Business news 23 January 2024
Almost 50,000 companies facing collapse. HMRC’s income from late payments soars. Government debt, economic stagnation, household disposable income, corruption, slimmed gown corporate governance code & more business news that we thought would interest our members.
James Salmon, Operations Director.
Almost 50,000 companies facing collapse
Nearly 50,000 companies are on the edge of failure as higher borrowing costs and taxes pile pressure on the economy. The latest Red Flag Alert from insolvency specialist Begbies Traynor warned that 47,477 companies were in “critical” financial distress at the end of 2023, an increase of 10,000 since September.
Begbies Traynor partner Julie Palmer said: “Any company which is consumer facing is feeling the effects of the cost of living crisis and the days of cheap money are over. Consumer confidence is very low and they’re having to pay more for their debt. It’s going to be a hard year. It’s a double whammy.”
All of the 22 sectors tracked by Begbies showed an increase in critical financial distress, although construction and real estate sectors were the hardest hit.
HMRC’s income from late payments soars
HMRC has seen its profits from late payments more than double in a year, reaching a record £346m. This is over double the £159m made the previous year. HMRC collected a total of £638m in late payment interest over the three years from November 2020 to October 2023. The tax office charges interest on late payments at a rate of 7.75%, which includes time to pay arrangements. The increase in interest rates has led to a surge in the cost of deferring tax payments.
Chris Etherington, of RSM, said: “HMRC may have thought increasing their interest charges would encourage more taxpayers to pay on time but instead they’ve benefitted from a significant windfall, with the interest received in 2023 over double the year before.” Nimesh Shah, of tax specialists Blick Rothenberg, said: “I’m surprised to see that HMRC had agreed such a significant number of time to pay arrangements…I wonder whether HMRC is more receptive [to these arrangements] because they can generate higher interest on these deferred arrangements.”
Government borrowing
UK Government Borrowing dropped sharply in December, figures from Office for National Statistics showed. Public sector net borrowing, excluding public sector banks, amounted to £7.8 billion – some £8.4 billion less than the prior year. It was the lowest level for December since 2019. Borrowing in the financial year to December was £119.1 billion, which was the fourth-highest for the period on record. It was 10% higher than the equivalent nine-month period of the prior fiscal year.
All parts of UK hit by economic stagnation since 2010, says think-tank
A report from the Centre for Cities think-tank argues that every part of the UK has suffered from economic stagnation since 2010 and none of the levelling-up initiatives launched by the Tory government made any difference.
Rising demand boosts UK industries
More than twice as many British industries reported rising demand last month, according to the latest Lloyds Bank UK Sector Tracker, with real estate witnessing the fastest increase. Metals, mining, and software services sectors also experienced significant expansion. The tourism and recreation industries achieved their first growth in demand in ten months. The hospitality sector, which has faced numerous challenges, saw a sales bump, but uncertainty remains. Inflationary pressures continue to impact weak trading, with firms blaming inflation for dragging down sales.
Household disposable income improves
The average UK household had a disposable income of £224 per week in the fourth quarter, the highest since the start of 2022, according to the Asda Income Tracker. This increase in disposable income is attributed to wage growth and easing inflation. However, despite the improvement, disposable income is still down from before the pandemic.
PM urged to appoint anti-corruption tsar
Rishi Sunak has been urged to appoint an anti-corruption tsar, as the role has been vacant since John Penrose resigned in June 2022. Lord Pickles, who oversees the watchdog on post-government appointments, stressed the importance of filling the role with someone who can “tell important truths to government.” Campaigners believe that the lack of an anti-corruption tsar has worsened issues such as PPE procurement, government appointments, and funding decisions. Margaret Hodge, chair of the cross-party group on anti-corruption and responsible tax, said the UK was “no longer a trusted jurisdiction” and called for the Prime Minister to appoint someone to “provide political leadership and tackle the corrosive impact of corruption head on.”
FRC confirms new slimmed-down corporate governance code
The Financial Reporting Council (FRC) has confirmed a newly slimmed down rulebook for companies in order to ease the red tape burden and support the growth and competitiveness of the UK. The FRC’s original plans for new reporting requirements, including diversity and inclusion reporting and higher environmental, social, and governance (ESG) requirements, have been dramatically pruned. Under the new plans, directors will have to take responsibility for stronger internal controls, with the regulator expecting companies to review their risk management and internal controls annually.
