Business news 30 August 2022
James Salmon, Operations Director.
More overdue payments are adding to the woes faced by SMEs! Energy costs pose an ‘existential threat’ to small firms. Multi-billion-pound relief measures needed to save small firms. Recession? Business confidence in negative territory. And more business news.
More overdue payments are adding to the woes faced by SMEs!
The Daily Express reports this morning that small businesses are owed on average £23,000 in late payments, adding to the pain caused by the energy bill crisis. Drawing on research from Intuit Quickbooks. the average small business is owed on average 65% of their monthly turnover in late payments, 6% higher than this time last year.
This is a further attack on the life blood, the cash flow of these small businesses. Quickbooks shows that almost 2 thirds of invoices owed to small businesses were overdue in May.
A quarter of small businesses are already saying that energy bills will be unsustainable within 12 months. Late payments are further hitting their viability with almost a third of small firms not confident in their financial stability.
A Government spokesperson said: “We are determined to see late payments reduced to ensure that small businesses are given the best chance of succeeding and growing, which is why we recently reformed our Prompt Payment Code to ensure best practice in payment culture.”
Energy costs pose an ‘existential threat’ to small firms
Entrepreneurs have warned that rising energy and food bills – and pressure on consumers’ budgets – pose a much greater threat to small businesses than enforced closures during the pandemic. Bosses have warned that many small firms face collapse, with risks particularly acute because, unlike consumers, businesses are not protected by the energy price cap. Martin McTague of the Federation of Small Businesses warns that small firms face an “existential threat” due to soaring energy costs, saying that while there had already been a “hefty” increase in the number of insolvencies, the situation would get “even more desperate” later in the year. “The situation they face is dire and likely to get worse. Our members are telling us they are already struggling to cope with energy price hikes, which are often four or five times what they were previously paying,” he added. The Telegraph’s Jessica Beard reports that the Government is considering Covid-style bailouts for small companies facing collapse due to unmanageable energy bills, noting that energy executives have warned ministers they fear civil unrest without major interventions.
FSB: Multi-billion-pound relief measures needed to save small firms
Federation of Small Businesses chairman Martin McTague writes in the Daily Mail on the perfect storm of economic forces facing small businesses this autumn, which he says is “off the scale”. He writes: “It has been hard enough for business owners to deal simultaneously with the ill-timed national insurance hike, corporation tax rises, shortages of labour in almost all sectors, soaring inflation, and unprecedented increases in input costs. Now, ballooning energy prices will deliver the coup de grace.” Mr McTague goes on to explain that the pandemic lockdowns undermined the balance sheets and cash reserves of thousands of small firms. Now, “the doubling, trebling, even quadrupling of energy costs will kill them.” He concludes that offers of help from Tory leadership candidates Rishi Sunak and Liz Truss have so far been “woefully in sufficient” adding: “Nothing less than help on the scale of Covid-like multi- billion-pound relief measures will prevent the decline of our small business community, the unheralded backbone of our economy and society.”
Recession?
Britain will go into recession before the end of this year and the economy will keep contracting throughout 2023, Goldman Sachs has warned. The investment bank believes that the economy will have shrunk for two consecutive quarters by the end of 2022. It has also revised previous estimates that the economy will grow by 1.1% next year, instead forecasting that it will contract by 0.6% through 2023. Economists at Goldman said that “concerns around cost of living pressures in the UK have continued to intensify on the back of the worsening energy crisis. Real consumption is still likely to decline significantly.”
Business confidence in negative territory
According to a survey of accountants by trade body the ICAEW, business confidence in the UK has hit minus-5, the first negative reading since Britain emerged from lockdowns last year and a sharp decline from a high of 47 in the third quarter of 2021. The high costs of production, driven by rising prices of raw materials and energy , as well as staff shortages and transport chaos were likely to have affected optimism, the ICAEW said. Michael Izza, ICAEW chief executive, said: “With inflation running at levels not seen for 40 years, ministers must provide targeted support for struggling businesses and households to keep the lights on this winter.” Suren Thiru, economics director for the institute, added: “Record high price pressures suggest the inflationary surge will intensify considerably in the coming months. A perfect storm of growing input costs for businesses, eye-watering energy bills and persistent supply constraints means that inflation could peak higher and later than the Bank of England predicts…A painful downturn looks inescapable.”
