Business news 28 June 2023
James Salmon, Operations Director.
UK firms’ insolvency fears recede, UK and EU sign deal on financial services and other business news that we thought would interest our members.
UK firms’ insolvency fears recede
Fears of insolvency among UK firms are receding, according to new research from Evelyn Partners. The study found that 32% of UK businesses believe there is a risk of insolvency in the next 12 months, down from 47% in September. This comes despite insolvencies reaching a four-year high in May, with a 40% surge year on year and over 2,500 firms declared insolvent. However, almost all of these firms had revenue of less than £1m. In contrast, the 500 business owners surveyed by Evelyn Partners had revenue of over £5m, pointing to a stronger outlook for medium-sized businesses. “It is encouraging that business confidence remains stable, and survival prospects have improved,” said Evelyn Partners partner Claire Burden.
Markets
Markets recovered slightly yesterday with the FTSE100 closing up 0.16%, encouraged by strengthening US stocks which were bolstered by encouraging capital goods orders.
British Supermarkets Denied Food Price Profiteering to MPs
Inflation fell in UK Shops After hitting record last month.
UK Grocery Sales Rise 12.4% Helped by Warm Weather, NIQ Says
US markets closed broadly higher yesterday, buoyed by a resurgence in technology stocks after last week’s sell-off. Overnight, US markets rose. The DOW rose 0.63%, the S&P 500 rose 1.15% and theNASDAQ rose 1.65%
UK and EU sign deal on financial services
UK Chancellor Jeremy Hunt visited Brussels on Tuesday to sign a Memorandum of Understanding (MoU) on financial services. The agreement, signed by Mr Hunt and EU financial services commissioner Mairead McGuinness, will see greater cooperation between officials from the EU and the Treasury. The new deal allows officials to discuss regulatory changes, international developments and risks to financial markets. It will also allow both sides to coordinate positions ahead of G7, G20 and other summits. However, the MoU will not restore access to the single market or prejudge decisions on equivalence, where one side recognises the other’s regulations. The Treasury said that the memorandum will allow the parties to “coordinate positions where appropriate on issues ahead of G7, G20 and other international meetings”. Chris Cummings, chief executive of the Investment Association, said the deal was “an important milestone” while Treasury minister Andrew Griffiths described it as a “momentous day in the history of British and EU relations”. Brussels’ financial services commissioner Mairead McGuinness said it was “fair to say we have turned a page” in the relationship.
UK economy could receive £31bn boost from generative AI, says KPMG report
The UK’s economy could receive a £31bn boost from the adoption of generative AI, according to a KPMG report. The technology has the potential to increase UK productivity by 1.2%, which is equivalent to an extra output of £31bn a year. The report also found that generative AI could automate around 2.5% of tasks across various occupations in the UK, freeing up workers to focus on other activities. However, only 10% of occupations will face significant impact, with over 5% of their work affected. The report recognises the need for caution from regulators and policymakers due to the potential for uncertain wider social and economic implications of generative AI.
Resolution calls for pro-growth tax priority
A report from the Resolution Foundation calls for a move away from a “simplistic and pernicious cycle of promising tax cuts while delivering tax rises” and instead calls for reform of the tax system. Adam Corlett, principal economist at the think tank, said: “The UK’s taxes have jumped up overall and are more likely to rise further than fall in future, despite the political rhetoric around cuts. But this rising quantity of tax revenue has not been matched by a rising quality of tax policy. There is no strategy behind a complicated system that sees some business owners pay no tax on their profits, while some families face marginal tax rates of over 80%. Britain’s tax system needs a complete overhaul so that it is focused on helping rather than hindering economic growth, reducing inequality and creating a level playing field. These are basic principles that most taxpayers would expect, but that our current system frequently fails to deliver.”
Parents supporting children with rising mortgage bills
One in four parents are helping their grown-up children cover rising mortgage bills, with 79% stepping in to support with other everyday costs, according to a survey by Saltus Wealth. Empty-nesters have also been lending their adult children a hand with the rent, with 20% helping to cover shortfalls. A fifth of parents have sacrificed their own financial stability for the good of their children, by reducing pension contributions, selling other assets or taking equity from property. Mike Stimpson, of the firm, said the level of reliance on parents was “not sustainable”.
Charity warns of hunger crisis in the UK
One in seven UK citizens are going hungry due to rising food costs, with disabled people, single parents, and those living alone being the worst affected, according to food bank charity Trussell Trust. An estimated 11.3m people faced hunger in the past year, with people distancing themselves from family and friends due to the costs of meeting up. The charity is calling for the government to create an “Essentials Guarantee” to ensure that universal credit benefit payments never fall below the basic amount needed to afford essentials like food and bills.
