Business news 22 March 2022
James Salmon, Operations Director.
Cyberattack Threat. Small business bosses reveal year one challenges. Just 175 companies grew revenue 20% or more in each of the last five years. Economists expect inflation to climb again. Consumer spending jumps 19%. And more business news.
Cyberattack Threat
Yesterday, U.S. President Joe Biden warned of possible threats of coming Russian cyberattacks, as the Kremlin responds to the severe sanctions from the west over the invasion of Ukraine. Biden referred to “evolving intelligence that the Russian government is exploring options for potential cyberattacks.” He urged the the the business community to “Harden your cyber defense immediately.” While aimed at American companies, UK companies should also pay heed!
Small business bosses reveal year one challenges
Small business owners have revealed the biggest challenges during the first year of trading, with these including long hours and no time off, according to a poll for accounting software company Osome.
Of the 1,000 entrepreneurs quizzed, 64% said taking time off is practically impossible over the first 12 months, while 29% said not being able to switch off is an issue. While more than a quarter worked for at least 12 hours a day, four in 10 got six hours or less sleep a night. Keeping on top of paperwork was cited as a struggle by 23%, while having very little money was flagged by 30%.
Despite the pressures seen in the first year of business, 91% are glad they started their company and 77% would recommend running a business to others, although six in 10 said there were things they would do differently now. Asked to detail the best things about launching an enterprise, 70% said being your own boss, 55% pointed to having satisfied customers and 48% said making a profit.
Just 175 companies grew revenue 20% or more in each of the last five years
Research from Hazlewoods shows that only 175 UK companies have managed to grow their revenue by 20% or more in each of the last five years, with this equating to just 0.0007% of UK businesses. Out of the 240,000 private sector companies in the study, only around 1,000, or 0.004%, have managed 10% or more revenue growth in each of last five years.
The analysis reveals that many of the companies that have sustained 20% growth for five years or more have been private equity and venture capital-backed businesses. Hazlewoods director Ryan Hancock said: “Being able to continue growing year after year is a major challenge for any business. Only a very small number are able to achieve this consistently.” He added: “Perhaps there needs to be an even more deliberate focus from the Government on helping UK businesses scale up and continue their trajectory of growth.”
Economists expect inflation to climb again
Economists expect UK inflation to accelerate to its highest rate since 1991. Analysts at Bank of America expect inflation to hit 6% when the Office for National Statistics publishes the data this week, while Paul Dales, chief UK economist at Capital Economics, thinks it could be as high as 7% in December. Economists at KPMG believe inflation could hit double-digits in October if a surge in energy prices continues, prompting the energy watchdog to lift the cap on bills on bills again.
Consumer spending jumps 19%
Nationwide data shows that consumer spending hit £6.9bn last month, marking a 19% increase on February 2021, with prices being driven up amid the cost-of-living crisis. Spending on fuel and electric vehicle charging rose by 70% year-on-year to £249m in February, while spending of utilities and bills increased 15% to £439m and debt jumped by 23% to £488m.
Mark Nalder, the head of payments at Nationwide Building Society, said: “As inflation impacts how much money we can spend and where we are spending it, we expect overall spend to outstrip last year, particularly in areas where the rising cost of living is likely to be having a big impact, such as utilities, bills and fuel.” He added that Nationwide expects many households to curb non-essential spending “as they do their best to balance family finances.”
How the Chancellor can soften the NI hike
Tim Wallace in the Telegraph looks at April’s 1.25 percentage point rise in National Insurance, saying that while when it was proposed the post-pandemic economic recovery “seemed to be on track”, it came before households were hit with a cost-of-living crisis.
With this in mind, he considers how Chancellor Rishi Sunak can “get out of the disastrous tax pledge, or at least soften its hard edges.” Mr Wallace suggests that the 1.25% hike could be scrapped, noting this would mean the Treasury misses out on £17bn in revenue. Raising the NI threshold from £9,880 to £11,284 would effectively stop the increase from hitting those earning below the average income of £27,500, according to the Centre for Policy Studies. This option, Mr Wallace notes, would mean a £4.7bn in revenue. Suggesting that Mr Sunak could pull back on splitting the tax hike across employers and employees, he flags that the Treasury coffers would miss out on £9bn if the increase were only applied to employers. Finally, he suggests the employment allowance could be increased. While small firms can reduce their NI payments by up to £4,000 per year via the allowance, the Federation of Small Businesses has called for this to be increased to £5,000.
