Business news 31 July 2023
James Salmon, Operations Director.
Insolvencies hit highest level since 2009. Not enough hours in the day for SME owners. Energy costs put small firms at risk. Rate rise expected but hiking cycle may soon end. And more business news that we thought would interest our members.
Insolvencies hit highest level since 2009
More companies are in trouble than at any time in the last 14 years!
Insolvency Service data shows that company insolvencies hit the highest level since 2009 in Q2 when the UK was battered by the aftershocks of the global financial crisis. There were 6,342 company insolvencies recorded in the three months to June, with this marking a 13% increase on Q2 2022.
A record number of companies becoming insolvent will leave huge number of creditors unpaid.
Small businesses have faced a wave of headwinds, following Covid. We’ve seen businesses already weakened by the global pandemic, saddled with debt in from the pandemic, hit by the cost of living crisis, the energy price shock, tightening labour markets and large wage demands and difficult supply lines. We have also seen an increase in late payments draining the cash flow of small businesses. On top of that we have had 13 consecutive rate rises taking interest rates to their highest level since the financial crisis in 2008.
There’s no doubt that the UK economy is in stormy waters.
Analysis shows that creditors’ voluntary liquidations (CVLs) accounted for 5,240 of Q2’s insolvencies. This was the highest quarterly number of CVLs since records began in 1960.
The Q2 data also shows that there were 637 compulsory liquidations, 409 administration and 56 company voluntary arrangements.
David Kelly, head of insolvency at PwC, expects to see an increasing number of larger companies go into insolvency this year. He said: “High inflation and the increasing cost base for firms is resulting in the erosion of both liquidity and shareholder value, thus reducing confidence in the ability to hit future forecasts.”
He added: “Coupled with rising interest rates, it is making for a very challenging environment for business.”
EY analysts have also voiced concern over a possible increase in firms failing, highlighting that nearly one-in-five listed firms have issued profit warnings in the past year, with many citing tighter credit conditions. Samantha Keen, UK turnaround and restructuring strategy partner at EY-Parthenon, says a tighter lending environment will have an ongoing impact on profitability.
Those who bury their heads in the sand leave themselves in a very vulnerable position.
If you are considering insolvency, before you go down the insolvency route, talk to CPA about our LPC service that is unlocking cash for B2B businesses. You are entitled to compensation for late payments you have had from business customers, going back six years. That compensation could make all the difference to your cashflow. CPA’s unique service is unlocking these claims for our clients and recovering the payments due.
And if you are worried about late payments from customers who could be at risk of going insolvent, ask about our Overdue Account Recovery service which resolves an average of 84% of referred accounts quickly and efficiently.
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.
Not enough hours in the day for SME owners
A poll of 500 small and medium-sized businesses found that the average owner needs an additional four hours in the working day to complete their admin. The survey by business insurer Superscript shows that 33% of SME bosses feel that there are not enough minutes in the day to get everything done. While, on average, they would like to free up 20 hours each week, bosses typically only get 90 minutes to focus on admin, with 43% saying they take these chores home with them. The biggest time-consuming tasks were sorting out tax returns (29%), managing cash flow (20%), and supply chain issues (18%). Quizzed on the biggest challenges they face, 24% said long hours, 14% pointed to chasing payments and 13% said paperwork. Asked which tasks they wish could be simplified, a fifth said the hiring process.
Energy costs put small firms at risk
Almost 100,000 small businesses are at risk of closure due to high energy bills, with analysis showing that more than one in ten small firms are locked into long-term gas and electricity contracts signed when prices were at their peak last year. Some firms say they signed multi-year contracts due to concerns that prices would increase further. Paul Wilson, policy director at the Federation of Small Businesses (FSB), said: “I’ve seen examples where businesses have signed up to deals that I found surprising, in terms of the prices paid or the length of the contract or both.” Meanwhile, Ofgem has called on the Government to increase regulation of energy brokers, saying there is also a need for greater transparency on money they receive from energy firms. The FSB estimates that one in three businesses with fewer than ten employees use brokers who are paid to find customers the best deal but also get commission from energy suppliers.
