Corporate debt crisis needs tackling- business news update 16 July 2020.

16 July 2020.

James Salmon, Operations Director.

Corporate debt crisis needs tackling, SMEs show optimism, Inflation, Unemployment, recovery predictions, hint of tax rises, layoffs, property prices, Covid-19 and lots more business news.

Here are CPA we want to  share the business news stories we have seen that we think will affect our members and readers. Many of us are busy fighting to protect our businesses and therefore might have missed some of the news that could impact small businesses, their owners and those that sell on credit.

Corporate debt crisis needs tackling

A report from a number of big players in the City has urged the Government to act to prevent defaults on £35bn of corporate debt taken on during the COVID-19 pandemic hitting the economy.

The Recapitalisation Group, which was formed by finance industry body The City UK, has suggested a UK Recovery Corporation should be formed to turn risky debts into more manageable forms like tax liabilities or shares.

The 144-page report, which is being sent to the Treasury and the Bank of England, says ministers should set up a new UK Recovery Corporation to oversee schemes designed to restructure companies’ debts to make them more sustainable.

Omar Ali, a partner at EY and one of the report’s key organisers, said the proposals would help firms “get back onto a stable footing as we emerge from the pandemic, and will ultimately support the UK’s economic recovery”, adding that “taking action now is vital.

City grandees from Lloyds Bank, Citigroup, Schroders, Legal & General, and the City of London Corporation have backed the report. The City UK estimates UK firms could hold £100bn of unsustainable debt by the time repayments of coronavirus support loans first become due in March 2021, with pre-pandemic borrowing factored in.

SMEs optimistic despite pandemic

UK SMEs are among the most optimistic in western Europe, with research by Facebook, the World Bank and the OECD showing that 60% of owners are hopeful about the future of their business.

Small firms in the UK remain positive despite the coronavirus lockdown forcing 43% to temporarily close and 58% seeing a decline in sales due to the pandemic.

The study shows that 64% of male-led firms reported falling sales during the crisis, compared to 52% of female-run companies, while SMEs run by women are 11% more optimistic on future performance.

Facebook vice president of northern Europe Steve Hatch said: “These findings show a steely optimism among British business owners looking to bounce back better following COVID-19, despite how challenging the past few months have been.”

Inflation up 0.6% in June

Data from the Office for National Statistics (ONS) shows that the inflation rate rose to 0.6% in June, with the Consumer Prices Index rising from May’s four-year low of 0.5% as lockdown measures began to ease.

Despite the increase recorded last month, inflation remains below the Bank of England’s 2% target. The ONS said it is possible that prices have been influenced by the coronavirus lockdown “changing the timing of demand and the availability of some items”.

Debapratim De, a senior economist at Deloitte, said: “June’s inflation figures are slightly above expectations but there remains abundant spare capacity in the economy. This should maintain a downward pressure on inflation, which could fall further, especially if there is a spike in unemployment later this year.” Yael Selfin, chief economist at KPMG, said the figures pointed at “ample room for the Bank of England to act” to boost the economy.

Unemployment

UK Unemployment data showed round 650,000 people lost their jobs in the UK between March and June as the UK labour market “weakened markedly” amid the coronavirus pandemic. Job losses led to a 0.3% drop in total pay in May compared to a year earlier, the Office for National Statistics said. That is a 1.3% drop when taking inflation into account.

BoE policymaker: ‘Incomplete’ V-shaped recovery likely

Bank of England rate-setter Silvana Tenreyro believes the UK economy is likely to go through an “interrupted or incomplete” V-shaped recovery.

Ms Tenreyro, a member of the Bank’s monetary policy committee, told a London School of Economics webinar that the economic recovery will depend on coronavirus cases being brought under control, both nationally and globally, adding that if case numbers fall, her “central forecast is for GDP to follow an interrupted or incomplete V-shaped trajectory, with the first quarterly step-up in the third quarter”.

Ms Tenreyro highlighted two factors likely to slow the recovery, saying higher unemployment could hit consumer demand, while “voluntary or mandated social distancing” would hit both supply and demand if it continued for a prolonged period

Sunak: Tough choices ahead on tax

Chancellor Rishi Sunak has hinted that tax rises could be on the way as the Treasury looks to tackle the economic fall-out from the coronavirus crisis.

He told the Treasury select committee there were “tough choices ahead” for the economy as he took action to balance the books over the “medium term”.

This came after the Office for Budget Responsibility warned that the Government faces a gap of at least £60bn in its finances, suggesting an increase in taxes could be required to get public spending back under control.

Considering the impact of the calculations, Mr Sunak told MPs: “In terms of what does that mean for spending and taxes, those are decisions that will have to wait until we get to Budgets. But there are tough choices ahead, that is clear.”

Meanwhile, shadow chancellor Anneliese Dodds has warned against raising taxes, saying she thinks doing so “would be really quite a dangerous move at a time when the economy is very fragile”.

1 in 3 firms could lay off staff

A poll of 7,400 firms by the British Chambers of Commerce (BCC) shows that 29% plan to cut the size of their workforce in the next three months.

This marks the biggest proportion of firms planning layoffs since the BCC began tracking employment intentions in 1989.

Larger firms were found to be more likely to be plotting redundancies, with more than four in ten of those with ten or more staff saying they expect to reduce headcount in the next quarter.

It was also found that 28% of respondents have already laid off staff since the lock-down began.

The BCC notes that the survey was carried out prior to Chancellor Rishi Sunak announcing up to £30bn of fresh tax and spending measures to protect jobs in the aftermath of the COVID-19 crisis.

City group urges policymakers to tackle corporate debt crisis

A report from a number of big players in the City has urged the Government to act to prevent defaults on £35bn of corporate debt taken on during the COVID-19 pandemic hitting the economy.

