Business news 24 May 2023

James Salmon, Operations Director.

Some of business news that we thought would interest our members.

UK company directors face tougher conduct regime
Boards of listed companies in the UK will face tougher hurdles from January 2025 to show investors they have effective safeguards against fraud to ensure accurate financial reports, according to proposals from the Financial Reporting Council (FRC). The proposals include stating if controls have been kept effective on an ongoing basis during the reporting period, and explaining why they reach this conclusion. “The objective of our proposed approach is to avoid a situation where the review of effectiveness is seen as a one-off exercise,” the FRC said. Under the revised Corporate Governance Code, directors would also be expected to disclose “material weaknesses or failures” in these controls. Other proposals include more emphasis on audit committees at companies to promote effective competition when selecting an auditor, to reduce Big Four dominance.

IMF expects UK to avoid recession this year
The International Monetary Fund has upgraded its outlook for the UK, saying the country will no longer fall into recession this year. The body previously predicted Britain would be the worst performing economy in the G7, but now says the UK will grow by 0.4% this year, up from its estimate in April of a 0.3% contraction. However, the organisation warned the Government against cutting taxes as this would fuel inflation and result in a longer period of high interest rates. Responding to the report, Chancellor Jeremy Hunt said the forecast was a “big upgrade” for the UK’s growth prospects, adding: “Today’s IMF report credits our action to restore stability and tame inflation.” Several commentators say Hunt is likely to use the IMF’s analysis to quell demands for tax cuts within Conservative ranks.

PMI

Sterling fell following the PMI data which illustrated a ‘two-track’ economy, marked by robust services and weak manufacturing. The Services PMI came in at the positive figure of 55.1 while manufacturing was more negative than expected at 46.9. Despite the resilience of services sector helping to stave off recession, questions linger about the longevity of this support given the prevailing high inflation. Furthermore, with services sector making a large portion of the UKeconomy, it is likely that BoE will be compelled to persist with tightening measures in order to suppress demand.

Growth in services adds to inflationary pressures
The latest survey of purchasing managers by S&P Global and the Chartered Institute of Procurement and Supply shows the service sector enjoyed growth in May, albeit slowing slightly from April’s one-year high, while production levels at manufacturing firms fell at the fastest pace in four months. The index’s figure for May dropped to 53.9, from a 12-month high of 54.9 in April. Any reading over 50 shows growth. Chris Williamson, chief business economist at S&P Global, said the PMI was consistent with quarterly gross domestic product growth of 0.4% in the second quarter, speeding up from 0.1% in the first three months of the year. “However, this growth spurt is driving renewed inflationary pressures, as service providers struggle to meet demand and hence not only offer higher wages to attract staff but also find themselves able to charge more for their services,” he said.

BoE has ‘lessons to learn’ after forecast errors
Bank of England Governor Andrew Bailey admitted to MPs on the House of Commons Treasury select committee on Tuesday that the Bank had failed to forecast inflation accurately and it had reduced the role of its own model when setting interest rates. Harriet Baldwin, the chair of the Treasury committee, likened the Bank’s failure to spot inflationary pressures to City figures missing warnings before the 2008 financial crisis. “I think you could’ve made the same error as bankers and traders did running into the financial crash,” she said. Mr Bailey went on to say that annual inflation was on track to fall sharply in the face of a recent drop in wholesale energy prices and despite the UK being hit with the fastest annual growth in food prices since the 1970s. High supermarket prices are being driven by food producers rebuilding their margins following a severe squeeze last year, Bailey said, rather than profiteering

London needs more powers to ensure businesses thrive – Sadiq Khan
Writing in City AM, Mayor of London Sadiq Khan says London’s business community is facing a difficult period due to Brexit, COVID-19, and inflation and businesses need support with dealing with this legacy and in preparing for the future. He says a “recurring problem business leaders raise is the difficulty in attracting the right people with the right skills following Brexit.” The number of businesses in London experiencing at least one skills shortage has now risen to almost seven in ten. Khan proposes devolving some immigration powers to City Hall to create a regional shortage occupation list in partnership with businesses. Khan met with key business leaders on Tuesday at a breakfast roundtable summit hosted at the KPMG London headquarters in Canary Wharf.

UK public borrowing rises on social security and interest payments
The UK Government borrowed an additional £25.6bn in April, the second highest monthly total since records began in 1993, according to the Office for National Statistics. The borrowing total was £3.1bn higher than forecast by the Office for Budget Responsibility at March’s budget and was £11.9bn more than a year earlier. Rising social security benefits and debt interest pushed up spending as did the cost of energy support schemes. Compared with April 2022, income tax and corporate tax revenues were strong with increases of 7.8% and 7.7% respectively. But VAT receipts came in at just 0.4% up on last year – far below the rate of inflation, which stood at 10.1% in March. This indicates that consumers are beginning to tighten their belts and spend more on food, which is not subject to VAT.