Rate rise expected but hiking cycle may soon end
While economists are predicting that the Bank of England is nearing the end of its hiking cycle, rate-setters on the Monetary Policy Committee (MPC) are still expected to increase the base rate from 5% to 5.25% this week. This means around 1.5m borrowers on variable rate mortgages and 850,000 on tracker mortgages are set to see an immediate increase in their payments.
While Paul Dales, chief UK economist at Capital Economics, believes there is still “enough inflationary pressure” for the Bank to raise the rate to 5.5% in September, he says an easing in both wage growth and core inflation will prevent further hikes. Other analysts, however, believe the base rate could climb to 5.75% before coming down, with George Buckley, chief UK economist at Nomura, saying “persistent inflationary pressure” means the Bank may need to hike rates “for longer than we initially thought.” RSM UK economist Thomas Pugh says inflation is “far from under control” and the economy is “clearly far too hot for the MPC to relax.”
Energy Security
The Prime Minister Rishi Sunak is set to announce an energy security policy today as disquiet grows over green policies within the Tory party. The PM will announce policies to help the North Sea oil and gas industry move towards net zero greenhouse gas emissions when he meets industry leaders in Aberdeenshire. The PM will reportedly unveil funding for a carbon capture project in Scotland to help support oil and gas production.
Britain comes up short on robots
Analysis suggests that Britain is lagging behind when it comes to utilising robots in the workplace. Data from the International Federation of Robotics (IFR) shows that Britain had around 24,445 industrial robots in service in 2021. While this is almost double the number recorded a decade earlier, the UK has fallen behind international peers. The UK has 111 industrial robots for every 10,000 manufacturing workers. This is below the global average of 141, leaving the UK the lowest in the G7 and 24th in the world. The US has 274 robots per 10,000 workers, while Germany has 397 and South Korea has 1,000.
The IFR last year said that the UK “has a strong manufacturing industry that has surprisingly low annual robot installation counts.” While annual installations of industrial robots more than trebled globally between 2011 and 2021, in the UK they rose just 36%. Experts say the shortfall has contributed to Britain’s flatlining productivity levels. Office for National Statistics figures suggest that the manufacturing sector is shrinking at its fastest rate for more than three years. Britain, it is noted, was the only country to see a fall in productivity last year.
Banks shut 350k accounts last year
Banks are shutting more than a thousand accounts every working day, according to data obtained under a Freedom of Information request to the Financial Conduct Authority (FCA). Almost 350,000 accounts were closed last year compared to under 50,000 in 2016. The analysis shows that almost 90,000 individuals are estimated to have been categorised as ‘politically exposed persons’ by the banks, including MPs and other figures deemed to be at risk of abusing their positions for private gain and who require extra checks. MPs on the All Party Parliamentary Group on Fair Business Banking last week launched an inquiry into the scale of bank account closures.
James Russell, managing partner of Humphries Kerstetter, the law firm working with MPs, said: “The FCA data suggests it is far more widespread than was previously known.” Tina McKenzie, policy chairman of the Federation of Small Businesses, has urged regulators to publish annual figures on how many accounts have been closed. Separate data from the Financial Ombudsman Service shows that NatWest and Barclays had the highest number of complaints about decisions to close accounts last year.
