Business news 22 November 2021

James Salmon, Operations Director.

1 in 3 businesses see late payment as one of their biggest threats to survival. Plea to back local firms this Christmas. Economy predicted to grow slower than expected. Government must be bolder on growth targets.  And more business news.

1 in 3 businesses see late payment as one of their biggest threats to survival

Research by Time Finance shows 1 in 3 businesses see late payment as one of their biggest threats to survival. For 70% of SMEs, late payments are a recurring issue leading to more severe consequences with over 40% worrying about their own cashflow as a result. Time Finance found that less than one in three businesses are paid by their customers within the agreed 30 days terms, with an astonishing 70% waiting more than 60, 90 or 120 days.

42% of SMEs believe that late payments from customers was one of the greatest challenges and threats hampering business success, and one in ten are concerned for anticipated insolvency as a result.

Almost one in three businesses also fear their relationships with customers are negatively affected due to chasing payments, whilst over one third struggle to pay their own invoices or their own employees on time.

Plea to back local firms this Christmas
Writing in the Independent, Michelle Ovens, the founder of Small Business Britain and director of Small Business Saturday, urges consumers to support small businesses this Christmas arguing that the festive period will be make or break for entrepreneurs as they recover from the aftermath of prolonged lockdowns. She states: “Not only did the crisis bring home how much we rely on and value our local independents, but it also sparked a newfound admiration for the incredible entrepreneurialism we saw across the country. With rising costs and product shortages, it’s vital we support local hero vendors this winter.” Ms Ovens’ comments are echoed by Mike Cherry, the national chairman of the Federation of Small Businesses, who tells the Mail on Sunday: “We have lost 400,000 small businesses over the last year. If we want to avoid a similar outcome in the next 12 months, we have to think small this Christmas.”

UK restaurant insolvencies jump by 31%

The Caterer magazine reveals that UK restaurant insolvencies jump by 31 in the last three months.

Interest rates

The Bank of England’s Governor Andrew Bailey said risks to the U.K. economy are “two-sided” at the moment, with slowing growth and rising inflation, following similar comments made by Chief Economist Huw Pilltop. The joint comments question the certainty of an interest-rate increase in December, which analysts have almost fully priced into their predictions.

Economy predicted to grow slower than expected
The latest economic forecast from the EY Item Club predicts growth slowing from an expected 7.6% this year and 6.5% next year to 6.9% and 5.6% respectively. It added that growth would slow to 2.3% in 2023, before stabilising at 1.8% over the following two years. Martin Beck, chief economic adviser to the EY Item Club, said: “The UK was always expected to enter a tougher phase of the recovery. Record growth is still forecast, but there are headwinds as we approach the end of the year: pandemic-related policy support is being withdrawn, supply chain disruption and shortages have been more severe than expected and the scope for catchup growth has been run down.” The Item Club also expects inflation to peak at nearly 5% early next year, up on the 3.5% it had forecast in July, and to remain above 3% until the second half of the year.

Treasury officials “kill off” freeport strategy
Treasury officials have been accused of killing off Government plans for freeports through a lack of ambition and concern that the low tax zones will simply move activity from one area to another and reduce tax receipts. One senior conservative figure told the Telegraph that officials considered all freeport proposals as “a zero sum game” and that if civil servants don’t like a policy they will just obstruct until the minister in charge is shuffled out.

Consumers face rising food prices
Analysts say Britain’s food price pressures will get worse should the country suffer a cold winter. With global food prices already at their highest in half a century, economists at BCA Research say they will increase next year and remain elevated into 2023. Robert Ryan, chief commodities and energy strategist at BCA, warned higher freight, fertiliser and fuel costs will be passed on to shoppers through higher food prices next year. He said: “We should start seeing this feeding through and the longer we get this cold weather and elevated natural gas prices, the more of this is going to feed through over time.”

Danker: Government must be bolder on growth targets
The head of the CBI will tell ministers this week that targets for growth and investment are “nowhere near bold enough” and that more ambition is required to achieve Boris Johnson’s hopes for a “high-wage, high-skill, high-growth” economy. Tony Danker told the Times that the country was “going back to a 2008 storm” when, soon after pledges were made to transform the economy after the financial crisis, “we started arguing politically, we had an MP scandal crisis and everybody just got on with business as usual, and the economy basically flatlined for a decade”. He added that the PM was “betting the shop” on the private sector delivering his agenda around net zero and levelling up but that that he needed to “seize the moment” and “start to make bigger bets. I think the Government are hoping that the private sector just delivers on all this stuff — I think it’s more complicated than that.”

