Coronavirus business news update 6th April 2020.
6th April 2020.
James Salmon, Operations Director.
During the Coronavirus outbreak we will continue to share (as we can) the business news stories we have seen that we think will affect our members and readers. The news stories you might have missed that might have an impact on SMEs and those that sell on credit.
Economists expect biggest slump in a century
Economists have warned that the economy is set to suffer its worst year for a century.
Analysis from Nomura suggests the economy is set to shrink by 7.8% overall in 2020, marking the biggest hit since a 13% slump in 1921.
George Buckley, UK economist at Nomura, said the crash would far surpass the 2008 financial crisis, which prompted a 4.2% decline, commenting: “The worst data we’ve seen since the depression of 1921 was during the final stages of the Second World War, when GDP fell by 4.6%.”
Coronavirus loan scheme updated
Chancellor Rishi Sunak has announced an overhaul of the emergency coronavirus business interruption loan scheme, banning banks from demanding personal guarantees on loans under £250,000.
Under the revamped scheme, small firms will find it easier to qualify for loans while larger companies – with a turnover up to £500m – will be eligible for the first time.
Michael Lassman of the Federation of Small Businesses welcomed the move but said the “devil is in the detail and there now needs to be a step change.” “Words are all very good but we need to see it being carried out. We will know by the middle of next week whether we’re getting somewhere,” he added
Government to pilot no-interest loan scheme
The Government is to pilot an initiative offering no-interest loans for people on low incomes, with a Treasury-commissioned report saying a no-interest loan scheme (Nils) would be feasible, with cash coming from either a government body or existing lenders.
With the scheme primarily aimed at lower-income earners who cannot afford to repay interest on loans of between £200 and £2,000, the London Economics report notes that more than 400,000 people in Britain would be eligible.
While the Treasury has said a pilot will be rolled out, a spokesperson declined to give a timetable. Nor would they comment on whether Chancellor Rishi Sunak would use the Nils as a relief measure amid the COVID-19 pandemic.
Banks question loan scheme figures
Banks have criticised the British Business Bank (BBB), which administers the emergency small business loan scheme rolled out due to the COVID-19 outbreak, questioning data which suggests that many lenders have failed to take part.
Although a report from the BBB show s that HSBC is the only large bank to have made money available through the Coronavirus Business Interruption Loan Scheme, spokespeople for Lloyds, Santander, Barclays or NatWest owner Royal Bank of Scotland insisted their banks have handed out cash.
The BBB figures suggest fewer than 1,000 of the 130,000 firms to have expressed interest have benefited from the scheme, with £91m of ultra-cheap credit given to small companies.
Craig Beaumont of the Federation of Small Businesses says regular updates on the amount of loans being approved and rejected by banks is needed, saying: “We could see businesses going to the wall as well as the banks’ already battered reputations ruined. The sort of experiences that small businesses have so far received have to improve.”
Support schemes fall short for entrepreneurs
Phillip Bond, director of the ResPublica think-tank, says that while Chancellor Rishi Sunak’s measures to support both the self-employed and employees amid the coronavirus outbreak have been “bold and ambitious”, a number of people are falling between the gaps of the two main support schemes.
He notes that the self-employed are only covered if they have been fully self-employed for a year, before highlighting that the owner/directors of Britain’s small businesses are “almost wholly unsecured”.
Mr Bond says that many, “almost universally on accountant’s advice”, have given themselves minimal salaries and pay themselves mostly through dividends.
The structure of the Government support schemes means people in this position who self- furlough will only see 80% of their small salary. He argues that minsters are “abandoning” Britain’s entrepreneurs.
Blanchflower sounds unemployment warning
David Blanchflower, a professor of economics at Dartmouth College and a former member of the Bank of England’s monetary policy committee, has warned that the economic hit from the coronavirus pandemic could see unemployment on both sides of the Atlantic surpass levels reached during the Great Depression of the 1930s within months.
Drawing a comparison with US figures that suggest unemployment could reach 52.8m – around 32% of the US workforce – he said UK unemployment could rapidly rise to more than 6m people, or 21% of the workforce.
Suggesting that the Government has “no idea of the scale of the problem it is going to have to deal with”, he comments: “We make some back-of-the-envelope calculations and they are scary.”
Analysing the climate alongside University of Stirling economist David Bell, he said a dip in activity and resulting loss of jobs appears to be unfolding at least 10 times faster than in the recession triggered by the 2008 crisis.
