Business news 27 July 2022
James Salmon, Operations Director.
Insolvency Service uses new UK powers to ban Covid loan fraudsters. Small businesses fight to keep prices down. IMF slashes global growth forecast and raises inflation projections. UK expands software scheme to help small businesses. CBI issues warning over supply chain risk. Households cut back as disposable income shrinks. And more business news.
Insolvency Service uses new UK powers to ban Covid loan fraudsters
The Insolvency Service has used its new powers to investigate and sanction directors who dissolved their companies to avoid repaying bounceback loans for the first time in recent weeks, banning three directors for defrauding the state-backed emergency COVID-19 loan scheme. Business minister Lord Callanan said the Government had provided “unprecedented support to businesses to help them through the pandemic, but unfortunately a minority of people abused this support for personal gain”. The new powers allow the Insolvency Service to investigate directors without a formal insolvency process.
Small businesses fight to keep prices down
Research commissioned by Smart Energy GB reveals that three quarters of small business owners have had to pass rising costs onto their customers. A survey of 500 SMEs revealed 86% are trying to minimise their overheads in an attempt to reduce further increases or keep their prices the same, while 26% are working unpaid hours to alleviate the financial pressure. Small business owners estimated their outgoings had risen by 13% since the start of the year. Spokesperson Fflur Lawton said: “Small businesses are facing many of the same challenges and price hikes that consumers are. However, many businesses are trying their best to minimise the impact of these price rises on their customers and are going to great lengths to keep their overheads as low as possible.”
IMF slashes global growth forecast and raises inflation projections
The International Monetary Fund has warned that the global economy will grow more slowly this year than previously forecast, with the UK set for the slowest growth of the G7 richest economies next year. It is predicting UK growth will fall to just 0.5% in 2023, much lower than its forecast in April of 1.2%. The IMF has cut its 2022 global growth forecast to just 3.2% and warned the slowdown risks being even more severe. “The global economy, still reeling from the pandemic and Russia’s invasion of Ukraine, is facing an increasingly gloomy and uncertain outlook,” economist Pierre-Olivier Gourinchas said. “The outlook has darkened significantly” since April, the last time the IMF issued forecasts, he added.
UK expands software scheme to help small businesses
The Government’s Help to Grow: Digital scheme, which provide firms with discounts worth up to £5,000 on software designed to boost productivity, has been extended to businesses with at least one employee after being restricted to firms with more than five members of staff. This boosts the number of eligible businesses by 760,000 so that it now reaches up to 1.24m. Martin McTague, the national chair of the Federation of Small Businesses welcomed the move. Business Minister Lord Callanan said: “Boosting productivity isn’t some abstract concept to be sniffed at – for individual SMEs it means bigger sales and breaking into new markets. It can add £100bn to the British economy overall, creating jobs and opportunity across the country.”
CBI issues warning over supply chain risk
The director-general of the CBI has said Britain’s next prime minister must accelerate the pursuit of trade deals to prevent a further sharp rise in costs. Tony Danker argues that more trade agreements should be pursued not just to take advantage of Brexit but to cushion the blow of deglobalisation. Danker says: “I understand why there are political drivers to escalate deglobalisation, but if we do them without thinking about our economic resilience, that’s incredibly expensive for everybody.”
Households cut back as disposable income shrinks
The average household was £175.80 worse off in June this year than they were in the same month in 2021, according to the Centre for Economics and Business Research. June’s fall in disposable income marks the eighth consecutive month of decline and leaves the average household with £200 left to spend after taxes and essential bills – the lowest level in five years. A separate report by Nationwide found spending fell by an average of 4% in June, driven by a 6% decline in spending on non-essentials and a 3% fall in essential spending. Mark Nalder, head of payments at Nationwide, said: “Following a peak in spending during May, our data suggests households have started to cut back across the board.” He added: “As we head into the holiday season, we expect budgeting to continue being a feature as the nation prepares for even higher costs with inflation continuing to climb and the energy price cap rising again this autumn.”
OECD optimism for global minimum corporate tax rate
OECD Secretary-General Mathias Cormann says all G7 economies have scheduled domestic implementation of the global corporate tax rate of 15%. “Once you’ve got sizeable jurisdiction, like for example the European Union and a number of others, legislating for a global minimum tax . . . it becomes self-defeating and counterproductive for other countries not to follow suit,” Mr Cormann told Sky News Australia in a discussion of progress on the OECD’s ‘Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy.’ He said: “I’m quietly optimistic that when it’s all said and done, this reform will be implemented.”
