Business news 31 January 2024
Number of companies going bust hits 30-year high. IMF warns over tax cuts. Thousands face HMRC late payment fees. And more business news that we thought would interest our members.
James Salmon, Operations Director.
Number of companies going bust hits 30-year high
In the wake of unprecedented economic challenges, the resilience of small businesses is being tested like never before. The recent report from the Office for National Statistics paints a stark picture: a 30-year high in company insolvencies across England and Wales in 2023 with over 25,000 insolvent companies, coupled with concerning numbers in Scotland and Northern Ireland (Scotland and Northern Ireland also recorded their highest numbers of company insolvencies since 2012 and 2019, respectively) . As the financial landscape grows increasingly treacherous, small business owners find themselves navigating a sea of uncertainty, facing rising costs, soaring interest rates, and the looming specter of a cost of living crisis. Experts predict another difficult year for UK businesses in 2024.
In such turbulent times, vigilance is not just advisable; it’s essential. Small business owners must arm themselves with every available tool to protect their enterprises from the ravages of financial instability. One such tool is credit checking—the act of assessing the creditworthiness of potential customers before entering into business transactions.
Why is credit checking so vital, you might ask? Consider this: every transaction with a new customer is, essentially, an extension of credit. By extending goods or services without ensuring the reliability of payment, small businesses expose themselves to significant risk. A single default or late payment from a customer can send shockwaves through the delicate balance of cash flow, potentially jeopardizing the very survival of the business.
The importance of credit checking is not merely theoretical; it’s practical, grounded in the harsh realities of today’s economic climate. Rising insolvency rates indicate that the specter of financial distress is not confined to distant corporations but lurks ominously closer to home. As Mark Ford, partner in restructuring and recovery services at Evelyn Partners, aptly describes it, the figure is “striking,” serving as a sobering reminder of the precariousness of modern business.
Moreover, as financial stress begins to permeate from smaller businesses to mid-market and larger companies, the need for vigilance becomes even more pressing. Simon Edel, UK turnaround and restructuring strategy partner at EY-Parthenon, highlights this concerning trend, underscoring the urgency for small business owners to fortify their defenses against potential defaults and late payments.
But what practical steps can small business owners take to safeguard their enterprises? The answer lies in proactive measures, chief among them being the diligent practice of credit checking. By conducting thorough assessments of the creditworthiness of potential customers, small business owners can mitigate risk, identify potential red flags, and make informed decisions about whom to extend credit to.
Moreover, small business owners must adopt a proactive approach to managing their accounts receivable, chasing late payments promptly and assertively. In an environment where every penny counts, allowing outstanding invoices to languish can have dire consequences. Timely follow-up, clear communication, and firm but fair enforcement of payment terms are essential tactics in maintaining healthy cash flow.
As we stand on the precipice of another challenging year for UK businesses, the imperative for small business owners to take control of their financial destiny has never been greater. While the road ahead may be fraught with uncertainty, one thing remains clear: those who arm themselves with knowledge, foresight, and proactive strategies will be best positioned to weather the storm.
So, to all the small business owners out there, I urge you: heed the warnings of the times, empower yourselves with the tools at your disposal, and forge ahead with resilience and determination. By credit checking your business customers and diligently managing your accounts receivable, you can fortify your business against the turbulent seas of economic uncertainty and emerge stronger on the other side.
IMF warns Jeremy Hunt against further tax cuts
The International Monetary Fund (IMF) has cautioned the UK Government against implementing new tax cuts before the upcoming general election. The IMF claimed the UK economy needs higher tax revenues to meet growing demands for public services and investment. The IMF recommended strengthening carbon and property taxation, closing loopholes in wealth and income taxation, and reforming the pensions triple lock. Responding to the IMF, Chancellor Jeremy Hunt said: “It is too early to know whether further reductions in tax will be affordable in the budget but we continue to believe that smart tax reductions can make a big difference in boosting growth.” The IMF also projected that the UK economy will be the second worst performing in the G7, with a growth rate of 0.6% this year. The IMF’s warnings pose challenges for both the Conservative government and the Labour Party.
Thousands face late penalties amid helpline delays
HMRC is facing pressure to extend the self-assessment deadline as taxpayers experience long delays on the helpline, risking late penalties. Taxpayers were informed that they could expect a 40-minute wait to speak to an adviser when calling the self-assessment phone line. The Taxpayers’ Alliance CEO, John O’Connell, expressed concern that many may be fined for missing the deadline due to the tax office’s phone delays. Taxpayers who miss the deadline face an automatic £100 late filing penalty, along with additional penalties for late payment.
Nimesh Shah, chief executive of Blick Rothenberg, said: “I’d be amazed if anyone ringing up can get through in the next 24 hours.” The delays come as many taxpayers are filing self-assessments for the first time due to frozen income tax allowances. Tom Clougherty, executive director at the Institute of Economics Affairs, suggested that HMRC should grant penalty-free deadline extensions to those affected, while Tory MP Sir Jacob Rees-Mogg called it fundamentally unjust to fine individuals for a fault that lies with the Government.