SMEs short on debt cash
UHY Hacker Young has analysed the balance sheets of more than 13,500 SMEs and warns that the average small business does not have enough money to cover debts due in the next year.
On average, UK SMEs hold 95% of the cash needed to pay debts due in the next 12 months.
Martin Jones of UHY Hacker Young said: “It’s worrying to see British SMEs struggling to pay their short-term debts already,” adding that there is “no doubt the coronavirus disruption is going to make the situation even worse over the coming weeks and months.”
Debenhams to file for administration
Debenhams is in danger of collapse as a result of the coronavirus outbreak. The department store chain is reportedly set to appoint administrators, with KPMG said to be among those on standby to handle the process.
It is suggested that the move would be designed to shield the company from legal claims from creditors during the pandemic.
The retailer, which employs 22,000 people, is currently in the process of closing around 50 stores in an effort to cut costs. All stores remain temporarily closed during the coronavirus crisis, with most of its workforce placed on furlough.
Services sector posts worst month on record
The IHS Markit/CIPS services purchasing managers’ index shows that the UK’s services sector – representing 80% of the economy – shrank at the fastest pace on record in March, sliding to 34.5 from February’s 53.2 on an index where a reading below 50 signals contraction.
Tim Moore, economics director at IHS Markit, said: “Emergency public health measures to combat the COVID-19 pandemic continue to mothball business operations [and] force aggressive cutbacks on non-essential expenses.”
Andrew Wishart, an economist at Capital Economics, believes the PMI – and a manufacturing index released earlier this week – were probably underestimating the scale of the economic fallout of COVID-19, forecasting a 15% fall in economic output in the period from April to June, “a larger fall in output than in the financial crisis or the Great Depression.”
Post crisis tax increases not inevitable, says EY
EY believes that low interest rates could mean Chancellor Rishi Sunak is able to avoid increases in personal tax to cover the cost of unprecedented measures designed to ease the impact of the coronavirus pandemic.
With the Bank of England reducing the cost of borrowing to 0.1% and the popularity of Government bonds reducing the cost of raising cash for the Treasury, EY’s head of tax policy Chris Sanger believes that with “the cost of borrowing close to nil or maybe even negative at times … it’s about managing the debt and looking to the future to how you repay it rather than an emergency call to do so”.
He added that we may be “moving into a new paradigm where these levels of debt we thought were untenable are actually more manageable over time.”
Half a million house sales to be lost
Analysis by estate agency Knight Frank suggests that more than half a million property sales will be lost this year due to the ongoing coronavirus crisis, warning that prices are set to fall by 3%.
It estimates that transactions will fall from 1.18m last year to 734,000.
In analysis assuming the lockdown lasts through April and May before restrictions are eased in June, Knight Frank says prices are likely to dip 3% through 2020 but rebound to 5% growth in 2021.
Having previously forecast that 2020 would see 1.26m transactions, it now expects 526,000 sales to be lost and less than half of those to be carried into 2021.
HMRC issues coronavirus scam warning
HMRC has issued a warning about people using the COVID-19 pandemic to carry out scams, reminding taxpayers that the taxman will never text, email or phone to ask for bank details, a PIN or passwords.
Experian warns over SME cash reserves
A report from credit agency Experian seen by the Mail on Sunday suggests that half of Britain’s small businesses will run out of money within eight weeks without emergency financing.
The paper says the document, which has been sent to the chief executives of Britain’s largest banks, shows that around 2.9m of the UK’s 5.8m SMEs – many of which are set to apply for interest-free loans designed to ease pressures brought about by COVID-19 – would deplete their cash reserves within two months even if they maintained half of their current income.
It added that a quarter of small firms would be unlikely to survive for two weeks if their income dried up altogether.
Insolvency rules reform plea
Legal experts argue that an overhaul of insolvency rules is needed due to the COVID-19 outbreak, calling for the creation of a bankruptcy protection regime after the number of companies going bust jumped in the early weeks of the pandemic.
Insolvency specialist Mark Phillips has put forward plans for a new light touch regime called “protective rescue administration” that would help businesses keep trading despite the ongoing shutdown.
His plan would see administrators consent to a company’s management running the business while the administration framework protects it from being wound up or creditors making claims against its assets.
He said: “You don’t want KPMG running a hairdressing salon. You want the management running it.”
