Business news 30 May 2023

James Salmon, Operations Director.

Energy debt bankruptcies surge as costs climb. Hunt – If we need a recession to bring down inflation, so be it. Sunak warned price controls will create food shortages.  And more business news that we thought would interest our members.

There will be a brief break in the posting of this blog, with it resuming on Monday 12th June.

Energy debt bankruptcies surge as costs climb
Energy suppliers are set to file a record number of winding-up petitions against businesses as companies struggle with soaring energy costs. Court filings show that there have been more than 400 attempts by suppliers to shut down companies to reclaim their energy debts over the past decade. Analysis by law firm Harcus Parker shows that if the rate of winding-up petitions filed in the first four months of the year continue at the same pace, 2023 will see a new record high. The firm notes that around half of petitions have typically resulted in the targeted companies being shut down. The Federation of Small Businesses (FSB) has warned that more than 90,000 small businesses are at risk after signing up to fixed deals in the second half of last year, when rates were at their peak. Tina McKenzie, policy chairwoman at the FSB, said: “Large energy suppliers must give vulnerable small businesses every chance to pay their bills. If winding-up petitions are being issued in great numbers, without support being provided, then there’s a need for a moratorium to be imposed.” Harcus Parker is also arguing for a moratorium while it brings a £2bn class action legal claim against several energy companies, with this centred on allegedly undisclosed commission payments to third-party brokers.

Hunt – If we need a recession to bring down inflation, so be it
The Chancellor has said he would be comfortable with the Bank of England hiking interest rates even if it led to a recession as defeating inflation was necessary to avoid instability. Jeremy Hunt told Sky News: “In the end, the only path to sustainable growth is to bring down inflation.” Also speaking on Sky News, former Chancellor Lord Norman Lamont backed the Chancellor and chided the BoE for over-reacting to the pandemic with too much QE and for keeping rates too low for too long. Meanwhile, comments from Luke Hickmore, investment director at asset manager Abrdn, add to the recession narrative. He explained that even higher rates will lead to surging mortgage costs, which will put people’s incomes under a lot of pressure and likely lead to a recession by the end of this year or early next year

Rishi Sunak warned price controls will create food shortages
Plans being considered by Downing Street to ask retailers to agree to maximum prices for some basic goods such as bread and milk would lead to food shortages and would do nothing to halt food price inflation. The proposal has been condemned by the major supermarkets and has angered at least two Cabinet ministers. A statement from the British Retail Consortium slamming the idea as “1970s-style price controls” that “will not make a jot of difference to prices” was backed by Tesco, Sainsbury’s, Morrisons and Waitrose. Food prices rose 19.1% in the year to April, a near-record high. One retail boss said: “It is a hare-brained idea, and instead of trying to intervene in supermarket pricing, the Government would be better advised to address the root causes of inflation.”

BRC: Food price cap will not make a difference
Retailers have warned that Government plans to introduce a cap on the price of basic food items will not help tackle the rising cost of living. The British Retail Consortium (BRC) said the measures would not make a “jot of difference,” adding that ministers should focus more on cutting red tape so resources could be “directed to keeping prices as low as possible.” Andrew Opie, director of food and sustainability at the BRC, said: “As commodity prices drop, many of the costs keeping inflation high are now arising from the muddle of new regulation coming from government.” Government sources say there are no plans for a mandatory price cap, with it instead suggested that a voluntary agreement could see price reductions on basic food items, such as bread and milk.

AI will turbocharge the end of working from home – Kevin Ellis
The chairman of PwC contends that the rise of artificial intelligence will prompt more people to return to the office as they strive to stand out from bots. Kevin Ellis said: “The latest wave of AI will likely bring people back to the office. People are going to want to learn from others face to face, and the best way a human can differentiate themselves from a robot is in person.” Ellis told staff last week: “For professional services, where researching and summarising data is a key part of junior roles, AI has the potential to fast-track year one trainees to year three. You’re freeing people up to do more.” He added that the acceleration came with challenges: “This will in turn require more coaching to equip people for more responsibility sooner, and impart knowledge that would typically be acquired over a longer period.”

Savers could be hit by £2bn tax raid
Analysis by Azets shows that savers face a £2bn hit from new rules that will mean first-time tax bills for dividends and capital gains. People with small shareholdings are allowed to earn dividends tax-free if they are below a certain level. They can also sell those shares at a profit without being taxed if the gain is small enough. However, changes set out in Chancellor Jeremy Hunt’s Budget will reduce the level of those exemptions. The dividend allowance fell from £2,000 to £1,000 in April this year and will be cut to £500 from April 2024. Capital gains tax annual exemptions have gone down from £12,300 to £6,000 and will fall further, to £3,000, in 2024/25. John Hiddleston, associate director at Azets, said: “Very soon, significant numbers of people who aren’t used to paying tax on their savings are likely to have to do so.” He warned that “lots of ordinary people could receive surprise tax bills.” Azets estimates that this will impact up to a million people, with bills of up to £2,000. Mr Hiddleston also flagged that a number will face penalties for non-compliance, saying many of these people “won’t be used to submitting a tax return, they won’t be issued with a notice to do so by HMRC, and they won’t realise they have a tax liability.” Former Conservative leader Iain Duncan Smith has criticised the Government’s changes, saying: “It’s a tax hike,” adding: “You are going to get ordinary savers penalised – when you have already taxed them once.”

