Business news 21 August 2023
James Salmon, Operations Director.
UK enterprise devotes too much time to satisfying civil servants. Business rates hike could ruin small hospitality businesses. Craft beer boom goes flat. And more business news that we thought would interest our members.
UK enterprise devotes too much time to satisfying civil servants
Sir John Timpson writes in the Telegraph on how businesses and the Government should approach solving the UK’s productivity problem. Sir John, the chairman of the high street services provider Timpson, says the majority of businesses have to do unproductive tasks that never existed a couple of decades ago, such as compliance with a range of regulations and guidelines. “Corporate governance has made business more complicated and caused companies to do things that probably reduce productivity.” The Government needs to lead by example, Sir John contends, and should start with slashing the number of civil servants and the red tape they insist on rolling out.
Business rates hike could ruin small hospitality businesses
The Chancellor is coming under renewed pressure to freeze business rates again amid warnings a further hike could ruin small hospitality businesses. High interest rates mean firms could face a steep increase next April, and coupled with the ending of 75% rate relief for retail hospitality and leisure businesses, further financial strain is inevitable for many firms. Kate Nicholls, chief executive of UKHospitality, said: “The looming business rates hike facing hospitality businesses is a ticking time bomb that has the potential to cause as much damage next year as the energy crisis. The ending of current business rates relief next April could mean an additional £630m hit, while an inflationary increase to rates adds a further £220m. Together, it’s an almost billion-pound bill that could put businesses on the brink.”
Craft beer boom goes flat
The Observer yesterday looked at the plight of small brewers, more than 100 of which have been forced out of business in the past 18 months. They have been hit by a combination of Brexit, the pandemic and the cost of living crisis, the paper says, and now threatened by changes to beer duty laws. In June, the accountancy firm Mazars found that 45 small brewers had gone into liquidation, but many more have either been sold or swallowed by rivals.
House Prices
Property sellers cut their asking prices at the sharpest rate since December, as rising interest rates drag down buyers affordability. Rightmove said its house price index fell 1.9% to £364,895 this month. It was the biggest decline for August since 2018 and the sharpest drop since the end of last year, when sellers were trying to wrap up deals.
VR brings new dynamic to workplace training
Virtual reality (VR) training is becoming increasingly popular in the workplace, with firms using VR headsets for team-building exercises and skills refreshment. VR training allows employees to learn four times faster than in a classroom, according to a study by PwC. It also found that employees were 1.5 times more focused in VR classes. VR training is cost-effective, safe, and allows users to practice repeatedly. “People like the idea they can have a go again, they can learn again,” says EY’s Edwina Fitzmaurice. “You get much higher retention rates, you get much better engagement scores. In addition, many VR training systems give the user feedback rather than a human boss. Sophie Thompson, the founder of London-based VirtualSpeech, which offers VR-based training for public speaking and leadership skills, says: “People aren’t good at giving honest feedback, and you have to explicitly ask. Whereas a machine isn’t worried about your feelings.”
National Debt & Credit rating
At £2.6 trillion, the national debt has soared by 40% to more than 100% of GDP for the first time since 1961, as successive governments have borrowed the nations way out of the financial crisis, the covid pandemic and the energy price crisis. With rising inflation and interest rates, a bigger and bigger slice of the tax take must go to servicing this debt and is threatening the nations credit rating with the three main credit-rating firms due to update their assessments of the UK over the next four months. Moody’s and S&P Global Ratings are scheduled to make their announcements on 20th October with Fitch following on 1st December.
London Warehouses
London Warehouse space is the most expensive in the world having risen 10% this year, according to Savills.
Pound
The British pound is the best performing G10 currency this year, up 5.6% against the US dollar, thanks entirely to the 14 consecutive interest rates from the Bank of England and in spite of all the other negative news around the UK economy.
The tax system can make investing in UK assets more attractive
The Sunday Times’ Oliver Shah commented on plans by the Chancellor to encourage UK pension schemes to invest more in high-growth British companies, pointing out that the defined benefits scheme that looks after MPs’ retirement savings invests just 12% of its assets into UK equities. One of the reasons for shrinking liquidity on the London Stock Exchange, asserts Shah, is the fact that the “depth of the American market, along with laxer corporate governance and higher executive pay, is luring companies to list there, rather than here.” But focussing pension funds on UK assets will only artificially stimulate domestic demand. Instead, a better route would be to use the tax system to make investing in UK assets more attractive, Shah proposes, including by scrapping the 0.5% stamp duty on shares, which might help tempt back retail investors.