Meanwhile, law firm Freshfields has reportedly written to the Treasury proposing the formation of an insolvency task force designed to help manage corporate failures amid t he fallout of the coronavirus crisis.
Separately, Christina Fitzgerald, a board member of insolvency trade body R3, says “adapting” existing restructuring tools is a priority.
Data compiled for the Sunday Telegraph shows that there were 3,807 liquidations in March, up from 2,183 in February.
Lifeline call for small firms
In a letter to the Sunday Telegraph, Andrew Harding, chief executive of management accounting at the Chartered Institute of Management Accountants, welcomes Government reform of its support for SMEs amid the COVID-19 outbreak.
However, he warns that many firms are not being granted access to funds via the Coronavirus Interruption Loan Scheme and says small firms need “immediate access to some much-needed cashflow,” insisting: “It is about time we throw SMEs a lifeline they can really hold on to.”
Boom on the horizon for insolvency firms
Michael O’Dwyer in the Sunday Telegraph says that the insolvency and restructuring sector is preparing for a boom as a swathe of businesses face challenges thrown up by the coronavirus outbreak.
David Fleming, a debt and restructuring adviser at Duff & Phelps, tells the paper: “The diary is full of calls from half seven in the morning, and laptops are going down at midnight. You’re on calls relentlessly with directors and lenders.
It has been very, very intense – very long hours and weekends.” Carl Jackson of business advisory Quantuma says: “I have no doubt that the rate of corporate failures will increase in this calendar year”.
Insolvency numbers ‘incredibly low’ – Nimmo
Blair Nimmo, head of restructuring for KPMG, says that while there may be an increase in insolvencies, the number of firms going bust during the COVID-19 pandemic is “incredibly low at the moment”.
While acknowledging that some firms are folding, he highlights that many more are being mothballed, adopting careful cash management and seeking support to stay afloat.
Saying that seeing viable companies entering insolvency is the “last thing we need right now”, he suggests that “if businesses were viable before the pandemic, they can be viable again.”
Retailers hit by coronavirus
Topshop owner Arcadia Group is preparing to walk away from as many as 55 stores as the COVID-19 shutdown puts Sir Philip Green’s retail empire under increasing pressure.
Arcadia is being advised by Deloitte and law firm Freshfields.
Elsewhere, Cath Kidston is set to appoint administrators in a move which puts 800 jobs at risk.
Virgin awaits bailout decision
Virgin Atlantic has asked the Government for a multi-million pound bailout to help it weather the coronavirus crisis, with the Treasury and advisers EY and Rothschild said to be reviewing the request and likely to deliver a decision within the next few days.
Utilities call on ministers for support
Energy UK has called on the Government to create a fund that would enable utilities firms to offer customers payment holidays amid the COVID-19 outbreak.
Firms in the sector have been hit by the Government shutdown which has seen reduced demand, with Simon Virley, head of energy at KPMG, saying: “For generators, power demand is already about 10% lower than normal at this time of year, leading to falling wholesale prices and more pressure on margins.”
Lights go out on more electricity suppliers
A record 24 electricity suppliers went bust in the UK last year, up from 17 in 2018 and five the year before, according to data from Price Bailey.
The firm’s Paul Pittman warns of the knock-on effect when an energy retailer collapses, saying: “We are seeing a domino effect. Every time a small energy retailer does go bust, that increases the financial strain on the rest of the supply chain, making those businesses more vulnerable to collapse.”
Ad firms under pressure
The Sunday Times considers the climate for marketing and advertising firms and the toll the coronavirus crisis is taking.
Looking at challenges to the sector, it says Facebook and Google threaten to make the multinational model obsolete, while the emergence of consultancies such as PwC as credible rivals also poses a threat.
MP calls for exemption over ‘Virus Added Tax’
Chancellor Rishi Sunak has been urged to act over a tax loophole that could hit firms attempting to help tackle coronavirus.
A tax rule which means firms pay full VAT on the value of anything they donate if it is not their “main” product could hit companies switching production lines to produce hand sanitiser, ventilators or masks.
Liberal Democrat Layla Moran says this amounts to a “Virus Added Tax for businesses who are doing the right thing” and has called on the Government to offer a special exemption to help firms creating life-saving products.
3 in 4 back higher taxes for the wealthy
A survey by the Tax Justice Network shows that 74% of people believe wealthy individuals and firms should pay higher taxes.
Of the 3,010 people polled, 66% said those who profit from wealth should face the same tax rates as workers, while 87% urged the Government to close loopholes which enable tax dodging.
