Business News 26th June 2017

We hope you enjoy reading the business news compiled by the Credit Protection Association on Monday 26th June 2017 for its members and visitors.

One in every eleven northern businesses would struggle with interest rises

One in eleven northern businesses would struggle to pay their debts if interest were to rise, according to new research. Insolvency and restructuring trade body R3 found that 29,000 businesses in the north – nine per cent of the total – would be unable to repay their debts if interest rates were to rise by a small amount. This is compared to 17,000 in September 2016. The research, part of a long-running survey of business distress which found that 13,000 firms – four per cent – were just paying interest on their debts. This research shows that many firms are currently walking a very tight line. While paying interest only on debts is always a bad sign, rising inflation may lead to a double whammy. The head of investment at Hermes Investment Management in the daily Telegraph today predicts a wave of companies will go bust when interest rates go up and quantitative easing ends. Eoin Murray warned that investors are set to be burned because they have failed to put in place covenants that limit companies’ debts and protect savers.

Brexit

Theresa May will offer to give Europeans living in the UK the same residency, employment, health, welfare and pensions rights as British citizens, but demand that “serious and persistent” criminals may be more easily deported than at present. The prime minister’s 15-page package, which will be published alongside a statement to parliament, will be designed to give people who arrived in Britain before an agreed cut off date settled status.

Low UK Growth forecast

The UK growth over the next few years is forecast to remain anaemic, the British Chambers of Commerce said. Nonetheless, in its Economic Forecast, the BCC upgraded its growth outlook for 2017 to 1.5% from 1.4%, citing strong global growth outlook. Moreover, lower sterling is likely to boost short-term export activity this year, the business lobby said. For the second quarter of 2017, the BCC projected 0.4% growth. Its expectations for 2018 and 2019 remained unchanged at 1.3% and 1.5%, respectively.

Silvio Berlusconi leads centre-right to local gains in Italy

Italy’s centre-right opposition was poised for an emphatic victory in municipal races around the country on Sunday, bolstering its hopes of a political resurgence and dealing a blow to Matteo Renzi’s ruling centre-left Democratic party. According to exit polls and early projections, candidates from the centre-right — led by Silvio Berlusconi, the former prime minister, and Matteo Salvini, the leader of the far right Northern League — won run-off contests for mayor in Genoa, a leftwing bastion, and Verona, in the industrial north-east.

Market Wrap up

Asian stocks advanced overnight as technology shares continued to mount a recovery and oil climbed to $43 a barrel, rising for a third straight session after last weeks bear market. The yen was flat against the dollar. The pound rose for a fourth day amid Brexit negotiations by U.K. Prime Minster Theresa May, whose leadership remains under threat.
An absence of catalysts over the weekend left investors waiting for clues from central bankers on policy paths for some of the world’s biggest economies. European Central Bank President Mario Draghi will make speak in Portugal before Fed chair Janet Yellen makes an appearance in London on Tuesday. With Bank of Japan Governor Haruhiko Kuroda also speaking at the ECB forum, the heads of key central banks have the chance this week to shape discussion by offering more clueson future policy.
Markets were gripped last week by a plunge in oil while equities, the dollar and Treasuries all made little headway. Global stocks remain near all-time highs. US stocks ended Friday higher as technology and energy stocks offset weakness in financials. Oil continued to rise this morning despite concerns over an increase in UK drilling activity. Gold conversely fell as investors start to overcome concerns.

Business confidence on the rise

Business confidence has risen to an 18-month high, according to a new survey by Lloyds Bank. The Business in Britain report’s confidence index rose to 24% – double the level immediately following the EU referendum last year. However, the net balance of companies that said they had found it difficult to find skilled labour in the past six months hit a 10-year high of 52%. The share of firms facing similar issues with unskilled workers also rose to 26%, up from 14%. The report surveyed the views of 1,500 UK companies in May, after the general election was called.

Tax evasion crackdown

HMRC is boosting its fraud investigation service in advance of what lawyers say is a prosecution drive over tax evasion. The tax authority stepped up investment in its fraud investigation service staff by 10% to £204m in 2016-17, from £186m in 2015-16. The rise has led to speculation that HMRC is conducting initial investigations into companies before launching prosecutions when the Criminal Finances Act becomes operational in September. The act makes it possible for the Revenue to prosecute companies that fail to prevent staff, agents or contractors from assisting, encouraging or turning a blind eye to tax evasion. Jason Collins, partner and head of tax at Pinsent Masons, said: “Big-ticket investment in staff at the fraud investigation service is further evidence that HMRC is gearing up for a crackdown on tax evasion.”

Business yet to receive rates relief

A £300m business rates relief fund is still not up and running, despite half a million companies facing higher bills since the start of April. The fund was announced by Philip Hammond in the Spring Budget, but experts claim not a “single penny” had been passed on to companies. Councils, who have been tasked with drawing up their own rules to hand out the money, are reportedly still deciding how they should distribute the funds. Separately, the Guardian looks at how the shake-up in business rates has hit Bond Street shops particularly hard. About 25 of the 100 top fashion brands with stores on Old and New Bond Street are understood to have flagged to the property market that they are ready to quit the fashion district, after their bills increased by millions of pounds in some cases

Global economy mired in ‘boom-bust cycle’

The Bank for International Settlements has warned that the global economy is caught in a permanent trap of boom-bust financial cycles. The watchdog said the rot in the global monetary system has not been cut out since the Lehman crisis in 2008, and that the financial system will be tested again as the Federal Reserve steps up the pace of monetary tightening.

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