Business news 25 September 2023
James Salmon, Operations Director.
Small Business Commissioner recovers less than £800k in late payments. UK needs more business failures to solve productivity crisis. Recession risks, energy support, HS2, consumer confidence, retail, builders, Hollywood, electric vehicle tariffs & more business news that we thought would interest our members.
Small Business Commissioner recovers less than £800k in late payments
A Government watchdog set up to tackle late payments has reclaimed less than £800,000 for small businesses since June 2021. The Office of the Small Business Commissioner, launched in December 2017, has recovered £8.5m owed to small businesses, with £7.8m retrieved before June 2021. The Commissioner attributed the lower amount recovered to resolving larger outstanding payments in the early days of the service and smaller firms seeking help for smaller amounts. A Government review of payment rules and the role of the Commissioner was completed this year and is due to report soon.
Business Secretary Kemi Badenoch says the Government is committed to strengthening rules in this area. Craig Beaumont, chief of external affairs at the Federation of Small Businesses, says the decline in recoveries shows it is “crystal clear just how much senior cabinet leadership is needed on this issue to turn it around,” while Terry Corby, CEO of Good Business Pays, has called for the Commissioner to have more powers and resources to tackle late payment issues.
UK needs more business failures to solve productivity crisis
The UK’s long-running productivity crisis can be solved by having more businesses fail or shrink, according to a study by the Resolution Foundation. The lack of “economic dynamism” in the country has resulted in a 4% lower GDP between 2008 and 2019. This equates to a loss of £1,400 per household annually. The think-tank calls for policymakers to embrace economic change by reducing transaction taxes and reforming the VAT threshold.
Greg Thwaites, from the foundation, said: “Britain needs more, not less, economic change. We need successful firms to grow, and struggling ones to shrink. While many people assume this severe economic turbulence has led to major economic change, in fact, the opposite is true.” He added that the economy is suffering “from a Great British slowdown, which has left families poorer.”
Recession risk rises
The UK is at growing risk of recession, with analysis by S&P Global and the Chartered Institute of Procurement and Supply (CIPS) showing the sharpest monthly fall in private sector activity, outside of the pandemic, since the financial crisis. S&P Global/CIPS data shows a steep decline in service sector and manufacturing output in September, with total new work in the private sector falling for the third month in a row. The S&P Global/CIPS UK PMI composite output index fell from 48.6 in August to 46.8 in September on a gauge where a reading above 50 separates growth from contraction.
Chris Williamson, the chief business economist at S&P Global market intelligence, said: “The disappointing PMI survey results for September mean a recession is looking increasingly likely in the UK. Underscoring the severity of the UK’s deteriorating situation, September’s downturn is the steepest since the height of the global financial crisis in early 2009, barring only the pandemic lockdown months.”
Economy set to slow in H2
The UK economy is expected to experience a slowdown in the second half of the year due to high interest rates and policy uncertainty.
KPMG forecasts that annual economic growth is likely to slip from 0.4% to 0.3%, a significant drop from last year’s 4.1% growth rate. The firm warns that the UK’s public finances are “fragile” and calls for tax cuts before the upcoming general election. The forecast predicts that consumer price inflation, currently at 6.7%, will only reach the Bank of England’s 2% target by the end of 2024. KPMG also anticipates a rise in the unemployment rate to 4.8% next year.
KPMG’s chief UK economist, Yael Selfin, believes weakening global economic conditions and higher interest rates could pose challenges for the economy, saying: “said: “While interest rates have now potentially reached their peak in this cycle, uncertainty remains regarding their future path.”
UK Private Sector falls
The UK Private Sector has fallen at its fastest rate in 32 months. The headline seasonally adjusted UK composite output Index registered 46.8 in September, down from 48.6 in August, to signal the fastest reduction in output since the lockdown period in January 2021.
Hunt looks to tackle surging welfare bills
With increasing numbers of working-age people claiming benefits, Chancellor Jeremy Hunt plans to use his Autumn Statement to tackle Britain’s surging welfare bills. The Chancellor will seek to encourage people back to work – a move that would help to control inflation as staff shortages have put pressure on employers to meet high wage demands. Efforts to reduce inactivity could see tougher rules for people outside the job market and claiming long-term sickness payments. Mr Hunt is also considering cutting back sharply on uprating benefits. The number of working-age people classified as economically inactive rose by 63,000 in the three months to July.
The Office for Budget Responsibility says public finances could be boosted by as much as £17bn if the Government can get people off health benefits and back into the workforce, with £10.9bn in higher tax receipts from people returning to work plus a saving of £6.5bn on welfare bills.