HomeServe founder invests £110m to help businesses scale up
HomeServe founder Richard Harpin is investing £110m of his personal fortune into medium-sized businesses. Harpin sold the business to Canadian investor Brookfield for more than £4bn last year, netting him and his wife Kate about £500m. He has already invested £55m in growth firms including outdoor retailers Passenger and ACAI, Keelham Farm Shop and Crafter’s Companion, and intends to invest another £55m in about ten firms. Harpin said: “I am not doing it primarily for financial return. If we are going to get the country and economy going, we need to help businesses scale up. Today I’m using 45 years of insights to help others grow their businesses and galvanise a regeneration of our city centres.”
North East and Yorkshire rife with business opportunities
According to KPMG UK and the University of Nottingham’s Local Business Pulse Index, more than two fifths of local areas in the North East (42%) – more than double the 19% average seen across England, Scotland and Wales – have been identified as Business Creation areas – places which share an anticipated high rate of new business and investment growth. Ian Beaumont, Office Senior Partner at KPMG in the North East, said: “The North East is witnessing a surge in start-ups and investment opportunities, positioning the region as a crucial player in the Business Creation group.” In Yorkshire, the figure was 33% – still way above the national average.
HMRC paid out £500k to informants last year
Payouts made by HMRC to informers have leapt by 75% over the past five years, the Telegraph reports, with the tax office paying £508,500 to whistle-blowers reporting their ex-spouses and former employers for tax fraud last year. This comes as HMRC steps up the number of “dawn raids” it conducts as part of investigations into tax fraud. Officers in HMRC’s fraud investigation service searched 623 properties last year, an annual rise of 36%, according to data from UHY Hacker Young. Michelle Sloane, of law firm RPC, said HMRC should be more transparent about how it rewards informers – and more generous: “A more formal and transparent system might incentivise a greater number of people to come forward and report tax evasion.” A spokesman for HMRC said: “There will be times when it is appropriate for us to make payments to individuals for providing us with information that helps us tackle avoidance and evasion. We make these at our own discretion, based on what is achieved as a direct result.”
Spike in UK car dealerships sold to overseas investors
UK car dealerships are increasingly being snapped up by overseas investors on the cheap amid a surge in dealmaking in the sector. According to research by EY, the weakened pound has made British firms attractive takeover targets. US car dealership Lithia Motors and Canada’s Alpha Auto Group are among the overseas investors that have made recent acquisitions. Taj Lalli, UK automotive M&A director at KPMG, added that UK dealerships are “well run and operate in a well regulated environment, which adds to the stability that investors look for when executing their M&A strategies.”
Financial jobs defy gloom to hit record high
The number of jobs in the UK financial services industry has hit a record high, according to new figures from the ONS. The data showed the number of jobs in financial and insurance activities hit 1.235m in the first quarter of the year – 34,000 more than at the end of 2022. It was above a previous peak of 1.209m in 2008 and is the highest since comparable ONS figures began in 1978. City Minister Andrew Griffith said: “Our vision for Britain as the most open, innovative and competitive financial centre in the world is bearing fruit.” He said the UK had ‘seized the opportunities of Brexit’ through laws which will help unlock billions in investment. He added: “Our financial services industry is a jewel in Britain’s crown that even the doomsters and armchair generals cannot deny.”
Pensioners need £4,200 more for comfortable retirement
Pensioners now need an extra £4,200 every year to maintain a comfortable standard of living in later life, according to analysis. Over the course of a 20-year retirement, the additional amount needed in a pension pot as a result of rising costs amounts to £68,700. Prices and daily expenses have soared by 9.1% since last April, significantly eroding spending power. The Pensions and Lifetime Savings Association estimates that more than nine in ten workers are not saving enough into their pension to guarantee themselves a comfortable retirement.
Listed companies could extract £50bn from pension schemes
Listed companies could be allowed to extract as much as £50bn from their traditional staff pension schemes if the Government goes ahead with a radical reform floated in the Mansion House speech last month. The dramatic shift in gilt yields in the past two years has raised hopes among companies that they might be able to access the excess assets in their pension schemes. The Department for Work and Pensions issued a consultation last month over whether the rules could be relaxed to make it easier for scheme sponsors to take out spare cash from their defined-benefit schemes. Jeremy Hunt has proposed encouraging pension schemes to invest more adventurously. Trustees of most closed schemes prefer to invest in safe assets once they reach surplus. Mark Tinsley, principal at Barnett Waddingham, said that many pension schemes have seen large improvements in their funding positions and sponsors stand to benefit if the rules around returning surplus funds are relaxed. However, pension trustees are likely to be cautious about allowing any of the surplus to flow back out.
Demographics – Births
The number of babies born in England and Wales dropped to its lowest level in 20 years in 2022, while a record ppercentage (23.1%) came from parents who were both born abroad (up from 16.7% in 2008), highlighting a long-term shift in the nation’s demographic makeup.
Latest Insolvencies
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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.
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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.
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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!
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Check our compensation calculator to see how much your business could be owed!
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.