National debt interest payments could surpass £84bn
The Institute for Fiscal Studies (IFS) has warned that the cost of servicing Britain’s national debt will hit more than £1,200 per person over the next year, saying that debt interest payments could surpass £84bn in 2022/23. This would be £31bn more than the Government’s budget watchdog predicted in October.
Isabel Stockton, research economist at the IFS, said: “We estimate that higher retail prices index (RPI) inflation might add £20bn to next year’s debt interest spending, but I should stress that the uncertainty is huge here.” It is noted that with the Bank of England having raised interest rates three times in three months, higher rates will bump up the Government’s borrowing costs, while soaring inflation has an impact, with around £500bn of Britain’s £2.3trn debt pile pegged to the RPI.
The Mail’s Lucy White says that while debt interest costs in cash terms are “ballooning”, they are still relatively low in historic terms compared to the size of the economy. Economists at Capital Economics think Chancellor Rishi Sunak has around £23bn of headroom against his promise to see debt falling as a share of the economy in three years’ time. The firm’s senior UK economist, Ruth Gregory, said Mr Sunak “has scope to unveil a big fiscal giveaway.”
US interest rates
Federal Reserve Chair Jerome Powell said the central bank is prepared to raise interest rates by a half percentage point at its next meeting if needed, marking a more aggressive tone toward curbing inflation than he used just last week.
Covid
The omicron sub-variant BA.2 is continuing to gain dominance, according to Covid-19 tests sequenced over the last two weeks. Data in this country. show the UK’s rise in infections began around the same time that BA.2 surpassed the 50% mark of overall cases. Although initially slow to take hold across the pond, it is now estimated that 50% to 70% of all Covid cases in the USA are also BA.2.
Screwfix
Kingfisher has reported uplifted sales as the Screwfix owner warned of an “uncertain macroeconomic and geopolitical environment.” Sales increased 6.8 per cent in the year ended 31 January 2022, results published on Tuesday revealed. Adjusted pretax profit stands at £949m, compared to £786m the year prior – a 20.9 per cent increase.
Under-30s bear the brunt of cost-of-living crisis
Analysis by think-tank the Intergenerational Foundation says the under-30s are likely to be among the hardest hit by the cost-of-living crisis. The study suggests that while workers across all generations face rising prices and bills, younger people face another cost after the Government froze the thresholds at which student loan repayments start. Liz Emerson, co-founder of the Intergenerational Foundation, says policymakers have chosen to “extract more tax from younger, rather than older, generations by targeting earned, rather than unearned, income.” The report notes that the generation under 30 typically rents and earns less in real terms than those who were young adults in the late 1990s, while the median gross weekly wage of someone aged 18 to 21 has fallen by almost a fifth in real terms since 1997.
House prices exceed £350,000 for the first time
House prices have hit a new record high of £354,564, according to Rightmove, with this marking the first time asking prices have risen above the £350,000 mark. The report shows that prices have risen by 1.7% in the last month – or £5,760 on average. This is the largest monthly rise since March 2004. Larger homes led the way, with price growth for properties with four or more bedrooms up 3.8% between February and March to an average of £647,112. Year-on-year, asking prices across all homes rose 10.4% in March, marking the fastest rate of annual growth recorded in any month since June 2014. Annual growth was above 10% for all UK regions and countries except London and Scotland. There were more than twice as many buyers as sellers in March, while the report also shows that more than one in five deals on Rightmove were agreed within the first week of being listed, a record high. Rightmove’s Tim Bannister believes the market could be set to cool in the coming months, saying: “There are headwinds that seem likely to remove the current market froth in the second half of the year.” Values could slip, he suggested, as recent interest rate increases – and ones forecast for the future – push up mortgage rates. He added: “Inflation and cost of living increases are also likely to affect buyer affordability and market sentiment.”
London house prices ‘50% overvalued’
The London property market is overvalued by as much as 50%, according to ratings agency S&P Global, with the analysis raising fears of a correction. The firm used long-term average prices of properties and compared them with income data for its calculations. Outside London, S&P estimated that UK property was overvalued by 20%. Alastair Bigley, a researcher for the agency, said prices have been driven higher by combination of low rates, the stamp duty holiday and excess savings amid the pandemic. He added that he expects prices to fall, saying: “We expect a greater correction in property prices in an overvalued market.”
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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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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.
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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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.