Business news 26 June 2023

James Salmon, Operations Director.

PM pleads with borrowers to hold their nerve. Banks forbearance measures. UK economy loses momentum. BoE accused of tightening too quickly. Mortgage prisoners left ‘suicidal’.  And more business news that we thought would interest our members.

PM pleads with borrowers to hold their nerve

Rishi Sunak has given the Bank of England his full backing after rates were raised again to a 15-year high of 5%. Speaking with the BBC’s Laura Kuenssberg on Sunday, the Prime Minister urged homeowners and borrowers to “hold their nerve” in the face of soaring borrowing costs, insisting that the measures being taken would eventually bring inflation down. Mr Sunak went on to say he is prepared to make unpopular decisions to keep public sector pay from ballooning and would refrain from bailing out homeowners struggling with mortgages. The Bank is facing heightened criticism over its predictions last year that inflation would be transitory and for moving too slowly to increase rates to dampen rising prices.

Banks forbearance measures

UK banks have agreed to give mortgage holders a 12-month grace period before their homes are repossessed should they fall behind with their repayments. Struggling homeowners will also be able to switch to interest-only for six months or temporarily lengthen mortgage terms for the same period without affecting credit ratings in new measures announced by Jeremy Hunt.

The Chancellor met with lenders on Friday to hash out a deal amid growing alarm at rising interest rates. Mr Hunt said following the meeting: “These measures should offer comfort to those who are anxious about high interest rates and support for those who do get into difficulty.”

According to UK Finance, repossessions are currently well below pre-pandemic levels with a total of 750 homes repossessed by lenders in the first quarter of this year, up from a low of 140 in the final three months of 2020. In the fourth quarter of 2019 some 1,340 were repossessed.

Investors bet on higher rates, sending sterling and bonds down

Markets are expecting the Bank of England to continue to aggressively raise interest rates with swaps markets now implying an interest rate of 6.25% in February. After BoE governor Andrew Bailey said on Thursday that the central bank was willing to do “what is necessary” to bring inflation down, the two-year gilt yield climbed to the highest since 2008 as investors sold off government debt in anticipation of more rate rises. Furthermore, the pound lost value amid worries that the economy will be weaker over the coming year. Normally when rates rise sterling would go up. The weakness in sterling will push up the cost of imported goods, potentially hampering the BoE’s efforts to curb inflation.

UK economy loses momentum amid high inflation and growth fears

This month’s data from the S&P Global’s Composite Purchasing Managers’ Index (PMI) shows high interest rates, persistent inflation and negative expectations for growth are weighing down businesses across the UK’s services and manufacturing sectors. The index fell to a three-month low of 52.8 in June – down from 54.0 in May.

The UK’s services sector grew at its slowest pace in three months amid faltering consumer spending, while the manufacturing sector contracted by the most in six months. Hiring saw the strongest growth since September last year. But this contributed to wage growth stoking inflation in the service sector.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said the survey suggested “the economy had lost momentum after a brief growth spurt in the spring and looked set to weaken further in the months ahead.”

BoE accused of tightening too quickly
The Sunday Telegraph considers the view of a minority of the Bank of England’s Monetary Policy Committee that interest rates have been pushed too high. Rate-setters Silvana Tenreyro and Swati Dhingra voted to keep rates on hold at 4.5% at the last meeting despite inflation obviously continuing to rise. But their argument was that the Bank was essentially looking at data expressing what had happened in the past year, not what was ahead. Additionally, previous rate hikes had not yet made their mark on inflation.

Martin Beck, chief economic adviser to the EY Item Club, agrees. “The Bank is setting rates on the basis of past data – they should be looking forward and thinking, what do we think inflation will be in 18 months’ time?” Worrying about data month-to-month means “they are constantly at the mercy of erratic moves in inflation and wages”, Beck adds. “This is where the risk of over-tightening comes in, when they use the rear-view mirror.”

But Michael Saunders, a hawk who left the MPC last year, is confident the Bank has chosen the best option available. “The journey back to 2% inflation will be painful, but will ultimately be even more painful if the MPC fails to tighten enough,” he says.

Scottish SMEs optimistic, but hurdles remain
Scottish small businesses remain stable amidst economic uncertainty, with 28% predicting significant or modest expansion in the next three months, according to research by Novuna Business Finance. The proportion anticipating contraction this quarter hit its lowest level in almost four years, at 12%. Half of small businesses in Scotland said they had plans to grow their businesses in the next 12 months. The main concern for businesses was general market uncertainty, followed by red tape issues and high fixed costs.

Joanna Morris, head of insight at Novuna Business Finance, welcomed the “signs of confidence” evident in the survey results, “particularly after the considerable headwinds that have been faced by small businesses in the past five years”. Access to finance is key for small businesses in their ability to enact their plans and retain confidence. This is becoming a growing issue that must be tackled,” she added.

