Business news 23 August 2023

James Salmon, Operations Director.

Bank of England warns on corporate default risk. Manufacturing output falls sharply. SMEs committing to tech investment. UK needs strategy to protect food supplies, retailers say. UK recruitment firms cut jobs amid hiring slowdown.  And more business news that we thought would interest our members.

Bank of England warns on corporate default risk
The Bank of England has warned that rising interest rates are putting British companies at higher risk of corporate defaults, with the proportion of non-financial companies experiencing debt-servicing stress expected to hit 50% by the end of the year, up from 45% in 2022. The proportion rose to 70% for medium-sized companies, meaning corporate debt stress would hit its highest level since the 2008-09 financial crisis. Martin McTague, national chair of the Federation of Small Businesses, said the analysis had mainly focused on bigger firms and “so doesn’t show the whole picture, with small businesses far more exposed to rising interest rates than their medium-sized and large peers”.

Manufacturing output falls sharply
UK factory output has fallen to its lowest level in nearly three years following a slowdown in activity over the three months to August. The monthly snapshot of manufacturing from the CBI found production fell in 15 of 17 subsectors over the summer while the balance of firms expecting to raise selling prices over the coming months was at its lowest since February 2021. Martin Sartorius, a CBI economist, said: “With output volumes contracting at their fastest pace since the pandemic and order books deteriorating, this survey makes for gloomy reading for manufacturers. However, easing price pressures will bring some relief to many manufacturing firms and the broader economy.”

SMEs committing to tech investment
London’s small and medium-sized enterprises (SMEs) are allocating over half of their annual revenue to technology investments, such as data analytics and artificial intelligence tools. This move is aimed at countering rising costs and climbing interest rates by increasing productivity. The retail sector, in particular, is embracing new technologies, with two-thirds of SMEs in the capital establishing specific tech teams. Colin O’Flaherty, head of SME at Barclaycard Payments, praised SMEs for investing in technology to future-proof their operations.

UK needs strategy to protect food supplies, retailers say
The British Retail Consortium has called on the UK Government to introduce a long-term strategy to protect food supplies following the closure of the UK’s last remaining ammonia plant. Andrew Opie, director of food and sustainability at the BRC, said: “UK food security is important for every retailer who source the vast majority of their food here, so losing a plant which produces both fertiliser and CO2 as a by-product is very worrying. This is not a recent problem, and while we do not expect any immediate impact on food supplies, it is high time the Government implemented a long term food security plan.”

UK recruitment firms cut jobs amid hiring slowdown
UK recruitment firms are cutting jobs as economic uncertainty leads to a slowdown in the jobs market. Labour shortages and fierce competition for talent during the pandemic resulted in record results for recruitment firms. However, inflation and interest rate hikes have caused businesses to reduce investment and freeze new hires, leading to job cuts in the recruitment sector. While some recruiters are diversifying their offers and focusing on temporary work, others are experiencing declines in net fees and consultant headcounts. The outlook for recruiters remains uncertain, with forecasters from the Bank of England, KPMG and others predicting a rise in unemployment.

British workers need £3k pay rise just to keep pace with costs
Research suggests British workers need a £3,000 pay rise in order for their salaries to keep pace with rising inflation. Investment platform easyMoney analysed historic changes to inflation and the average salary in the UK to determine the wage growth needed to beat the cost-of-living crisis. Employees would need a sizeable increase to mitigate the impact of the inflation-hiked prices for goods and services. According to easyMoney’s data, the average salary dropped by 0.7% to £31,437 in 2021 while inflation rose by 2.6%.

Britain risks destroying its thriving tech scene
Matthew Lesh, the Director of Public Policy and Communications at the Institute of Economic Affairs, laments the regulatory environment in the UK, arguing in a piece for the Telegraph that the Government is proving itself decisively anti-tech. He cites the blocking of the Microsoft – Activism deal by the Competition and Markets Authority; the Online Safety Bill, which will likely discourage smaller platforms from bothering to operate in the UK; moves to give Ofcom the power to require private messaging services to scan user messages; and the Digital Markets and Competition Bill, which Amazon warned would block innovation and make the UK a harder place to innovate. “There is a real risk that rather than launching ourselves into the vanguard of the AI revolution, we’ll regulate ourselves into a technological backwater.”

Chancellor pressed to cut UK taxes after positive borrowing data
Public sector net borrowing came in at £4.3bn in July, less than the £6bn estimated by the Office for Budget Responsibility, official figures show. The fall in public borrowing was largely due to ballooning tax receipts, which increased by £3.4bn from July last year to £85.2bn last month, well above the OBR forecast. The figures led to a chorus of Tory MPs calling for taxes to be cut and criticising the OBR for its “ridiculously pessimistic” forecasts. Julian Jessop, economics fellow at the Institute of Economic Affairs think-tank, said: “Government borrowing continues to undershoot the official forecasts, raising hopes that there may be more room for tax cuts than previously thought.” But Martin Beck, economic adviser to the EY Item Club, was more cautious pointing out that since the OBR’s last forecast, market expectations for interest rates have risen markedly leaving the Chancellor less likely to meet his fiscal rules.

BoE’s bond buying cost taxpayers £14.3bn last month
The rise in interest rates is leading to growing losses from the Bank of England’s quantitative easing programme. The Treasury transferred a record £14.3bn to the BoE last month to meet the shortfall from the bond buying programme put in place after the global financial crisis. The July sum is £5.4bn more than forecast by the Office for Budget Responsibility in March.

Green Manufacturing

The Institute for Public Policy Research says the UK needs billions of pounds of strategic state investment if we are to  deliver on government plans to put innovative green manufacturing at the heart of the economy.


Huawei is reportedly building secret semiconductor facilities across China to attempt to skirt US sanctions on its chips.

VC funds considered overvalued
Top investors with over $10tn in assets under management are expressing concerns about overvaluation in venture capital (VC) funds. A survey by Preqin reveals that 68% of investors consider their VC portfolio to be overvalued. Additionally, 75% of the surveyed investors plan to commit less than $50m to VC funds in the next year. This signals skittishness towards venture capital as an asset class, following a decline in valuations of early-stage companies. While investors remain cautious, there is optimism for wider investment in private asset classes. Allocations to private assets are expected to grow, with only 5% of investors planning to sell down their private capital allocations and over a quarter planning to increase allocations. Private equity deals in the UK have declined, but a recovery is anticipated in the mid-market, according to the latest deal tracker from KPMG.

Latest Insolvencies

Appointment of Liquidators – COPYHOLD CONSULTING LTD
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Petitions to wind up (Companies) – COPIT LTD
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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.


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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.