Business news 31 October 2022
James Salmon, Operations Director.
Company insolvencies jump by 40%. Almost 28,000 Britons enter insolvency. Small businesses need mentors. Trading outlook improves but business confidence slips. BoE expected to hike interest rate to 3%. And more business news.
Company insolvencies jump by 40%
Insolvency Service data shows that company insolvencies in England and Wales jumped by 40% year-on-year over the past quarter, with 5,595 registered company insolvencies over the three months to September 30. While the total was marginally lower than the previous quarter, it marked a 40% increase on the same quarter of 2021. The total comprised of 4,800 creditors’ voluntary liquidations, 492 compulsory liquidations, 274 administrations and 29 company voluntary arrangements.
Christina Fitzgerald, president of insolvency and restructuring trade body R3, said: “Two years of economic turbulence are translating into a rise in corporate insolvencies.” She added that Government support “paused rather than prevented the economic effects of the pandemic from leading to more businesses entering insolvency processes.”
Nicola Banham, insolvency director at Azets, commented: “This pressure will continue to build as companies face ever-increasing costs at a time of prolonged economic uncertainty.”
Almost 28,000 Britons enter insolvency as cost of living hits finances
The Insolvency Service data also shows that 27,927 individual insolvencies were recorded over the three months to September. This is 5% down on the previous quarter but 2% higher than the same period last year.
Small businesses need mentors, says SME expert
Emma Jones, founder and chief executive of small business network Enterprise Nation, says there is a “pent up” demand for guidance among SMEs, with a poll showing that 82% of businesses are interested in mentoring. The study shows that 61% of the 823 small business founders surveyed said that mentoring’s reputation among their peers and business colleagues had increased. Of the businesses that had received mentoring, 66% said it had helped them survive, while 76% said it had been key to business growth. Ms Jones says mentoring “has a very clear role to play in improving business performance and supporting growth.”
Trading outlook improves but business confidence slips
Business confidence has slipped to a 19-month low, according to the monthly index by Lloyds Bank. Confidence among business leaders fell by one percentage point to 15% in October. This is the lowest level since March 2021 and comes amid forecasts of a recession. Despite the dip in confidence, almost half of businesses (46%) reported better trading prospects, with this up by two percentage points.
The survey of 1,200 UK companies saw 39% offer a pessimistic outlook on the economy, up from 36% in September. Almost two thirds said that they expect to raise prices in the next year, up from 59% last month. The number of companies planning to recruit rose to 42% from 39%, marking the first increase in five months.
BoE expected to hike interest rate to 3%
Economists expect the Bank of England’s Monetary Policy Committee (MPC) to increase interest rates by 0.75 percentage points at its November 3 meeting. This would mark the steepest increase since 1989 and take the base rate to 3%. It would also be the MPC’s eighth consecutive increase in interest rates.
Governor Andrew Bailey recently said the Bank was likely to lift interest rates by more than the 0.5 percentage point increase to 2.25% seen at the previous meeting, saying: “As things stand today, my best guess is that inflationary pressures will require a stronger response than we perhaps thought in August.”
A majority of analysts at Deutsche Bank expect the MPC to opt for a 0.75 percentage point rise. They also expect forecasts from the Bank to show that “the economic outlook has deteriorated further,” warning: “Conditioned on market pricing, the UK economy will likely fall into a deeper and more prolonged recession.” James Smith, developed markets analyst at ING, said the forecasts “are likely to be dismal – showing both a deep recession and inflation falling below target in the medium term.”
Analysts at Capital Economics believe a majority of five members of the MPC will back a whole percentage point rise, while Sanjay Raja, senior economist at Deutsche Bank, said: “We expect the Bank Rate to reach 4.5% as fiscal policy retreats and fiscal consolidation grows over the coming years.”
Citizens Advice in mortgage payment warning
More than a quarter of mortgage holders would not be able to afford their monthly repayments if they increased by £100 a month, new research shows. The analysis from Citizens Advice also found that 45% would be unable to make their payments if they rose by £250 a month. One in seven mortgage holders have already cut down on essentials, while one in ten have taken out high-cost credit in order to make ends meet, according to the poll. The Citizens Advice report notes that the Financial Conduct Authority and Bank of England are currently recording the lowest level of mortgage arrears in 15 years – but warns this may be a sign people are not coming forward to ask for help and risk making their situation worse.
Working mothers call for support
Thousands of working mothers have marched to Downing Street to call for Government reform that would deliver greater support on childcare, parental leave and flexible working. The demonstration was one of several taking place across the country as campaigners called for action over unaffordable childcare and parental leave structures. Mandu Reid, leader of the British Women’s Equality Party, accused the Government of leaving mothers to work on “pittance wages” while raising children, adding that “underpaid, undervalued, largely women workers” were paying the cost for the “failures” of the political system. Labour MP Stella Creasy commented: “For me, investing in childcare pays off because the more women – and it is mainly women being penalised by this – can work, the more families can make choices that work for them.”