Demand for office space above pre-Covid levels
Data from Rightmove and property intelligence supplier EG shows that demand for office space remains higher than pre-pandemic levels, despite a surge in remote working. While interest in leasing office space in the first four months of the year was down 8% on last year, it is 9% above levels recorded in 2019. Scotland leads the way, with demand up 7% on 2022 and 11% on 2019. London, however, has seen demand for office space fall 11% in a year and 1% since 2019. In the retail sector, demand for space has fallen marginally year-on-year but is 11% up on the pre-pandemic level. Demand for leisure and hospitality space is down 8% on pre-pandemic levels but for industrial and warehousing space, there has been an increase of 7%. Noting that flexible, hybrid and remote working have become the norm for many businesses since the coronavirus outbreak, Andy Miles, a commercial expert at Rightmove, said the latest figures show that businesses “clearly still see value in retaining a physical presence for employees, even if they now gather there more infrequently.”
Housebuilding slows
Industry data suggests that the housebuilding market has slowed in recent weeks, with rising mortgage costs having an impact on the purchase of new homes. Department for Levelling Up, Housing and Communities figures show that the number of energy performance certificates (EPC) issued to newly-built houses — a key forward indicator of housebuilding completions — fell by 13.5% year-on-year in Q2. The fall to 58,000 new homes was the steepest dip in a decade, excluding a 60% drop seen at the start of the pandemic. As well as pressure from mortgage costs, the construction industry has warned that tougher environmental regulations will see firms cutting back on new homes. The Home Builders Federation said: “The EPC data confirms that the Government’s increasingly anti-development and anti-business policy approach is driving down housing supply.” The trade body has called for “urgent Government action to address the major barriers we face to building homes.”
Bernanke to investigate Bank of England forecasting
The Bank of England has appointed Ben Bernanke, the former chairman of the US Federal Reserve, to lead an official review into its forecasting. David Roberts, chairman of the Bank’s court, has asked Mr Bernanke to examine its economic predictions “during times of significant uncertainty” in a review that will be supported by its Independent Evaluation Office. Mr Bernanke said it is “right to review the design and use of forecasts and their role in policymaking, in light of major economic shocks.” Warning that the economy has faced “a series of unprecedented and unpredictable shocks,” Andrew Bailey, the Bank’s governor, said the review will allow it to “take a step back and reflect on where our processes need to adapt to a world in which we increasingly face significant uncertainty.” Harriett Baldwin, chair of the Treasury Committee, welcomed the appointment. She commented: “The sooner the Bank is able to learn the lessons of the recent past the better.”
US inflation
US Annual Inflation slowed considerably in June, likely pushing the Federal Reserve closer to ending its fastest interest rate hiking cycle since the 1980s. Inflation as measured by the personal consumption expenditures price index increased 0.2% last month after edging up 0.1% in May, a 3% annual increase, the Commerce Department said on Friday.
Core prices, which exclude food and energy and are regarded as a more reliable signal of underlying inflation, advanced by a less-than-expected 4.1%.
UK and India could sign trade deal this year, says official
India’s commerce secretary says the UK and India could sign a trade deal before the end of the year. Sunil Barthwal said that it was possible that the deal could be agreed “much before” 2023 comes to an end. The Department for Business and Trade says the Government would “only sign when we have a deal that is fair, balanced, and ultimately in the best interests of the British people and the economy,” with a spokesperson adding that the UK and India “are committed to working towards the best deal possible for both sides.” “While we’ve made good progress in closing chapters, we’re now focused on the high ambition areas including goods, services, and investment,” they added.
Banks see slowdown in interest rate boost
Banks have warned that a boost from rising interest rates might be coming to an end, with several offering a cautious outlook despite posting bumper profits. Both NatWest and Barclays have lowered their forecast for their full-year net interest margin (NIM) – the amount of money a bank is earning in interest compared to the amount it is paying in interest on deposits. While Lloyds has increased its full year NIM, its margin in Q2 was down on the first quarter. Tomasz Noetzel, an analyst at Bloomberg Intelligence, said the scaled back forecasts “sum up the intensifying pressures in the domestic mortgage and deposit markets.” This comes with banks seeing an increase in customers moving deposits into higher yielding savings accounts and using excess savings to pay down debts.