CFOs should be more active in leading their businesses
Chief Financial Officers should step up and take control of major transformative initiatives at their companies, according to a report from Deloitte and Anaplan, a cloud computing company. A poll of business leaders found they believe CFOs have a vital role to play in advancing their companies’ ESG initiatives – even as many CFOs do not consider ESG concerns to be one of their main priorities. Additionally, the survey found 91% of the executives polled credit CFOs for the successes of ESG initiatives. This is despite 78% of CFOs believing they have been least successful when it comes to ESG. Anaplan’s chief of connected planning, Victor Barnes, said: “CFOs are critical to driving digital transformation and expanding growth opportunities.” Barnes continues: “While we’ve done our best to dispel the myth of the CFO as conservative executives preoccupied with numbers, there’s still more to be done. It is encouraging, therefore, to see that these findings show CFOs are in fact inspiring, strategic leaders.”
City bosses could face fines for failing to prioritise consumers
The Financial Conduct Authority (FCA) has said it will press ahead with new rules requiring financial services companies to focus on delivering “good outcomes” for customers. The new consumer duty rules will aim to reduce call wait times, end rip-off charges and fees through clearer promotions, and make it easier to cancel or switch investments. The duty will be woven into the senior managers’ regime, with bonuses at risk if the rules are breached while fines could also be imposed. Sheldon Mills, the FCA’s executive director of consumers and competition, said: “Selling suitable products at a fair price, providing good standards of customer services and communications that people can understand shouldn’t really be a controversial thing. Too many firms are still not delivering this as they should.” The regulator outlined its plan for the duty in December last year but industry called for more time to prepare. The FCA has now agreed to give firms 12 months to implement the rules for new and existing products, and 24 months to apply the reforms to closed-book products.
Employers tempt workers with bumper bonuses
New figures reveal that the number of jobs in the UK being advertised that offer bonuses has more than doubled since the start of last year, as employers seek to fill staff shortages without committing to inflation-proof pay rises. According to figures from Adzuna, the percentage of recruitment advertisements offering bonuses rose from 13.6%, or 90,345, at the beginning of last year to 16%, or 190,333, this month. Paul Lewis, chief customer officer at the job search engine, said the rise in bonuses was widespread across sectors, adding that retail, IT, and customer service roles had all seen “notable proportional increases in jobs advertising a bonus since January 2021, directly responding to talent shortages worsened by the pandemic.”
Study finds fear prevents workers reporting low pay
A report from the Low Pay Commission (LPC) on the garment industry in Leicester found that workers fear violence or being labelled a “snitch” if they report their employers for failing to pay the minimum wage. Bryan Sanderson, the LPC’s chair, called on the Government to take comprehensive action, adding: “The case of Leicester is not unique. Across the UK, workers in precarious positions face the same obstacles.” The report also claimed HMRC, which is responsible for policing compliance on the minimum wage, struggles to deal with phoenixing, when employers close factories and rapidly reopen them under a new name to avoid investigations. HMRC said new legislation strengthened its ability to pursue individuals when a company had been dissolved, but that it would comment more fully on the LPC’s other recommendations when the report had been published.
GSK
GSK hiked its operating profit and sales forecasts for this year, in its first results as a newly focused biopharma firm. Bosses at GSK now expect adjusting operating profit growth of between 13% and 15%, and sales growth of around 6% and 8%, with guidance lifted by 1% each. The company, earlier this month split from its consumer healthcare division as it formed a separate entity known as Haleon, saw sales rise to £6.9bn in its second quarter.
Lloyds
Lloyds Banking Group raised its annual guidance against a backdrop of rising UK interest rates. For the six months to June 30, net income was £8.45 billion, up sharply from £7.56 last year, but pretax profit was £3.66 billion, down from £3.91 billion. Lloyds said it set aside £377 million to cover a possible increase in loan defaults as UK interest rates rise to combat rampant inflation.
Reckitt Benckiser
Reckitt Benckiser reported strong revenues and performance in the first half of 2022 as it continues to tackle the challenging inflationary pressures gripping the global economy. The consumer goods company reported a revenue growth of 8.6% to £3.5bn and saw continued broad-based growth across all of its business units and geographies. Adjusted operating profit in the first half was £1.7bn, compared with £1.4bn in H1 2021.
Unilever
Unilever has seen sales propelled more than eight per cent after hiking prices of food and drink to mitigate cost increases. Underlying sales growth of 8.1 per cent was “driven by strong pricing to mitigate input cost inflation, which, as expected, had some impact on volume,” Alan Jope, chief executive officer said on Tuesday morning. “Unilever has delivered a first half performance which builds on our momentum of 2021, despite the challenges of high inflation and slower global growth,” he added.
Wickes
Wickes Group after it noted ‘signs of softening’ in the DIY market in recent weeks, leading it to expect a fall in annual profit. For the 26 weeks to July 2, like-for-like sales growth was 0.8% year-on-year. This comprised a 4.0% decline in the first quarter offset by growth of 5.4% in the second quarter.
Russian Gas
Gazprom cut gas flows from 40% to 20% of capacity, claiming the need for further repairs. Germany said there was no technical reason for cutting the supply amid claims that Russia is weaponising its commodity exports to pressure European politicians on sanctions. European leaders have agreed a voluntary 15% reduction in usage.
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.