Side hustlers face unexpected tax bills
More Britons are turning to side hustles to supplement their income, with one in five taking up a side gig since the start of the pandemic, BBC News reports. However, many are unprepared for the tax implications that come with these additional sources of income. Side hustles are taxed differently from traditional payroll, and workers must hold back part of their income to pay taxes later. Tax authorities worldwide are cracking down on unreported income, with digital platforms now required to report seller profits. The change is unsurprising, says Stevie Heafford , tax partner at London tax firm HW Fisher. “The reality is that trading profits, whether primary or secondary, have always been taxable,” she says. But people who are doing this for the first time may not know that, especially if they are accustomed to employers taking out taxes from their pay cheques.
Consumer borrowing drops sharply in December
Consumer borrowing in the UK dropped sharply in December, suggesting the UK economy probably slipped into recession at the end of last year. According to the Bank of England, consumer borrowing fell from £2.1bn to £1.2bn, with credit card borrowing experiencing a steep decline. Ashley Webb, UK economist at Capital Economics, stated that households are becoming less willing to take on unsecured credit. Reluctance to spend likely contributed to households depositing £5.4bn into banks and building societies in December, the largest total since October 2022. Meanwhile, businesses borrowed £700m from banks, compared to £1.4bn of repayments the previous month.
Demand for financial help surges by 34% in first week of 2024
The Money and Pensions Service (MaPS) reported a 34% surge in demand for financial help online in the first week of 2024. MoneyHelper’s Money Troubles pages received 10,187 hits, up from 7,625 the week before Christmas Eve. The website had 8,924 unique visitors, a 37% jump compared to the previous week. The most visited pages were “dealing with debt” and “help with the cost of living”. Charlotte Jackson, head of guidance services at MaPS, stressed the importance of seeking help and support during difficult times. The demand for financial assistance is expected to continue throughout the year, with a 23% increase in visits and a 34% rise in page views in the first two weeks of January compared to the weeks leading up to Christmas Eve.
Tourist tax costing Britain £11bn
The UK economy is missing out on an £11bn boost due to the ‘tourist tax’, according to a report by the Centre for Economics and Business Research (CEBR). The CEBR estimates that axing the tax could attract an additional two million tourists to the UK and would lead to increased spending in restaurants, shops, hotels, and transport. Although reintroducing the scheme would incur costs, the additional tourist spending would boost public finances by £2.5bn. The report comes as FTSE 100 bosses, including Stuart Machin, the chief of M&S and Paul Marchant the boss of Primark join 420 signatories in writing to the Chancellor urging him to reintroduce the VAT scheme. Jeremy Hunt should abolish the “ludicrous” tax before the Paris Olympics or risk Britain missing out on a European spending boom, retail bosses warn.
London Mayor launches £8.7m support scheme
A new £8.7m scheme called Grow London Local has been launched by Sadiq Khan to support small businesses in London. The initiative aims to serve as a “one-stop-shop” for small business support and will cover all boroughs by the end of February. The mayor has set aside almost £9m for the scheme, which has already provided support to 811 small businesses. The goal is to help a further 12,000 small businesses between now and March 2025.
Auditors threaten to quit Birmingham Council over ‘intimidation’
External auditors at Birmingham City Council have considered quitting due to “unacceptable” working practices and an “intimidation threat” from an external organisation. Grant Thornton said in a statement: “We are currently actively considering as a firm whether this constitutes an intimidation threat under the Financial Reporting Council Ethical Standards and whether this impacts on our independence and objectivity and ability to continue as the council’s auditors.” The firms went on to say safeguards had been put in place and it will review whether they prove effective. Birmingham City Council is currently facing a £300m budget deadline and has been under scrutiny for its financial affairs. The auditors’ remarks were made in a progress report to the council’s audit committee.
Barrowman faces prison in £5.5m tax evasion trial
Tory peer Michelle Mone’s husband, Doug Barrowman, is on trial in Spain for his alleged involvement in a £5.5m tax evasion scam. Barrowman, a billionaire businessman, could face up to five and a half years in prison if convicted. The couple is also being investigated by Britain’s National Crime Agency for alleged fraud related to COVID-19 contracts. Barrowman and his co-accused deny the charges. The trial, which began after several delays, is expected to last for five days. Prosecutors are seeking jail terms for Barrowman and his associates if found guilty. The case revolves around an allegedly fraudulent invoice created to evade tax and transfer funds out of a Spanish business.
Labour vows to cut financial services regulations
Labour has pledged to “unashamedly champion” the UK’s financial services sector and cut down on regulations. The party aims to reduce the industry’s “regulatory burden” by streamlining rules and scrapping overlapping regulations. Labour also plans to close a £500m tax loophole benefiting private equity executives. The report, titled “Financing Growth,” criticises the Conservative party for taking the financial sector for granted. Labour’s shadow chancellor, Rachel Reeves, confirmed that there are no plans for a windfall tax on bank profits. The party also aims to make the UK a global hub for green finance and would force large companies to publicly declare their carbon footprint and adopt “credible” climate transition plans.