UK entertainment and media market to hit £100bn by 2027
The UK’s entertainment and media market is expected to generate £100bn in revenue by 2027, according to PwC’s Global Entertainment & Media Outlook 2023-2027. The report predicts that the UK will remain the leading E&M market in Europe over the next four years, with internet advertising, virtual and augmented reality, and home and mobile internet spending driving revenue growth.
UK fails climate targets: Committee on Climate Change
The UK Government’s plans to hit net zero have been criticized by the Committee on Climate Change, which warns that targets are being missed on nearly every front. The installation of new wind and solar farms and the upgrading of the electricity grid are still too slow to meet net zero, and there is little progress on transport emissions. The committee says that the lack of urgency of government and a failure of political leadership means progress has stalled. Lord Deben, outgoing chair of the CCC, said the UK had “lost the leadership” on climate action shown at Cop26 in 2021 and done “a number of things” that were “utterly unacceptable”. The committee’s confidence that the Government would meet its shorter-term carbon-cutting goals by 2030 was even lower than last year.
Doctor Strikes
Senior doctors in England voted in favour of a two-day strike, beginning on July 20th. The country’s junior doctors will also strike for five days in July—the longest single walk-out in the history of the National Health Service.
Thames Water boss quits as collapse looms
The CEO of Thames Water Sarah Bentley has stepped down with immediate effect. The UK’s largest water company has come under heavy fire over the discharge of raw sewage into rivers and missing targets on pollution and sewer flooding. Last week it emerged that the company had the highest leakage rate since 2018, and will not meet its target to plug the leaks this year. It has since emerged that the Government is considering putting Thames Water into temporary public ownership amid growing concerns over whether it can service its £14bn worth of debts. The Telegraph reports that Thames Water was still trying to raise £1bn from shareholders and that AlixPartners had been drafted in to advise on the company’s operational turnaround plans. Rothschild, the investment bank, and law firm Slaughter & May are advising on funding options for the business, with a £1.4bn bond due to be repaid by the end of next year.
MPC member accuses BoE of forecasting failures
Swati Dhingra, an economist who joined the Bank of England’s Monetary Policy Committee last year, has said the BoE’s poor forecasting has undermined its response to the cost of living crisis, extending the pain and hitting the institution’s credibility. Dr Dhingra, who wanted to hold interest rates at 4.5% this month, went on to point out that a fall in headline inflation should follow a fall in producer price inflation, for which there is some promising evidence. Dr Dhingra also said the drop in energy costs is trickling through the economy while labour-intensive industries are “seeing a levelling off to some degree of wage inflation” which is important for keeping consumer prices down. Separately, Nick Macpherson, a former permanent secretary to the Treasury, told the Lords economic affairs committee on Tuesday that the BoE’s QE programme was excessive and enabled inflation to take root. “I am worried that quantitative easing has given windfall gains to a section of society, who quite frankly don’t need those windfall gains – potentially at the expense of poorer people who have suffered the effects of inflation because they spend more on food, energy and rents,” he said.
EU inflation
European Central Bank President Christine Lagarde said Tuesday that inflation is still too high and it’s still too early for her organization to declare victory over consumer price rises. Speaking at the Sintra central banking event in Portugal, she said: “Inflation in the euro area is too high and is set to remain so for too long. But the nature of the inflation challenge in the euro area is changing.”
UBS
UBS is planning to cut more than half of Credit Suisse’s 45,000-strong workforce starting next month following the completion of the bank’s takeover.
Millions more to face savings tax
A record number of people are expected to pay tax on their savings interest, research by RSM shows. The personal savings allowance lets basic rate payers earn up to £1,000 in interest on their savings, and higher rate payers £500, before they are taxed. But these limits have not changed since 2016 and, after Rishi Sunak froze income tax bands, a total of 1.2m savers will face the savings tax in 2023. Many of them will subsequently be forced to fill out a tax return for the first time. The tax cost savers £7.2bn last year and is expected to rise to £7.6bn in 2023-24. Former pensions minister Ros Altmann has urged the Chancellor to increase the tax-free savings allowance so taxpayers can keep more of their hard-earned savings. Elsewhere, Tom Clougherty of the Centre for Policy Studies said the tax on savings income should be scrapped altogether. “Cash savings are overwhelmingly made out of taxed income and shouldn’t be subject to another layer of tax.”
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
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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!
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Check our compensation calculator to see how much your business could be owed!
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.