Cost-of-living challenges set to persist
Dharshini David, BBC News’ chief economics correspondent, says that while pay rises are now matching the cost of living and interest rates are on hold, it “doesn’t mean all of us will see a rapid improvement in our fortunes.” He says that while a rise in unemployment has been relatively modest, it has “gathered momentum and will probably increase further,” while new pay deals have been moderating in recent weeks. On borrowing costs, Mr David says interest rates are set to stay high for some time and points to analysis by Oxford Economics which suggests that total debt repayments are typically set to take up almost four times as much of households’ budgets in 2024 as they did in 2021. He also warns that “stealth” taxes are set to have an impact, highlighting that a freeze on income tax thresholds will see an increase in taxpayers and tax bills. Ministers opting not to increase the threshold has helped create more than 2m new income taxpayers since 2021 – and pulled 1.3m people into the higher rate income tax bracket. The Resolution Foundation think-tank, Mr David notes, says the income of the typical working-age households will be 4% lower by 2024 than it was 2021.
Ministers urged to extend energy bill support
MPs on the Commons Select Committee have warned that vulnerable households face an “inevitable new winter crisis” without more help on energy bills. They have urged ministers, regulator Ofgem, and energy suppliers to take urgent action to deliver support. MPs on the Energy Security and Net Zero Committee said that while the Government provided “unprecedented levels of support” last year, they are concerned that no help has been announced for this winter. The committee suggested that the Government should extend the Warm Home Discount scheme, which gives a £150 one-off discount on energy bills. MPs also said households which missed out on the Energy Bills Support Scheme should receive a payment, while energy firms and Ofgem should make sure customers get more “time, attention and support.” Ofgem said there are rules in place requiring suppliers to be “proactive in identifying those who might be struggling and providing appropriate advice and support,” while Energy UK said suppliers had increased support “during a very difficult time for its customers,” including “emergency credit, offers of payment holidays and altered repayment arrangements.”
Consumer confidence climbs
UK consumer confidence has rebounded to its strongest level since the start of 2022, with GfK’s consumer sentiment indicator increasing to -21 in September from -25 in August. September’s figure marks the second consecutive increase and puts the indicator at the highest level since January 2022. The report shows that households’ expectations for their personal financial situation over the coming year edged up to -2 from -3. Joe Staton, GfK’s client strategy director, said: “While this month’s improved headline score is good news, it’s important to note many households are still struggling with the cost-of-living crisis and that economic conditions are tough.” He added: “The reality is that consumer confidence remains suppressed, and the financial mood of the nation is still negative.”
Retail
UK Retail Sales rebounded in August after the bad weather kept consumers away from the high street in July. Figures from the Office for National Statistics showed retail sales climbed 0.4% in August, after falling 1.1% in July (revised from a fall of 1.2%). The figure was slightly below analysts’ estimates for a rise of 0.5%.
Builders warn of 50,000 fewer new homes
Figures from the Home Builders Federation show 110,598 homes were completed in the first half of 2023, marking an 11% decline on 2022 and a 12% fall compared to pre-pandemic levels. The number of new homes receiving planning permission in the three months to June was down 20%, year-on-year. Reflecting on the data, Rico Wojtulewicz of the National Federation of Builders said: “If things continue, we could see up to 50,000 fewer homes being completed over the next 12 months.” He added: “The Government’s plan to stop mandatory minimum housing targets, and higher interest rates have slowed housing sales,” going on to describe this as “a perfect storm.”
HS2
PM Rishi Sunak is facing growing opposition from business leaders and politicians across all parties as suspicions rise that the Government is about to announce the watering down of the HS2 project as cost estimate hit £100 billion/ The prime minister and chancellor are reportedly set to halt the Birmingham-to-Manchester leg of the High Speed 2 line and supporters of levelling up are in uproar.
Hollywood
Hollywood writers have tentatively agreed to a new three-year contract with the industry that could end their 146 day strike, subject to approval from the 11,500 members of the Writers Guild of America. Writers were seeking better compensation and protections from artificial intelligence. The SAG-AFTRA union, which represents 150,000 actors, however, remains on strike.
Electric Vehicle tariffs
Europe’s autoundutrey has urged the EU to delay post-Brexit tariffs on electric vehicles, arguing they could reduce production in the region by 480,000 cars over three years. The European Automobile Manufacturers’ Association issued an “urgent plea” to the European Commission to push back the tariffs, which are due to take effect in January on trade between Britain and the EU.
Microsoft & Activision
The UK’s Competition Regulator, the CMA on Friday said Microsoft’s restructured takeover proposal of Activision Blizzard, submitted in August, “opens the door to the deal being cleared.” The UK Competition and Markets Authority had blocked the Redmond tech giant’s initial $69 billion transaction, first put forward in January 2022, on concerns that it would restrict competition in the nascent cloud gaming sector.
