Business news 24 April 2023
James Salmon, Operations Director.
Late payments and operating costs soar. UK economy shows signs of recovery. Inflation, manufacturing, Royal Mail, CBI, North sea wind, VAT anniversary and more business news.
Late payments and operating costs soar
Insurer Allianz has warned that businesses may struggle to access credit as operating costs hit their highest levels since 2008 and late payments soar. Credit is set to become more expensive and in shorter supply as companies become slower in making payments.
While operational costs as a proportion of turnover have hit their highest level since the financial crisis, late payments also climbed last year, with nearly a fifth of businesses reporting that they were paid for their services after 90 or more days.
Maxime Lemerle, lead analyst for insolvency research at Allianz, said that while late payments have driven up the costs of running a business, “lower growth, higher inflation, the higher cost of financing and more non-payments have all contributed.”
Figures from Bibby Financial Services, which provides financial services to SMEs, show that the average level of bad debt – where a company suffers because clients fail to pay the full sum invoiced – have risen by 61% in the past year. Smaller companies have £16,641 of bad debt on average.
Six in ten businesses said it was taking longer for customers to pay invoices in full.
UK economy shows signs of recovery
The latest flash PMI survey from S&P Global and the Chartered Institute of Procurement and Supply shows an uptick in activity April, with consumers shrugging off inflationary pressures to spend more on travel, leisure and entertainment. The PMI rose from 52.2 in March to 53.9 in April, the highest level for 12 months, but robust levels of service sector activity were offset by a sharp fall in manufacturing output. The reading was above analysts’ consensus forecasts of 52.5. Manufacturers said that their customers were looking to cut down their stock levels, leading to a decline in demand.
Chris Williamson, the chief business economist at S&P Global Market Intelligence, said: “The key takeaway is that the economy as a whole is not only showing encouraging resilience but has gained growth momentum heading into the second quarter.” Thomas Pugh, economist at RSM UK, said: “Even if the economy avoids a recession, as now seems likely, the manufacturing sector is in the midst of a pretty deep one.”
UK inflation exceeds EU average
Analysis shows that inflation in the UK currently exceeds the average seen across European Union countries. According to Statista’s harmonised index of consumer prices, average inflation across the bloc hit 10% in February, while in the UK the rate was just higher at 10.1% in March, having fallen from 10.4% in February. However, the data shows that some EU nations recorded far higher rates, with inflation in Hungary coming in at 26.2% and 21.4% in Latvia. Czechia, Estonia, Lithuania, Poland, Slovakia, Bulgaria, Romania, Croatia, Austria and Italy all saw inflation exceed the UK’s rate in February. At the opposite end of the scale, Luxembourg saw the lowest inflation rate at 5.8%, followed by Spain (5.9%) and Malta (6.8%).
Manufacturing
UK Manufacturing Production decreased for the second month running and at the fastest pace since January. The contrasting trends for business performance in April largely reflected divergent demand patterns. New order growth hit a 13-month high in the service economy amid rising spending on travel, leisure and entertainment. Meanwhile, manufacturers attributed a renewed fall in new work to customer destocking, elevated energy costs and subdued demand for big ticket consumer goods.
Royal Mail
International Distribution Services said an agreement had been reached between Royal Mail and the Communication Workers Union which it said “represents a good outcome for customers, employees and shareholders.” Royal Mail said workers will get a 10% salary increase over several years as part of a final deal which ends a year-long pay dispute. The postal and delivery holding company, which includes Royal Mail and GLS, said the agreement was ratified by CWU’s postal executive committee. It will be put to a ballot of CWU members with a recommendation to approve.
If members of the Communication Workers Union (CWU) accept a 10% pay rise over three years it will signal an end to the row over jobs and conditions which led to a series of walkouts last year. The deal includes a one-off lump sum of £500.
Credit Suisse
Credit Suisse over the weekend have revealed the magnitude of the outflows they experienced during Q1. Asset outflows of 61.2 billion Swiss francs (£55.5 billion) were recorded earlier this year. The Bank stated, “Credit Suisse experienced significant net asset outflows, particularly in the second half of March. These outflows have moderated but have not yet reversed as of 24th April”.
Corporates flee CBI after second claim of rape
The CBI has suspended all activity until June after a second claim of rape against a CBI worker drove major companies to terminate their membership. The organisation will hold an extraordinary general meeting in the summer when restructuring proposals will be put forward. On Friday, retailer John Lewis was among the high-profile firms to quit following the latest allegations. BMW, Virgin Media O2, insurers Aviva, Zurich and Phoenix Group also quit, along with NatWest, Mastercard, Lloyds of London, Schroders, and EY. Many others suspended membership, including GSK and AstraZeneca; Tesco, Sainsbury’s, Asda, and Marks & Spencer; British Land, PwC and Manpower Group. Allegations of a rape at a CBI summer party in 2019 and other sexual misconduct at the organisation emerged earlier this month. Now, a second woman had made a rape allegation – against two male CBI co-workers. Three employees have been suspended pending the outcome of an investigation by law firm Fox Williams and the group’s director-general Tony Danker was dismissed over separate complaints.