Mortgage prisoners left ‘suicidal’ as SVRs soar
Campaigners say around 200,000 households are paying the standard variable rate in mortgage deals they can’t leave, leaving many suicidal as rates approach double digits. Rachel Neale, of campaigning group UK Mortgage Prisoners, said: “These people aren’t on the 4.5% or 5% that the average person is now seeing. Their interest rate has gone from 4.5%, which everyone is moaning about, all the way up to 9%, 9.5% and 10% and above.” The co-chair of the All Party Parliamentary Group on Mortgage Prisoners Seema Malhotra MP said: “The Chancellor’s mortgage summit did not deliver any help for mortgage prisoners facing soaring standard variable rates after being sold on by the Government without any protection. These customers are trapped and need to be treated fairly and offered fixed rates.”

Rising inflation pushing young men into insolvency

The number of men under the age of 25 becoming insolvent rose 15% last year, according to research by Mazars. The increase, from 2,580 in 2021 to 2,980 in 2022, was the biggest rise of any demographic group. By contrast, insolvencies for women under 25 were up just 6%, from 3,600 to 3,830.

Ed Thomas, Mazars’ director of restructuring services, said: “The young tend to earn less than the national average and are therefore particularly impacted by the cost-of-living crisis. Some are building up debts quickly. That debt has become a lot more expensive to service.”

UK car insurance renewal costs rise up to 70%

UK motorists are complaining that prices are soaring by as much as 70% when their insurance policy comes up for renewal. Figures from the Office for National Statistics show the price of car insurance has risen 43.1% in the last 12 months, but some drivers are reporting 75% increases.

The Association of British Insurers explained that insurers faced extra costs that were becoming “increasingly challenging to absorb”. The Guardian cites a report by EY which outlines how a sharp rise in the cost of second-hand cars during the pandemic and vehicle parts and higher wages across the car maintenance sector have wiped out margins for insurers.

The FT also cites figures from EY showing UK motor insurers suffered their worst underwriting performance in a decade last year with their net combined ratio coming in at 109.5%. “It’s a long time since it has been this bad,” said the firm’s insurance lead Rodney Bonnard.

Hunt to unveil plans for pension reforms next month
The Chancellor will next month outline plans to change the rules around how pension funds can invest. The long-awaited reforms, to be put out to consultation, could include freeing up funds to invest in riskier, high-growth British assets, including start-ups, private equity and infrastructure. The proposals are also expected to contain plans to consolidate the fragmented UK pensions regime. However, the Chancellor will not attempt to control what investments pension funds make.

Late tax payments to cost more as interest rates rise
HMRC has increased the interest rate on unpaid taxes, which is linked to the Bank of England base rate. The central bank has recently increased rates by 0.5 percentage points from 4.5% to 5%. This means that customers who don’t pay their taxes on time will now face a 7.5% late payment fee, up from the current rate of 7%. The increased rate will come into effect on July 3.

Higher earners face tax penalties
Hundreds of thousands of higher earners may face penalties after HM Revenue and Customs raised the earnings threshold at which workers are required to file a tax return from £100,000 to £150,000. The move has been criticised by accountancy firms and trade bodies, who warn that it will lead to more taxpayers paying the wrong amount of tax and potentially incurring penalties from HMRC. The change, which comes into effect next year, has been accused of reducing the tax office’s workload at the expense of taxpayers.

Eurozone economy slows sharply
The latest Purchasing Manufacturers’ Index (PMI) survey from S&P Global shows the eurozone economy has slowed sharply since May, falling from a reading of 52.8 to 50.3 in June – its lowest level in five months. Carsten Brzeski, an economist at ING, said: “This is a severe slowdown. We are clearly heading for another weak quarter, with a possible flirtation with recession again.” Separately, German house prices fell at a record annual rate of 6.8% in the first quarter of 2023, as higher borrowing costs, inflation and weaker economic growth took their toll on Europe’s largest property market.

Government borrowing

The Bank of International Settlements called on governemnts to control public spending or raise taxes to contain inflation and reduce the risk of a financial crisis. In its annual report, the BIS, which advises 63 central banks, said governments’ loose fiscal policies were “testing the boundaries of what might be called the region of stability”.

German immigration

Germany’s parliament have agreed large-scale reforms of their immigration system, loosening entry requirements for skilled workers from outside the European Union and allowing qualified refugees to join the workforce before the approval of their asylum status. The legislation is a response to an acute labour shortage, with open vacancies approaching 2m.

Britishvolt owner’s HQ raided over alleged tax fraud
A company owned by Australian entrepreneur David Collard was raided by police on Friday over suspected tax fraud. SaniteX provides services to other companies owned by Collard, a former PwC partner, including Scale Facilitation, the entity which bought Britishvolt out of administration in February. The Times suggests the police raid will raise uncomfortable questions for Britishvolt’s administrator, EY, about the due diligence it conducted on Recharge before selecting it as the preferred bidder.

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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!

No face-to-face meeting required – just call Peter Uwins, CPA’s National Sales Manager, on 020 8846 0000 (business hours) or email 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 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.