UK retail sales grew more than expected in April
Data published on Friday by the Office for National Statistics show UK retail sales grew more than expected in April, rising by 0.5% on the previous month following a decline in March. The growth was ahead of the expected figure of 0.3%. But volumes were down 3% compared with April last year despite shoppers spending 4.7% more, exposing the impact of sticky high inflation on household finances. Martin Beck, chief economic adviser to the EY Item Club, said that April’s retail performance “tallies with an improving outlook for consumer spending”, with the jobs market proving resilient and consumer sentiment starting to recover.

UK Shop Price Inflation accelerated in May to a new peak, although food inflation decelerated despite remaining at an elevated level. According to the latest British Retail Consortium-NielsenIQ tracker, shop price inflation increased to 9.0% in May, on an annual basis, up slightly from 8.8% in April. This is above the 3-month average rate of 8.9% and takes shop price growth to a fresh high.

Shoppers question high street’s relevance
Nearly half of British consumers believe that high streets are no longer relevant, according to a poll by IT company Accenture. While 56% of respondents said the high street does not have everything they need to do their weekly shop, 28% said they may stop shopping on the high street over the next five years. Kelly Askew, retail strategy and consulting lead at Accenture, said there are “warnings that the high street is in need of a reinvention if it’s to survive.”

ASDA

Asda has bought petrol station group EG for £2.3 billion, combining the businesses owned by the billionaire Issa brothers.

Amazon

Amazon is to offer term-time only contracts to parents to boost recruitment.

Wealth tax on UK’s richest could raise £16bn annually
Research by Tax Justice UK, the Economic Change Unit and the New Economics Foundation has found that a 2% wealth tax on the UK’s richest 350 people could raise almost £16bn annually. The study also found that extending the tax to anyone with assets of over £10m could generate up to £22bn annually. The report highlights the inequality of the UK’s tax system, which taxes those who earn their income from work more heavily than those who are wealthy from investments, rent and inheritances. The report also reveals that the total wealth of the UK’s richest 250 people rose by over £44bn in the last year. The average wealth of UK billionaires rose from £3.7bn to £4bn. Less than a quarter of the 100 wealthiest people in the UK feature on the Sunday Times Tax List of the top 100 taxpayers.

Almost half of civil servants work from home
Around 44% of civil servants in the UK primarily work from home, according to analysis of Office for National Statistics data by the Chartered Institute of Personnel and Development. This is the highest proportion of employees predominantly working from home at any type of organisation. The figure has also risen since last summer, indicating a further shift towards flexible working among civil servants. Ministers were urged to “show leadership” and get government workers back into the office, as experts warned that Britain’s productivity could fall if employees do not return to the workplace. Conservative MP Sir Jake Berry said: “Britain has a big problem with productivity and I think the wholesale work from home culture is partially to blame.”

HMRC apologises for website failures
HMRC has apologised for technical issues on its website that prevented entrepreneurs from completing the necessary paperwork to set up their businesses. The anti-money laundering form required for certain companies to complete financial transactions was not usable due to the issues. The website also failed to inform smaller businesses that they did not need to complete the form and could register for anti-money laundering supervision elsewhere on the site. HMRC is issuing guidance to call handlers after admitting they did not know about the forms or where to direct entrepreneurs who called for help. The Federation of Small Businesses says tax compliance costs small firms £25bn a year, with each spending an average of seven days dealing with HMRC bureaucracy. Nimesh Shah, chief executive, of Blick Rothenberg, said: “HMRC is an archaic and hugely inefficient beast, there are numerous departments with vast numbers who don’t properly connect with each other and it’s very confusing for the taxpayer to speak to the right person.”

90 firms report Capita data breaches
Almost 100 organisations have reported breaches of personal data held by outsourcing firm Capita. The Information Commissioners Office, the privacy and data watchdog, said that around 90 organisations had been in contact regarding Capita. The firm, which was hit by a cyber-attack in March, was recently found to have left a batch of files unsecured online. Capita is used by a large number of public and private organisations and many company pension schemes administer payments through the firm. The Pensions Regulator has written to over 300 pension funds asking them to check if their data had been put at risk.