Natwest
NatWest said it has resolved an issue with its cash machines after some of the bank’s customers reported problems with their accounts. A number of people took to social media site X, formerly Twitter, throughout Thursday complaining money they had deposited in their NatWest accounts was missing. Others expressed concerns they would accrue fees after the issue resulted in their accounts being overdrawn. In a statement early on Friday, a NatWest spokesperson told the PA news agency the issue had been resolved.
CBI secures emergency funding
The Confederation of British Industry (CBI) has secured emergency funding from a number of banks, having come under financial pressure following a sexual misconduct scandal that prompted a number of businesses to withdraw their membership of the lobby group. The business group, which reportedly sought to raise £3m and had to cancel its in-person AGM due to budget issues, said it had “secured the financing necessary to overcome the short-term cash flow challenge.” HSBC, NatWest, Lloyds Banking Group and Barclays are among banks that have reportedly provided a revolving credit facility, a type of funding which essentially works like an overdraft.
Wilko to close final stores in early October
Wilko is set to close its last remaining stores on October 8. The retailer will shut its final 111 stores as part of the final phase of closures, administrators PwC have announced.
Shein’s UK sales hit £1bn but it pays just £2m tax
Chinese fast-fashion giant Shein has achieved £1bn in UK sales in just two years since entering the market. While the company reported a turnover of £1.1m and a profit of £12.2m in the 16-month period ending December 2022, its tax bill only came in at £2.3m. The figures have raised concerns about Shein’s minimal contribution to the exchequer. Shipping directly from China means Shein’s parcels escape import duties, which are levied only on consignments worth at least £135.
FCA to crack down on workplace harassment
The Financial Conduct Authority (FCA) is launching a crackdown on workplace misconduct, with a consultation paper set to propose tougher rules against perpetrators and companies that fail to punish abusive behaviour. The changes will include new guidance on “serious instances of harassment and bullying” and how “non-financial misconduct” forms part of the regulator’s “fit and proper” test for financial services employees. In an interview with the Sunday Telegraph, FCA chief executive Nikhil Rathi said: “Companies that do not have an environment where serious issues like that are dealt with and addressed are unlikely to be companies that have an environment which is healthy from a risk management perspective. We want to make sure that we are proactive around that.” The consultation will include guidance on other ESG issues, namely diversity and inclusion. The City watchdog will insist that companies recognise a “lack of diversity and inclusion” as a “non-financial risk.” Mr Rathi said: “I think having a financial services industry… that is genuinely open to people of all backgrounds, of all characteristics, who are able to progress, I think that will be very powerful for the financial service industry’s competitiveness.”
Rollout of auto enrolled pensions for under-22s likely in 2025
Experts have warned that major reforms to the UK pension system, expected to boost the retirement pots of young workers by tens of thousands of pounds, may not be implemented until 2025.
Pension funds losses hit £626bn
‘Gold-plated’ final salary pension schemes in the private sector have lost £626bn due to failed investment strategies, according to new figures from the Office for National Statistics. The value of these defined benefit plans fell almost a third from over £2trn to less than £1.4trn. The fall was accelerated by a sharp drop in the price of gilts following last year’s controversial mini-Budget. The schemes, which had traditionally invested heavily in UK shares, adopted Liability Driven Investment strategies based on gilts, which proved to be low risk. However, the crisis revealed hidden borrowing in the pension system, leading to a fire-sale of assets. Despite the losses, overall funding levels have improved as the estimated obligation to pensioners has fallen faster than their assets. Experts warn that schemes continuing to invest in gilts and avoid shares may be a driver in the poor performance of the FTSE index.
Tax office adds 3,000 compliance staff
HMRC has added over 3,000 more staff to its compliance team in an effort to reverse a decline in tax revenue. Data obtained by Price Bailey shows that HMRC has recruited 3,084 more staff to its customer compliance unit since 2021/22. This marks a 12% increase. Andrew Park, partner at Price Bailey, said: “There is growing pressure on HMRC to catch up on compliance activity and this hefty increase in staffing levels suggests that the number of targeted investigations should significantly rise in the coming years.” It is noted that HMRC’s focus on revenue raising rather than prevention and assistance has drawn criticism in some quarters, while the decision to bolster the compliance team while closing customer services helplines has raised concerns. A report by the Public Accounts Committee shows that tax revenue from HMRC’s compliance work has fallen to its lowest level in over a decade. The tax office has taken £9bn less over the past two years, largely due to fraudulent use of Covid schemes.
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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.