It was also shown that 24% of people did not want to pay more tax personally.
Commenting on the findings, Tax Justice UK boss Robert Palmer said: “People have had enough of clever accounting that allows companies and wealthy individuals to pay less than they should.”
McDonnell calls for wealth tax to cover COVID-19 measures
In his last act as Shadow Chancellor, John McDonnell has called for a wealth tax to fund the Government’s emergency response to the coronavirus crisis, adding a call for a windfall levy on the banking industry.
Addressing the strain the cost of tackling the pandemic could put on the public purse, Mr McDonnell said: “We pay for it by introducing an immediate windfall tax on the banks and finance sector we bailed out when they brought about the crisis a decade ago.”
He added a tax on multinationals and wealth levy on the richest band of society would also be welcomed.
Players warn wage cut would hit tax for NHS
With the Professional Footballers’ Association (PFA) having resisted calls for top flight players to take a 30% pay cut amid the COVID-19 crisis, it has warned that such a reduction would result in far less in taxes going to the NHS.
In a statement, the PFA said the proposed salary deduction over a 12-month period “equates to over £500m in wage reductions and a loss in tax contributions of over £200m”, asking what effect this loss of earning to the Government would mean for the NHS.
Do you sell on credit?
With pressures on the cash flow it is essential that you stay on top of the credit limits you grant customers and watch carefully for any late payments.
Those customers will look for the easiest option to boost their cash-flow. Don’t let it be you.
You can’t just assume your customers can and will pay you eventually, no matter how big their name is.
It is essential to have credit management systems in place to monitor and check your customers credit worthiness.
It is also best practice to use a trusted third party like CPA to make sure you are paid on time by customers, no matter how good a name they have.
About CPA
The Credit Protection Association can help!
Formed in 1914, CPA has been providing credit management services to SMEs for over 100 years.
At the Credit Protection Association, we provide first class credit information that can help you avoid being over extended to customers who are at risk. Our monitoring service can flag up warning signs long before the end, giving you the chance to adjust and reduce your exposure. We provide recommended credit limits and credit scores on a traffic light system and can help you set appropriate credit policies for your customers.
We regularly publish lists of the latest insolvencies but by then it is too late. Our credit reports however predict approximately 96% of company insolvencies long before they arrive.
Companies in trouble usually have very bad cash flow and they try to deal with it by delaying payment to their suppliers, increasing your exposure to them.
If you supply on credit, help us help you identify the risks.
Why use a third party collector?
As a third party collector, we can also get your payments prioritised over those who are not as hot on collections. When your customer receives a letter from the Credit Protection Association regarding their outstanding account, they are going to want to get that resolved as a priority. Our overdue account recovery service can get your unpaid invoices to the top of their “to do” list and get your invoice paid.
Over the years we have collected billions in overdue invoices for our customers.
Our debt recovery and credit management services give our members the financial freedom needed to grow and prosper, while our new Late Payment Compensation department could unlock hidden potential and offer the compensation needed to springboard your business to success.
You might be hesitant about contacting a debt collection agency. What are they going to be like?
Can they help your particular type of business?
There is no need for concern. CPA are courteous, helpful and very probably have had direct experience of working with your type of business.
Debt collection agencies are not all alike.
Success lies in both recovering money and keeping customers happy. The Credit Protection Association was founded in 1914 and has helped tens of thousands of UK businesses to collect outstanding payments and reduce the risk of incurring bad debt. We believe that creditors deserve to be paid for the work or goods they have supplied but we fully understand the need to maintain
the best possible relationship with customers!
At The Credit Protection Association, we provide solutions, advice and back-up in all areas relating to the supply of services or goods on account. Client-members receive everything they need from a single source to reduce debtor days and write-offs.
The Credit Protection Association has helped has assisted tens of thousands of UK businesses with their credit control requirements, since the First World War.
We are polite, firm and efficient when it comes to recovering outstanding debt.
“We have used CPA for a number of years now. The website is easy to navigate around with lots of helpful reports. The staff are always at hand and very friendly. CPA has helped us reduce our debt over the years and keep track of potential issues with our customers.”
~ CPA client in Buckinghamshire
“The service from CPA has proved to be everything that you said it would be. We have already seen a huge benefit. We have had a number of overdue accounts paid promptly and directly to us. It is also a huge weight off our mind to know that once we have passed an overdue payment over to you, you take care of everything whilst keeping us informed.