RMT boss urges nationwide, coordinated strike action
The general secretary of the Rail, Maritime and Transport union (RMT) has urged the entire union movement to coordinate strike action well into next year to force a redistribution of wealth, the Telegraph reports. Speaking at the Royal Mail picket lines, Mick Lynch said “the billionaires, the millionaires, the shareholders and the big corporations” are telling working people to cough up for the problems in this society. He added that the wealthy believe “working people have to become poorer in terms of cash, in terms of dignity and respect in the workplace. And our message to them is enough is enough, we say no”.
US stocks tumble after Powell stands firm on rate rises
Financial markets slipped on Friday after US Federal Reserve chair Jerome Powell pledged to force inflation down with aggressive rate rises. At a meeting of central bankers and academics at Jackson Hole, Wyoming, Powell said: “Restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy.” He added: “Reducing inflation is likely to require a sustained period of below-trend growth.” Andrew Hollenhorst, economist at Citi, said he expects another 0.75 percentage point rate rise next month which will take the Federal Funds Rate to 3.25%, the highest rate since early 2008. Elsewhere, the European Central Bank is widely expected to raise rates by a half percentage point for the second consecutive time at its next policy meeting on September 8. Investors are also betting that the Bank of England will have to raise rates by 75 basis points in November, its biggest single rate increase in history.
Economist backs Truss’ tax plan
Professor Patrick Minford, an economist and former key aide to Margaret Thatcher, has backed Conservative leadership frontrunner Liz Truss’ tax-cutting reforms, saying the Foreign Secretary’s plan “is the only way to secure Britain’s economic recovery.” Ms Truss has made tax cuts her top priority for tackling the cost of living crisis, pledging to scrap the 1.25% National Insurance hike and reverse a planned rise in corporation tax. She is also said to be considering a VAT cut and changes to income tax thresholds. The Sun reports that Professor Minford believes Ms Truss must cut taxes by £76bn. He reportedly wants corporation tax cut to 10%, the 45% top income tax rate abolished and the higher rate cut to 30%. He also wants the standard rate to be cut from 20% to 15%. Meanwhile, Professor Minford has questioned the Government’s desire to pay off pandemic-related debt as soon as possible, saying it has restricted what it can do amid the current crisis. He said: “The Treasury orthodoxy embraced by the Government up to now has sacrificed a tax system supporting growth to a policy of stopping new public borrowing.”
Services sector optimism slumps – CBI
A Confederation of British Industry (CBI) poll shows that optimism in the services sector, which makes up 80% of the economy, has plummeted as cost pressures increase. The survey of 199 firms found that increased costs have hit profits and led to investment spending being cut back. CBI data shows that output for business and professional services firms was flat over the summer and is expected to “fall sharply” over the next three months. In the three months to August the services sector saw cost pressures and average prices rising at record rates, with this driving the fall in business confidence.
Manufacturing collapses climb 63%
The number of manufacturing businesses going bust in the year to the end of June rose to 1,454, data from Mazars shows, with this up 63% on a year earlier. Julien Irving, a partner at the firm, said: “The level of inflation we’re seeing at the moment can be lethal for manufacturers, especially energy costs.”
1 in 3 over 55s are struggling financially
More than two-fifths of 55 to 64-year-olds are struggling financially, according to research by insurer Aviva, while more than a third of all over-55s said they are having difficulties with money. The research found that for over-55s, most believe they would need more than £257 per month extra to feel financially secure. This rises to £310 a month amongst the 55-64 year olds. Aviva found that three-quarters of over-55s are looking for ways to boost their income, with almost a quarter selling off unwanted items, 55% shopping around for best deals and over a third regularly shopping for reduced food at supermarkets. It was also revealed that 8% have had to delay their retirement or continued to work past retirement age. Alistair McQueen, head of savings and retirement at Aviva, said: “Despite the support of the rising state pension, inflation is bringing pressures to the incomes of those both approaching, and already in, retirement.”
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 charge our members a fixed annual subscription irrespective of how high the debt value is!
It takes less than 17 minutes to see how you would benefit, do you have the time now?
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
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 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!
CPA (LPC) Recoveries is using our bespoke software and decades of experience to do just that for our clients
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.