Dimon: US economy ‘driving towards a cliff’
The US economy is “driving toward a cliff” as the nation’s debt continues to surge, warns JPMorgan CEO Jamie Dimon. He predicts a potential “rebellion” in response to the mounting debt crisis, which could trigger upheaval in global markets. Dimon highlights the alarming disparity between now and 1982, with the debt-to-GDP ratio projected to exceed 100% and soar to 130% by 2035. Former Speaker Paul Ryan echoes Dimon’s concerns, describing the escalating debt as “the most predictable crisis we’ve ever had.” The Congressional Budget Office projects the national debt to nearly double in size over the next three decades, reaching 181% of GDP by 2053. Experts urge policymakers to confront the crisis head-on to avoid dire consequences.
House Prices
UK House Prices rose 0.7% month on month in January, according to latest figures. The data from Nationwide showed prices are now down just 0.2% when compared to last year. The average house now costs £257,656 compared to £257,443 last year.
Tesla
A judge in Delaware voided Elon Musk’s 2018 $55bn pay package as boss of Tesla after it was challenged in a lawsuit by a Tesla shareholder complaining the amount was excessive. The judge agreed and said the package, the biggest ever for a chief executive, was “unfathomable”.
Microsoft
Microsoft reported better than expected fiscal second quarter financial results after Tuesday’s closing bell, driven by strength in its Cloud segment. The company’s total revenue rose 18% over the year-ago quarter to $62 billion, above estimates of $61 billion. Cloud revenue rose 24% year-over-year to $33.7 billion.
Alphabet
Alphabet shares fell in after hours trading Tuesday after ad revenue fell short of expectations. YouTube ads contributed positively, growing by 16% to reach $9.2 billion, but overall Google ad revenue fell slightly short of analyst predictions, recording $65.52 billion against an estimated $65.8 billion which was still a 13% year on year increase.
GSK
GSK reported that turnover in 2023 rose 3.4% to £30.33 billion from £29.32 billion a year earlier. Pretax profit in the year climbed 7.7% to £6.06 billion from £5.63 billion. On the back of the results, the pharmaceutical company paid out a dividend of 16p, bringing the full year dividend to 58p. Looking ahead, GSK said it expects turnover growth between 5% and 7% in 2024.
Fujitsu
Fujitsu has apologized for its role in the wrongful conviction of more than 900 sub-postmasters who used its Horizon software, and said it will do its utmost to boost the quality of its products and regain the public trust.
Latest Insolvencies
Petitions to wind up (Companies) – SABTINA LIMITED
Appointment of Liquidators – SILICON COPY LTD
Petitions to wind up (Companies) – CFOOD (SUSSEX) LTD
Appointment of Liquidators – DERWENT FLOORING LIMITED
Appointment of Administrator – BUSINESS ENVIRONMENT LIMITED
Appointment of Liquidators – PARK MANOR LIMITED
Appointment of Liquidators – DACURY LIMITED
Appointment of Liquidators – SYNYEGA SERVICES LTD
Appointment of Liquidators – PARTICIPATE STRATEGIES LTD
Appointment of Administrator – OAKTREE INVESTMENTS (MANCHESTER) LTD
Appointment of Liquidators – PARKING TICKETING LIMITED
Appointment of Liquidators – PAGE FINANCIAL LIMITED
Appointment of Liquidators – PROJECT ALUMINIUM LIMITED
Appointment of Liquidators – ALCHEMY MANAGEMENT SOLUTIONS LTD
Appointment of Liquidators – ROUND MOVE LIMITED
Appointment of Liquidators – POSPAY LTD
Appointment of Liquidators – GARVEY ESTATES LIMITED
Appointment of Administrator – TRG LIVERPOOL LIMITED
Appointment of Administrator – BABCO UK LTD.
Petitions to wind up (Companies) – RES COMMERCIAL AND PROJECT MANAGEMENT LIMITED
Appointment of Liquidators – MAJAP INVESTMENTS LIMITED
Appointment of Liquidators – CLOUD APPS CONSULTING LIMITED
Petitions to wind up (Companies) – CROOK STORES LTD
Appointment of Administrator – THE COCKTAIL SERVICE LIMITED
Petitions to wind up (Companies) – PINNACLE MECHANICAL SERVICES LIMITED
Petitions to wind up (Companies) – AVERY AIR-CONDITIONING LTD
Appointment of Liquidators – QTECH FINANCIAL LIMITED
Petitions to wind up (Companies) – GENUINE RESTAURANTS LIMITED
Petitions to wind up (Companies) – MURKZ CONCRETE PRODUCTS LIMITED
Appointment of Liquidators – ABC INCORPORATION LTD
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 offer our members a fixed annual subscription regardless of how high the debt value maybe!
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
Check our compensation calculator to see how much your business could be owed!
Discover NOW the potential value of late payment compensation hidden in your sales ledger!
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.