~ Credit Controller client in Warrington
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
Ready to speak to an advisor?
For help or advice on credit management, entirely without obligation.
Call us today
0330 053 9263
CPA is passionate about late payment
The Credit Protection Association has been protecting smaller firms against poor payment practices for over 100 years.
We are extremely passionate about breaking the late payment culture that holds back the UK economy and threatens many SMEs with cash flow difficulties being the single biggest killer of Britain’s small businesses.
If you were regularly paid late we can help. Those former customers used you to boost their own cashflow, regularly paying you late.
As a result you had extra costs, you had the distraction of having to chase payment, you had opportunity costs because your capital was tied up in their late invoices.
Under little used legislation, you are entitled to compensation for those late payments.
Now you can boost your own cash-flow.
CPA can help unearth the those hidden treasures.
We have the technology to reveal the compensation you are due and we have the extensive experience and expertise to then turn those claims into cash.
Yes, CPA can help you boost your business cash-flow.
Don’t let your bankers control you, contact CPA today.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
Do you realise you could be sitting on a fortune?
Late payments often result in a cash flow crunch and leave SMEs in need of a cash injection.
If you sold B2B on credit then there may be a hidden source of capital you can call on.
If you fancy an bit of extra cash in your business, rather than jumping through hoops with your bank, you could look to uncover the resources from an unexpected source within your own business.
Not many are aware but there could be a hidden fortune within your business, sitting there, just waiting to be uncovered and released.
We can help you uncover the pile of gold, you didn’t even know you were sitting on.
If you trade with other businesses and were often paid late then you could be entitled to significant compensation.
Under little known and under-utilised legislation your business could be due huge amounts in compensation that you didn’t even know about.
Let’s be clear – this is not a way to weaken any customer relationships you value. It is one that identifies who’s been paying late and then recover the potentially significant sums in compensation using Late Payment Legislation from businesses where the relationship has already ended.
You can pick and choose who you want us to follow up – but once we’ve agreed which companies you’d like to pursue compensation from it’s a fast process and there’s no financial outlay to you whatsoever. My team at CPA put its expertise to work to recover the compensation due and fight late payment culture.
That compensation could provide the cash boost your business needed.
But don’t delay, that compensation evaporates if not claimed within six years of the late payment.
How can CPA help?
CPA has developed a unique technology to dig into your accounting records and discover the cash injection you are due by means of compensation. The software does all the hard work. Our software interacts over the cloud with over 300 different software packages, working directly with your accounts package, just so long as it’s stored on a computer.
We recognise that most companies do not have the resources to spend time on the identification and calculation of Late Payment Compensation. Our service can produce an Analyses within just a few days with (usually) less than 30 mins of co-operation from our clients. We work directly with over 300 accounting packages but can also work with bespoke accounts packages. Indeed, speed is essential as the oldest invoices may fall foul of the 6-year time limit.
Once the Sales Ledger Analyses is made available to clients, all that is required is that management decide which commercially sensitive ex-customers to remove from the list and return it to us.
CPA then uses its years of collection experience to explain and recover the Late Payment Compensation Claims. Clients do not handle any part of the recovery process as our team will take all communications from the companies against who the claims has been made. Often, it’s simply a case of explaining the legislation, sometimes we have to go all the way and enforce the legislation through the courts.
The result is that we are realising clients’ claims worth tens and sometimes hundreds of thousands of pounds which, of course, is pure net profit. You may also be among the recipients of “hundreds of thousands of pounds” should you elect to take advantage of our services.
We do the work, you receive the cash.
If you have supplied goods and services to businesses on credit and were regularly paid late then you could be due significant sums in late payment compensation.
We are talking to companies and unearthing claims in the hundreds of thousands from former business customers who paid them late. Large business customers who abused their power to inflict unfair and sometimes illegal payment practices.
We are helping business owners who are looking to boost the returns from their business before they retire. We are helping businesses who have lost major clients after years of loyal service to get properly compensated for systematic late payment. We are helping companies that were looking to close down, who looked insolvent and finding that cash injection they need to avoid insolvency.
Those former clients who regularly paid you late can finally be made to pay.
Ready to speak to an advisor?
For help or advice on credit management, entirely without obligation.
Call us today
0330 053 9263
The Credit Protection Association is a credit management company established in 1914. If you supply goods or services on credit then we can help you!
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