Business news 24 January 2023
James Salmon, Operations Director.
Thousands of firms face collapse. ONS revises productivity data after error. Bank of England expected to keep up interest rate rises as debt balloons. American companies drive FDI in Britain. Taxpayers waiting up to a year for a reply from HMRC. And more business news.
Thousands of firms face collapse, insolvency firm warns
There are growing fears that 2023 could see a wave of company collapses as the cost of living crisis continues. The number of firms on the brink of going bust jumped by 36% in the last three months of 2022, said insolvency firm Begbies Traynor.
It expects this number to rise due to higher costs and consumers cutting back their spending. said that up until now low interest rates and loans had helped firms. “In the pandemic, Covid loans and a longer time to pay taxes had meant that support had continued,” Julie Palmer, partner at Begbies Traynor, said. “[The support] all seems to be coming to an end at the same time, with nothing really on the horizon in terms of what might replace them,” she added.
A backlog in the insolvency courts due to Covid has also delayed some company collapses. “The courts were closed for business so nobody could take recovery action against non-payers and we are beginning to see those cases pushed through now,” Palmer explained.
ONS revises productivity data following ‘manual error’
The Office for National Statistics has revised its data on UK productivity, declaring that instead of Britain leading the way on productivity among the world’s wealthy nations, it had in fact suffered one of the worst rates of productivity growth in the G7. The statistics office released the correction after finding a “manual error” on its output per hour measurements had heavily skewed its findings.
Bank of England expected to keep up interest rate rises
The Bank of England is expected to raise interest rates by a further 0.5 percentage points next month, with analysts pointing to high underlying inflation, strong wage growth and broad unexpected resilience in the economy.
Government debt
UK Public Sector Borrowing – excluding public sector banks – in the final month of 2022 reached its highest December figure since monthly records began in 1993, according to the Office for National Statistics at £27.4 billion. Fueled by the Energy cap support and rising interest payment costs, borrowing was £16.7 billion higher than the previous year, and £9.8 billion higher than the latest official forecast from the Office for Budgetary Responsibility.
American companies drive FDI in Britain above £2trn
Data from the Office for National Statistics (ONS) show a surge in investment by US companies into Britain has pushed total overseas investment to above £2trn for the first time. American backers were behind an extra £89.7bn of cash flow into Britain in 2021, contributing to an overall £83.1bn increase in investment from abroad. Inward investment from non-EU countries also rose by £37.3bn, while investment from Asia and within the EU fell, driven by declines from Japan and Belgium. Meanwhile, overseas spending by British companies also increased by £16bn to £1.77trn in 2021, the ONS said.
Investors spurn US companies in favour of London stocks
Goldman Sachs says Europe has become the “region du jour” for investors betting on a less severe economic downturn and attracted by its cheaper valuations compared with American stocks. London-listed equities are among the European markets to have rallied this year, as a fall in wholesale gas prices, the reopening of the Chinese economy and signs that inflation may have peaked have boosted sentiment. Last week the FTSE 100 index of London’s leading companies came close to the record high hit in 2018. Beijing’s ending of its zero-Covid policies more rapidly than expected has provided a huge boost to European stocks, said Sharon Bell, senior European equity strategist at Goldman Sachs.
Taxpayers waiting up to a year for a reply from HMRC
HM Revenue and Customs is taking up to a year to answer postal queries from taxpayers and accountants, the Institute of Chartered Accountants in England and Wales has warned. Frank Haskew, of the ICAEW, said: “As the self assessment deadline approaches, we urge HMRC to take immediate short-term action to solve its customer service problem, and ease the pressure on taxpayers who seek to comply with their tax obligations.” The ICAEW also said those some members calling HMRC to speak with an adviser had waited for more than an hour before being cut off. Mr Haskew added: “The current and long-standing level of customer service is unacceptable but unsurprising, given the reduction in staff at HMRC. Our members tell us they are waiting for up to a year to receive written responses to technical queries, which is just not good enough.” The warning comes as HMRC trials a service that will redirect callers with straightforward queries to the tax authority’s website.
Long-term consequences of equity release can be devastating
The over-55s borrowed a record £5.6bn against their properties last year as the cost of living crisis drove more homeowners to extract cash from their properties to cover rising bills. But experts are warning that vulnerable homeowners are being pressured into taking out loans that may not be suitable. Baroness Ros Altmann, a former pensions minister, said equity release borrowers could be “enticed into an expensive loan” when cheaper options could cover their short-term spending needs. She said: “The commissions paid to those selling equity release plans are substantial, so there is a big incentive to get people to take out these loans, but the long-term consequences can be devastating for families.” A spokesman for the Financial Conduct Authority said: “We are already looking at the advice that equity release firms are giving with a particular focus on lifetime mortgages and will raise with firms where we see firms not giving good quality advice.”
Labour’s windfall tax plans would put energy security at risk
The Labour party has been warned that its plan to increase windfall taxes on energy profits would leave a vast number of UK projects economically unviable, leading to a significant decline in output. Labour’s plan to extend the windfall tax on UK North Sea operators from 75% to 78% could generate £13bn that would go towards keeping energy bills down. But Offshore Energies UK (OEUK), a trade body for the oil and gas industry, has warned that the measure would be “disastrous for the UK’s energy supplies and future energy security”.
UK to propose carbon border tax as part of steel industry aid package
The UK Government is considering a carbon tax on steel imports as part of a £600m package to level the playing field for Britain’s steelmakers and support their investment in greener technologies.
C of E leaders call for tax rises to fund social care system
Church of England leaders have called for tax rises to fund a new NHS-style universal social care system that could cost an extra £15bn a year. The archbishops of Canterbury and York, Justin Welby and Stephen Cottrell, have concluded a 20-month inquiry into Britain’s “broken care system” and decided that it would be a “collective sin” not to fix it.
PM orders inquiry into Nadhim Zahawi’s taxes
Rishi Sunak has asked his independent ethics adviser Sir Laurie Magnus to look into the disclosures made about the tax affairs of Nadhim Zahawi. The Prime Minister said there were “questions that need answering” over the case, signalling that he felt he had not been told the full story by Zahawi. The Conservative party chairman is facing calls to resign, after it emerged he paid a penalty to HMRC over previously unpaid tax while he was Chancellor, as part of a multi-million pound dispute.
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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.