Best place to live

Oxford, Swindon, Exeter, Bristol and Southampton were named the best places to live and work in the UK based on a survey of economic wellbeing by PricewaterhouseCoopers LLP. The  Good Growth for Cities Index put London, Bradford, Middlesbrough and Stockton, Birmingham and Manchester near the bottom.  Based on  12 data points including jobs, health, income, safety and skills, as well as work-life balance, housing, travel-to-work times, income equality, the quality of high street shops, the environment and business startups. Oxford has jumped 43 places in the ranking since 2021.

Calls for reform as apprenticeship numbers plummet
The number of people taking apprenticeships has fallen dramatically, triggering calls for major reform of job training. A report by think tank Policy Exchange reveals that £4.3bn raised by the Apprenticeship Levy since 2018 has gone unspent. The report calls for reform to help employers invest in training in areas where there are shortages of skills so the nation does not have to rely on imported labour. Tina McKenzie of the Federation of Small Businesses described the “sharp decline” in apprenticeship starts as “alarming,” warning: “We should not jeopardise the future of our economy by neglecting the skills and experiences of our youth.” David Hughes, chief executive of the Association of Colleges, added: “The apprenticeship levy has had a positive impact in many ways, but it is not working how it should. A reformed levy system is vital as soon as possible.”

Central London workers in office for 2.3 days a week
A poll of office workers in London by the thinktank Centre for Cities found they are spending on average 2.3 days a week in the workplace, or 59% of the time they would have been in the office prior to the pandemic. The report, entitled Office Politics: London and the Rise of Home Working, warns that, despite the upfront benefits for staff in terms of better work-life-balance and less commuting, there may be longer-term costs for the capital in terms of lost productivity.

Rolls-Royce

Rolls-Royce has cancelled plans for a direct air capture product, as Chief Executive Tufan Erginbilgic looks to keep a lid on costs, Sky News reported on Tuesday. The DAC project, which aims to extract carbon from the air and create synthetic fuel through a chemical process, has been abandoned. Staff working on the project have been redeployed elsewhere, Sky News reported, though one source noted that a team leading the creation of the DAC product has looked elsewhere for financing as they bid to keep work going.

Government sets up new Whitehall anti-fraud squad
The UK Government has introduced a new fraud team called the Risk, Threat and Prevention Service, to inspect all major spending plans for fraud risks. The team will “stress test” big funding pledges and check them for loopholes before the cash can be disbursed to the public. The move follows the loss of £4.5bn to fraud during the pandemic, much of which is yet to be recovered. The team will adopt the techniques used by criminals, including hackers, to test how well new spending pledges will protect taxpayers’ cash. They will also draw up a list of public sector areas at the highest risk of being targeted, such as work and pensions, so they can be given extra protection. The move is part of a wider £1bn crackdown on the misuse of money which is being led by the Public Sector Fraud Authority. Mark Cheeseman, the body’s first CEO, said: “Across the world, fraud is getting more complex and pervasive, but we know that the investment in understanding and preventing fraud pays off. The creation of the new Risk, Threat and Prevention Service, a first for the Government, will help us to continue innovating, and improving, across the system at finding, fighting and stopping fraud.”

Chinese owner of Canary Wharf building faces insolvency proceedings
The Chinese owner of 5 Churchill Place in Canary Wharf is facing insolvency proceedings, with FTI Consulting expected to oversee the administration of 5 Churchill Place Management Company Limited. The 319,000 square foot building was bought by Cheung Kei Group in 2017 for £270m. The building was previously owned by a vehicle controlled by businessman Wafic Said and before that by Canary Wharf Group. The building was occupied by Bear Stearns prior to its demise and then by JP Morgan. Lloyds Banking Group was attempting to sell a loan secured against the building in March. The development raises questions about commercial real estate values in the aftermath of the COVID-19 pandemic and the prospects for Canary Wharf office blocks.

Foreign companies in China want “greater clarity” on rules
Foreign companies in China are seeking clarity on newly expanded national security and other rules, following police raids on consulting firms. The British Chamber of Commerce in China conducted a survey of its members and found that they are optimistic about investing in China, but are waiting for steps to “restore the trust and certainty” in the country amid tension with Europe and Washington and official plans to promote economic self-reliance.

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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No face-to-face meeting required – 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?

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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.