FRC chief Richard Moriarty said the plans would enhance “transparency on internal controls, but in a way that is proportionate and minimises reporting burdens on businesses.” Julia Hoggett, chief of the London Stock Exchange, welcomed the approach stating: “Fundamentally, high standards of corporate governance are one of the UK’s strengths, as are having principles-based regimes designed to be straightforward to implement to maximise compliance, efficacy and impact – the FRC’s changes to the Code reflect these very principles.” Anne Kiem OBE, CEO of the Chartered Institute of Internal Auditors, praised the increased focus on robust risk management while Dr Roger Barker, Director of Policy and Corporate Governance for the Institute of Directors, said that the FRC has done a good job of balancing its objectives to improve governance while maintaining competitiveness.
London accounts for almost half of booming UK services exports
London is capturing an ever-bigger share of the UK’s service sector exports, according to a report by the Resolution Foundation, with its share rising from 38% to 46% between 2016 and 2021. Glasgow was the only other city to see a rise in its share, but it only exported 5% of what London did in 2021. The report highlighted the need for government action to ensure other big cities keep pace with London. The concentration of services exports in the UK contrasts with France, where cities such as Bordeaux and Lille have outperformed Paris. The thinktank called for more investment in public transport and housing, as well as a major expansion of city centres, to boost services exports in major cities outside London.
Used Car prices collapse in seven months
Research by used car buying service SellYourCarInAFlash.com, shows that many used car values have collapsed, with some losing almost half their value since May 2023 as the market adjusts after a Covid value boost. EVs on average have lost a quarter (24%) of their value since May 2023, while petrol vehicles have on average lost nearly a third of theirs (30%). The average price in the research showed petrol vehicles dropping £6,484, and electric cars falling £4,573.
Electric van maker in talks with EY as insolvency looms
Arrival is reportedly in discussions with EY about becoming administrator of the electric van manufacturer if it cannot secure rescue funding. Arrival announced in October that it would cut a quarter of its staff after a factory parts manufacturer issuing a winding-up petition against the company.
Natwest
NatWest confirmed that the UK Government has sold another 1% of its stake in the high street lender. The move from 36.94% to 35.94% was announced in a stock exchange filing.
Shorter hours for men add to strains on UK labour market
The Office for National Statistics has said that a fall in the average working work for men has been a major factor in the labour shortages seen in the UK since the pandemic.
Supermarkets
Marks & Spencer and J Sainsbury have announced a new round of price cuts as they look to win back market share from discounters Aldi and Lidl. Sainsbury’s brought the total items part of its Aldi price match to over 550 this month, while almost 6,000 products can now be bought cheaper with Nectar points. M&S said it would be cutting the prices of 65 of its products by an average of 6%.
Hunt drops more hints of future tax cuts
The Conservatives are continuing to tease possible tax cuts in the Spring Budget, with the Chancellor Jeremy Hunt repeating on Monday his promise to put Britain on the path to lower taxes. There are rumours that Mr Hunt could slash 2p off income tax in March, or unveil another cut to National Insurance. The Office for Budget Responsibility is expected to hand Mr Hunt figures next week showing he has around £20bn of headroom. Meanwhile, Rishi Sunak, the Prime Minister, has announced that Mr Hunt would be staying on as Chancellor in the run-up to the next election.
Markets
The S&P 500 in the US hit a new all-time high on Monday, as stock prices continued their recent run higher. Wall Street futures were little changed ahead of the opening bell on Tuesday. Asian markets followed the positive momentum, led by a rebound in Hong Kong, while Japanese shares were modestly lower after the Bank of Japan kept its monetary policy unchanged. Meanwhile India’s stock market overtook Hong Kong’s to become the world’s 4th biggest equity market. The combined market cap of India’s exchanges touched $4.3 trillion. However, European shares have opened lower.
Oil was little changed as traders weighed up a host of conflicting supply and demand worries, from rising tensions in the Middle East to cold weather woes disrupting production in the United States.
The pound was fairly static at $1.27 and €1.17.
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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.
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.