Meta slammed for “enabling” scams
Britain’s biggest retail bank has hit out at Facebook owner Meta for failing to stop a ‘Wild West’ surge in online shopping scams. Lloyds Bank claimed two-thirds of so-called ‘purchase’ frauds start on Meta-owned platforms, which also includes Instagram. Liz Ziegler, the banking group’s fraud prevention director, said: “Social media has become the wild west of online shopping in recent years …This has left consumers increasingly exposed to ruthless fraudsters, with hundreds of new victims targeted every day and tens of millions of pounds flowing to organised crime gangs each year.” She added: “It’s high time tech companies stepped up to share responsibility for protecting their own customers. This means stopping scams at source and contributing to refunds when their platforms are used to defraud innocent victims.”

Over-fifties add second jobs
Analysis of official data shows that the number of people aged 50 and older with a second job has increased by more than 100,000 since 2013. The study by Rest Less, which offers advice to older workers, shows that the total hit 440,000 in Q1. This means that of the 1.27m people in the UK with a second job, over a third of are 50 and older. Stuart Lewis, chief executive of Rest Less, warned that some over-50s who are unable to find secure and stable work due to age discrimination and a lack of flexible working opportunities, are forced to take unsecure, low-paid jobs “and find themselves needing to juggle a number of part-time jobs in order to make ends meet.” This trend, he added, “will have been exacerbated by high inflation and the current cost-of-living crisis.”

Ministers mull new rules on government contracts
Ministers are considering an amendment to the Procurement Bill which would introduce a traffic light system for government contracts, indicating value for money. The proposal put forward by John Penrose, the Government’s former anti-corruption tsar, would force Government departments to “state clearly what actual outcomes they are intending to achieve” when awarding a contract. For the most expensive projects, the results would be audited by an independent body, with a red, yellow or green rating applied and published. National Audit Office data shows that just 8% of Government spending on major projects – £35bn out of £432bn – had robust evaluation plans in place. Where an evaluation had been carried out, spending had been reduced by two thirds in some cases. Dame Meg Hillier, chair of the Commons Public Accounts Committee, and Sir Geoffrey Clifton-Brown, the committee’s deputy chairman back the proposals, as do campaign groups Transparency International UK, Spotlight on Corruption, the Centre for Public Data, the Campaign for Freedom of Information and the TaxPayers’ Alliance. James Roberts, managing director of the TaxPayers’ Alliance, said: “The contract rollover culture in Whitehall inevitably sees taxpayers’ money wasted.”

Closing gender pay gap will boost growth – Labour
Labour says that closing the gender pay gap will help boost Britain’s economy. Data shows that 185,000 more women aged between 50 and 64 have become economically inactive since the beginning of the pandemic. Deputy leader Angela Rayner argues that better wages could encourage women to return to work, saying: “The economy could be boosted by up to £7bn, were employment rates among this group to return to pre-pandemic levels.” She said a Labour government would strengthen workplace protections for new mothers, give employers more support to “eradicate unequal pay”, and review “the failing parental leave system.” “Progress remains too slow. Unequal pay claims persist, while the gender pay gap is too great,” Ms Rayner added.

Labour plans to block all new North Sea oil and gas projects
Labour leader Sir Keir Starmer is set to unveil plans to block new North Sea oil and gas projects and restrict borrowing to green investments, as part of his vision to make Britain a “clean energy superpower.” This policy will be one of Sir Keir’s key election pledges. The plan aims to create up to half a million jobs in the renewables sector, including at least 50,000 in Scotland. But the policy has been described by industry, business and political leaders in the northeast of Scotland as “naïve” and “deeply unserious”. Paul de Leeuw, an expert in the transition from oil to renewables at Robert Gordon University, said the policy would discourage investment, adding that the “focus should be on reducing demand for hydrocarbons, not supply.” Liam Kerr, the Scottish Conservatives energy spokesman contends that Sir Kier “completely ignores that we cannot achieve a just transition without the investment, expertise and entrepreneurialism of North Sea businesses.” He adds: “The oil and gas industry’s immense resources and skilled workforce are an integral part of any transition and it is just this sort of ill-informed policy from Labour that jeopardises our net-zero future.”

Young people shun trade unions
Trade union membership rates among young people have reached a record low, with Department for Business data showing that just 4% of employees aged 16 to 24 were in a union last year. This is down from 7% in 1995. For workers aged 25 to 34, the rate dropped five percentage points to 21%. A Trades Union Congress spokesman said: “Young workers tend to disproportionately feature in sectors and jobs which have traditionally been more difficult to organise, such as hospitality, accommodation and food, as well as be in low-paid, insecure work.” Manuela Galetto, associate professor of employment relations at Warwick Business School, said: “The decline reflects a steady increase in non-unionised occupations linked to the growth of e-commerce,” while also noting “an increase in the number of careers where there is a high concentration of precarious and short-term contracts, notoriously less likely to unionise.”

US Debt Ceiling

Following some compromise, Biden and McCarthy have made a deal to raise the US debt Ceiling, with the president agreeing to cap non-defence discretionary spending at 2023 levels. The deal will be voted on, on Wednesday.

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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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections

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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.

Get compensated for previous late payments

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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.