LTD
Appointment of Administrator – CELLARHEAD BREWING COMPANY LTD
Winding up Order (Companies) – WHITEHURST ELECTRICAL LIMITED
Winding up Order (Companies) – DARCY JONES CAPITAL LTD
Petitions to wind up (Companies) – BISTORT LIMITED
Winding up Order (Companies) – GETA DEVELOPMENTS LTD
Petitions to wind up (Companies) – WJD CONTRACTS LTD
Appointment of Liquidators – PEMBROKESHIRE RETREATS LIMITED
Appointment of Liquidators – BIRCHWOOD PARK LIMITED
Appointment of Liquidators – BIG BLUE BANANA LIMITED
Appointment of Liquidators – M H ENGINEERING AND MANAGEMENT CONSULTANTS LTD
Appointment of Liquidators – POWELL WILSON LTD
Appointment of Liquidators – DENVER HOUSING TRUST LIMITED(THE)
Appointment of Liquidators – ASTON RAYMOND & CO LIMITED
Appointment of Liquidators – ROSEGATE INVESTMENTS LIMITED
Appointment of Liquidators – A12 MACHINERY LIMITED
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 last one was particularly deadly for suppliers fand we are still seeing elevated insolvencies as businesses struggle.
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!
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.