The Confederation of British Industry (CBI) is suspending key activities after a number of firms quit the business group following allegations of sexual misconduct. The CBI board said it would put forward proposals for a “refocused” industry body at a meeting of its membership in June. A number of companies and trade bodies have announced they are terminating, suspending or reviewing their membership of the group amid claims of sexual misconduct by CBI employees. Among the allegations, two women claim to have been raped by colleagues, while a woman who was stalked by a colleague says she was actively discouraged from reporting the matter to the police. Tony Danker was last week sacked as CBI director-general after being accused of making unwanted contact with a woman who works for the organisation and three CBI employees have been suspended pending the outcome of an investigation by law firm Fox Williams.
Ministers look to woo private sector chiefs
A number of ministers will today attend a summit with business leaders, with Sky News’ Mark Kleinman suggesting Prime Minister Rishi Sunak is attempting to “mount a fresh private sector charm offensive.” Alongside Mr Sunak, Chancellor Jeremy Hunt and Business Secretary Kemi Badenoch will be joined by more than 20 ministers, including new deputy PM Oliver Dowden and City Minister Andrew Griffith. The Prime Minister’s new special adviser on business and trade, Franck Petitgas, a former senior executive at Morgan Stanley, will also attend. Speaking ahead of the event, Mr Sunak said: “We are bringing together some of the UK’s biggest companies and investors for meaningful dialogue – and I’m a Prime Minister passionate about working with business to unlock opportunity and progress.” The Telegraph says the summit comes amid “mounting” criticism from companies over higher taxes, “and follows attempts by Labour to reposition itself as the party of business.” KPMG UK chief executive Jon Holt is among business bosses set to attend.
Energy firms hold on to £280m of support cash
Britain’s biggest energy firms are sitting on £280m of taxpayer money intended for customers through support grants. British Gas, Scottish Power and Eon are among the firms to have held onto cash earmarked for the Government’s Energy Bills Support Scheme. Between them, these companies have retained an estimated £155m. Government figures analysed by the End Fuel Poverty Coalition suggest that while many prepayment vouchers may have been delivered to customers but not yet redeemed, others have not received them. Government data spanning October to February shows that Octopus Energy has handed out almost 90% of its support vouchers and now holds just over £1m worth of cash from the energy help scheme. By contrast, Scottish Power has yet to distribute £45.4m worth of support. Simon Francis, coordinator of the End Fuel Poverty Coalition, said: “In some cases, energy firms have been far too slow to pass on these vital funds to customers.” He added: “Energy firms need to up their game significantly to end this breakdown in customer service.”
North Sea countries in wind energy drive
European countries surrounding the North Sea are set to pledge to quadruple offshore wind energy capacity by the end of the decade. Energy ministers from the UK and Norway will join seven EU countries – Germany, France, the Netherlands, Belgium, Denmark, Ireland and Luxembourg – in committing to rapidly building wind farms, developing connected offshore green power generation sites, and launching projects to produce renewable hydrogen at sea. A draft of a declaration set to be published by the ministers says: “In response to Russia’s aggression against Ukraine and attempts of energy blackmail against Europe we will accelerate our efforts to reduce fossil fuel consumption as well as dependence on fossil fuel imports.” The declaration is set to be announced at a summit of European governments to promote North Sea green energy in Ostend this week.
VAT in the UK is 50 years old
UK VAT and Customs Duty adviser Robert Marchant provides a brief history of VAT in the UK in Forbes, as the tax reaches its 50th anniversary. Over £150bn of UK VAT was collected last year – around 16% of total tax receipts – and as inflation persists, the amount of VAT being collected is expected to continue to increase. “The VAT regime has evolved considerably over the last 50 years and will need to continue to do so as technology continues to fuel change,” says Marchant, adding: “As a transactional tax that generates a significant proportion of the UK Government’s total tax take, we can expect VAT to continue to impact all aspects of daily life for businesses, non-profit organizations, and consumers.”
Mike Lynch loses bid to appeal against extradition to US
The founder of software maker Autonomy, Mike Lynch, has lost his bid to appeal against his extradition to the US. He faces criminal charges related to claims Autonomy’s accounts were manipulated ahead of its purchase by Hewlett-Packard. A spokesperson for Mike Lynch said: “Dr Lynch is very disappointed, but is reviewing the judgment and will continue to explore his options to appeal, including to the European Court of Human Rights.” They added on the extradition: “The United States’ legal over-reach into the UK is a threat to the rights of all British citizens and the sovereignty of the UK.”
HMRC ‘weak’ on tackling avoidance schemes
Campaign group TaxWatch has criticised HMRC for a “weak” approach to tackling the creators of schemes designed to reduce workers’ tax bills. It said that while the tax office has pursued tens of thousands of users of “disguised remuneration” schemes, too few enablers of avoidance and evasion have faced serious sanctions. Fewer than six financial penalties for enabling failed tax avoidance schemes have been issued since 2019, while fewer than fifteen criminal investigations have been opened since 2017. HMRC estimates that 31,000 people used disguised remuneration schemes in 2020/21, resulting in the loss of an estimated £400m in tax. An HMRC spokesman said: “We have slashed losses to tax avoidance schemes for individuals by more than two thirds over the last decade.” They added: “A hard core of avoidance promoters remain, but we are determined to drive them out of business.”
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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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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Check our compensation calculator to see how much your business could be owed!
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.