Concern over state pension age changes after Covid
Experts are encouraging the Government to review its decision to hike the state pension age threshold, amid warnings that the pandemic may have impacted life expectancy within the UK. The 2017 State Pension Age Review (Cridland Review) proposed an increase in the state pension age to 68 over two years from 2037. As part of its plans, the Government is hoping to increase life expectancy by five years by 2035. However, David Sinclair, the Director of the International Longevity Centre-UK, believes this is unlikely to be met. He commented: “COVID-19 has likely had an impact on life expectancy and certainly had an impact on the employment rates of older workers… If [ministers] want to follow their plans to increase the age we receive our pensions further, they must be clear about how they will mitigate the impact on those of us who aren’t living longer and healthier lives.”

Confidence improves as demand for office space returns
The latest edition of Deloitte’s London Office Crane Survey reveals rising optimism among developers, with 90% now more positive about demand than they were six months ago. Mike Cracknell, director in real estate at Deloitte, said: “There’s a level of confidence [among developers]. The volume of new starts points to the resilience of demand for offices as an asset class, in spite of the dramatic shift in working practices in response to the pandemic and months of home working.” The report also reveals that 54% of new office space is coming from refurbishments rather than new builds. Philip Parnell, real estate valuation lead at Deloitte, commented: “The focus on refurbishment over redevelopment is unlikely to diminish as carbon accounting, including embodied carbon and the drive to net zero, continues to gather momentum.”

Retail sales up 0.8% last month
Office for National Statistics (ONS) figures show that UK retail sales rose 0.8% month-on-month in October, bringing a five-month run of falling or flat sales to an end. Clothing sales reached their highest level since the start of the pandemic, coming in at just 0.5% below pre-pandemic levels, while second-hand stores also saw sales rise. ONS chief economist Grant Fitzner said: “After five months of no growth, retail sales picked up in October. Although sales overall are above pre-pandemic levels, it remains a mixed picture.” Reflecting on the increase in sales, Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the “pick-up appears to reflect consumers purchasing Christmas presents earlier than usual due to warnings about product availability, rather than a sustainable improvement.” Helen Dickinson, chief executive of the British Retail Consortium, said retailers “will be relieved by the improvement in sales as they enter the final straight in the run up to Christmas.” Lisa Hooker, consumer markets leader at PwC, commented that retailers “will be breathing a sigh of relief as retail sales inched up in October on almost every measure.”

HMRC report criticised for patronising entrepreneurs
A report from HMRC suggests that many issues small business owners face when dealing with the tax office are because the entrepreneurs lacked computer skills and did not manage their time adequately. The report, Research with small businesses to explore their perceptions of the tax burden, suggests that fears over tax deadlines and demands from HMRC made small business owners “develop highly inefficient processes which took up unnecessary amounts of time”. HMRC said the report was designed to help to make things less stressful for small business owners, adding that it intended to change its practices to “make improvements in our guidance, business support and digital services”. The Times’ David Byers notes that the language used in the report has upset small businesses, highlighting a section that says problems dealing with the service were “driven primarily by emotional rather than practical considerations”. Tim Stovold from Moore Kingston Smith said: “Describing frustration with HMRC as an emotional response rather than an understandable reaction based on the reality of dealing with the tax office seems an extraordinarily patronising view.”

Government borrows £18.8bn in October
Official data shows that the Government borrowed £18.8bn in October, the second highest monthly figure since records began in 1993. The total came in higher than analysts’ forecasts, with experts expecting October’s public sector borrowing to fall to £13.8bn from the £21bn recorded in September. Borrowing this financial year stands at £127.3bn, with this £103.4bn down on the same period a year ago. The data also shows that tax receipts climbed 6.2% to over £65bn last month, while the debt-to-GDP ratio remained historically high at 95.1%. The interest the Government pays on what it borrows was up because of rising inflation, with interest payments tripling in October from a year earlier to £5.6bn. Chancellor Rishi Sunak, who last month set out new fiscal rules aimed at keeping debt on a sustainable path in his Budget, said: “It is right that we now strengthen our public finances for future generations.” Michal Stelmach, senior economist at KPMG, commented: “The UK is set to have the most contractionary fiscal policy of any G7 country in 2022, which could choke off growth next year if the Chancellor remains determined to meet his new fiscal targets.”

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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Unlike other credit management companies, we charge our members a fixed annual subscription irrespective of how high the debt value is!

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 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

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.