CBI prepares its comeback
The Confederation of British Industry (CBI) is preparing to announce the resumption of events, having paused activity amid allegations of sexual misconduct at the business lobby group. While it has recently restarted work such as analysing economic data, the body is reportedly ready to start holding events again as it prepares to draw up a manifesto for business before the Chancellor’s autumn statement. New director-general Rain Newton-Smith recently met with a Government minister, the first such meeting since the scandal made headlines in March.
Latest Insolvencies
Petitions to wind up (Companies) – ENGINEERING SUPPLY CHAIN NETWORK LIMITED
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Appointment of Liquidators – A J WOOD PLANT LTD
Appointment of Liquidators – AYARMA LTD
Appointment of Liquidators – HELSINKI TOPCO LIMITED
Petitions to wind up (Companies) – BHL GROUNDWORKS LIMITED
Winding up Order (Companies) – R M CROSS LTD
Appointment of Liquidators – STILO TECHNOLOGY LIMITED
Petitions to wind up (Companies) – DALGIC MEAT LTD
Appointment of Liquidators – CATLIN HOLDINGS LIMITED
Appointment of Liquidators – TCFG HOLDINGS LIMITED
Petitions to wind up (Companies) – ELECISERVE E&M LTD
Appointment of Liquidators – STILO INTERNATIONAL LIMITED
Petitions to wind up (Companies) – ASPIRE BEAUTY SALON LTD
Appointment of Liquidators – ADDO FOOD GROUP (HOLDINGS) LTD
Appointment of Liquidators – THE COMPLEAT FOOD GROUP INTERNATIONAL LIMITED
Appointment of Liquidators – HEP (GP) LIMITED
Appointment of Liquidators – NITESWOOD LTD
Appointment of Liquidators – SILVERLENS LIMITED
Petitions to wind up (Companies) – PIANO LOUNGE LIMITED
Appointment of Liquidators – THE RIVERSIDE EVENTS LLP
Appointment of Liquidators – LK SMILE LIMITED
Appointment of Liquidators – AH FINANCIAL BUSINESS SERVICES LIMITED
Appointment of Liquidators – SARSUN CONSULTING LTD
Appointment of Liquidators – THOMAS PINK HOLDINGS LIMITED
Appointment of Liquidators – SANAH QASEM LTD
Appointment of Liquidators – LONDON AND PROVINCIAL PROPERTY LTD
Appointment of Liquidators – WATTS CADMANS LIMITED
Appointment of Liquidators – SP NETWORK CONNECTIONS LIMITED
Appointment of Liquidators – STOBARTS (BRADFORD) LIMITED
Appointment of Liquidators – SPECIFIC COMPONENTS LIMITED
Appointment of Liquidators – SHAUN FISHBURN LTD
Appointment of Liquidators – CARROT COMMUNICATIONS AND ENGAGEMENT LTD
Appointment of Liquidators – HSBC UK HOLDINGS LIMITED
Appointment of Liquidators – RIP TEN LIMITED
Appointment of Liquidators – ANTI-MATTER GAMES LIMITED
Appointment of Liquidators – DE WINTER LIMITED
Appointment of Liquidators – TAN ROSE & SONS LIMITED
Appointment of Liquidators – AMORIM FLOORING UK LIMITED
Petitions to wind up (Companies) – ELITE ELECTRICAL SOLUTIONS (SOUTH COAST) LTD
Appointment of Liquidators – MT FINANCIAL CONSULTANCY LTD
Appointment of Liquidators – GSUS TECH LIMITED
Appointment of Administrator – KH RESOURCING LIMITED
Appointment of Administrator – FLEXI OFFICES LIMITED
Appointment of Administrator – DRYNKS UNLIMITED LTD.
Appointment of Administrator – MARTIN COWMAN LIMITED
Appointment of Administrator – HAYDON MECHANICAL & ELECTRICAL LIMITED
Appointment of Liquidators – H&A RESTAURANTS LIMITED
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!
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
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.