Poll calls for spending cuts, not tax increases
Research for MailOnline shows that Britons would prefer Prime Minister Rishi Sunak and Chancellor Jeremy Hunt to balance the books by cutting spending rather than hiking taxes. The poll shows that 52% believe state spending should be reduced, while 25% backed tax increases. On the Government’s economic strategy, 50% of those polled said taxes should be lower, 28% suggested tax should remain at the current level and just 12% said it should be higher. Meanwhile, 42% of Britons believe spending should be lower, 28% feel it should remain the same and 12% said it should be higher. The research also reveals strong support for getting government finances under control, with 70% of respondents saying stability must come before economic growth.
Government debt rose in Q2
Office for National Statistics data shows that government debt increased to £2,436.7bn in the second quarter of this year, making up 101.9% of GDP. This puts the UK 15.5 percentage points above the EU average. UK general government deficit, which measures the gap between total revenue and total spending, was £43.9bn in Q2, with this equivalent to 7.2% of GDP – 5.7 percentage points higher than the EU average.
Octopus to take over Bulb
Energy supplier Octopus Energy is to buy Bulb, a rival firm which collapsed last year and has since been run by the Government. While financial details have not been published, it is believed that Octopus paid the Government between £100m and £200m in a deal agreed with special administrators. Octopus has agreed to share any profits made from its new Bulb customers with the Government for up to four years. Octopus said the deal would bring “an end to taxpayer losses”, adding it was “paying the Government” to take on Bulb’s customers. The Department for Business, Energy and Industrial Strategy said Bulb’s 1.5m customers will not see any change or disruption to energy supplies.
Windfall tax on energy firms may be expanded
Chancellor Jeremy Hunt could increase the windfall tax on energy companies to 30% and extend it to 2028 amid internal Government calculations that oil and gas prices will remain at an “elevated level” until at least 2030. Increasing the levy by 5% would pull in billions of pounds in extra revenue on top of the £25bn it had been due to bring in by 2025. Officials are also reportedly looking at plans that would extend the scope of the levy beyond oil and gas companies to include electricity generators. Meanwhile, Cop26 president Alok Sharma has urged the Government to expand the windfall tax on the “excessive” profits of oil giants, saying that at its current rate, the tax is not raising “significant” amounts.
Accountants are concerned about rising costs
Nearly 71% of accountants globally were worried about rising costs weighing on their businesses in the third quarter, according to a survey released by the Association of Chartered Certified Accountants and the Institute of Management Accountants. That was an increase from 46.5% in the same quarter in 2021 and the highest level since the two professional accountant groups began tracking the issue about 10 years ago.
Sources: Bank windfall tax unlikely
Sources close to Rishi Sunak and Jeremy Hunt have played down suggestions that the Prime Minister and the Chancellor are considering a windfall tax on banks as the Government looks to plug a hole in its finances. Mr Sunak and Mr Hunt are said to be looking at the 8% surcharge that banks pay on top of corporation tax. When Chancellor himself, Mr Sunak said he would cut this to 3% and raise corporation tax from 19% to 25%. Banks have voiced concern that their tax burden could climb to 33% as Mr Hunt has yet to comment on reducing the surcharge. However, the senior sources expect the Chancellor to cut the surcharge to 3% as planned, leaving banks with a 28% rate.
Britain’s banks pay more than rivals, even without a windfall tax
Trade body UK Finance has warned that London will lose out to international rivals and become a less competitive place to do business if the Government introduces a windfall tax on banks. It added that the City will already be significantly more expensive than New York, Dublin, Amsterdam or Frankfurt by 2024, even if no windfall tax is introduced.
NatWest predicts 7% fall in house prices
NatWest has warned of falling house prices and a slowing mortgage market in the months ahead, forecasting that house prices are set to fall by 7% in 2023. This came a day after Lloyds predicted an 8% slide in house prices next year.
Gove commits to 300,000 homes target
Housing Secretary Michael Gove has said the Government remains committed to a manifesto pledge of building 300,000 homes every year by the mid-2020s – although he admitted that meeting the target would be “difficult” due to current economic circumstances
£1.3trn wiped off value of UK bonds
More than £1.3trn has been wiped off the value of UK bonds in 2022, according to asset manager Collidr. Just over £882bn has been wiped off the value of Gilts and Index-linked Gilts, which have fallen 26.4% and 36.2% respectively since the start of the year. The analysis also shows that the value of UK corporate bonds has fallen by £514.5bn since the beginning of 2022.
Colin Leggett, investment director at Collidr, commented: “The unprecedented meltdown in bonds is not just causing issues for pension funds with exposure to Liability Driven Investment Strategies. The fall is also wrecking the returns for any investor with a large exposure to UK bonds.” He added: “With the on-going economic and political instability, we may still only be in the eye of the storm.”
Eight held over tax credit fraud conspiracy
Eight people have been arrested over alleged “organised criminal attacks” on Government tax incentives meant to encourage investment in technology and innovation. HMRC is investigating suspected fraudulent claims for relief under the research and development tax credit schemes, with the arrests focused on more than 100 claims worth more than £16m. A tax agent suspected of criminally facilitating the fraud was among those arrested.
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.