The Recapitalisation Group, which was formed by finance industry body The City UK, has suggested a UK Recovery Corporation should be formed to turn risky debts into more manageable forms like tax liabilities or shares.

The 144-page report, which is being sent to the Treasury and the Bank of England, says ministers should set up a new UK Recovery Corporation to oversee schemes designed to restructure companies’ debts to make them more sustainable.

Omar Ali, a partner at EY and one of the report’s key organisers, said the proposals would help firms “get back onto a stable footing as we emerge from the pandemic, and will ultimately support the UK’s economic recovery”, adding that “taking action now is vital.

City grandees from Lloyds Bank, Citigroup, Schroders, Legal & General, and the City of London Corporation have backed the report. The City UK estimates UK firms could hold £100bn of unsustainable debt by the time repayments of coronavirus support loans first become due in March 2021, with pre-pandemic borrowing factored in.

Property prices could slip 2.4%

A forecast from the Office for Budget Responsibility suggests that the fallout from the coronavirus crisis could see property prices fall 2.4% this year and a further 11.7% in 2021.

This would see the value of the average British home, which currently stands at £230,000, fall to £200,000.

Russell Galley of Halifax commented: “Average house prices fell by 0.1% in June as the UK property market continued to emerge from lockdown.” He added that while this marks a small decrease, it is “notable as the first time since 2010 … that prices have fallen for four months in a row.”

Brexit warning from manufacturers

Manufacturing lobby group Make UK and BDO have warned that industrial areas in the north of England, the Midlands and Wales could be at most risk of severe economic damage if no Brexit deal is agreed, pointing to a “triple whammy” for firms dependent on Europe and manufacturing, with COVID-19 also hitting the regions.

VAT reduction rolled out

A number of firms have opted to reduce prices after the Chancellor’s temporary VAT cut for firms in the food, drink and hospitality sectors came into force. With the rate cut from 20% to 5% until January 2021, Nando’s, Pret A Manger, Wetherspoon, Starbucks and McDonald’s are among those who will pass at least some of the cut onto customers.

However, some firms are expected to use the money to bolster finances hit by the coronavirus lockdown rather than reduce prices. The Treasury estimates that, if passed on to consumers, the measures could save households an average of £160 a year.

Apple wins in landmark tax battle against EU

Apple will not have to pay Ireland €13bn ($14.8bn) in back taxes after winning an appeal at the European Union’s General Court. The decision follows a ruling by the European Commission (EC) in 2016 which found that the tech firm had been given illegal tax breaks by Ireland.

The General Court said it annulled that decision because the Commission had not proven Apple had broken competition rules. The EC brought the action after claiming Ireland had allowed Apple to attribute nearly all its EU earnings to an Irish head office that existed only on paper, and thereby avoided paying tax on EU revenues.

The EC has the right to appeal yesterday’s decision to the European Court of Justice. “This case was not about how much tax we pay, but where we are required to pay it,” Apple said in a statement.

The FT says the ruling is a “serious setback” to the EC’s “laudable efforts to curb unfair corporate tax practices through state aid control”.

Bistrot Pierre pre-pack

The owners of Bistrot Pierre have retained control of most of the restaurant chain after a pre-pack administration, with administrators from KPMG saying 19 restaurants have been sold to “a connected party”, saving 682 jobs. The remaining sites are to close with the loss of 123 jobs.

Next’s secret success

Next has won the race to take over Victoria’s Secret in Britain after its UK arm went bust, beating 30 bidders to be chosen as the preferred franchise partner. Victoria’s Secret’s UK arm was going through a ‘light touch’ administration process led by Deloitte, allowing it to keep trading while putting off its debts.

Covid-19 general news

Confirmed covid-19 cases now top 13.5 million; while deaths surpass 584,000

US biotech firm Moderna said late yesterday that it will start the final stage of human trials for its vaccine candidate later this month after promising results from earlier testing. Romours also came out that positive results are expected to be reported soon regarding initial trials of the University of Oxford’s potential Covid-19 vaccine that has been licensed to AstraZeneca.

PM Boris Johnson has committed to hold an independent inquiry into the government’s response to the covid-19 pandemic at today’s PMQ’s. Johnson told the House of Commons at Prime Minister’s Questions that there would be an inquiry, marking it the first official confirmation that the government’s response would be officially scrutinised. He did not stipulate when the investigation would begin, but it will not happen immediately.

According to an analysis of studies involving more than 10,000 patients in Asia, Europe and North America, fewer Covid-19 patients are dying in intensive care units. Overall mortality of patients treated in ICUs had fallen to just under 42% at the end of May from almost 60% in March.

California’s surge in infections continued, with the largest U.S. state reporting near-record increases in cases and deaths, while Los Angeles had record hospitalizations.

Markets.

The FTSE 100 was up 2% yesterday, boosted by positive news from test trials of potential Covid-19 vaccines. Astrazeneca advanced 5.2%, while travel stocks reacted positively to the news too, with Carnival and International Consolidated Airlines both gaining 11% and easyJet adding 6.4%. European stocks climbed similarly. The S&P Climbed 0.9%.

Credit Card Spending

Credit Card Spending dropped by nearly half at the start of lock-down as people played safe with their finances. A total of £8.7 billion was spent on credit cards in the first full month of lock-down in April, half the level of April last year, UK Finance said. The banking trade body said this was the lowest level of spending seen since the last economic downturn.

China

China’s economy returned to growth with GDP in the world’s second biggest economy increasing by 3.2% in the second quarter, compared with the same period last year. Snail like by China’s recent standards, the increase is however outstanding, given the global pandemic.

Treasury: CGT review is standard practice

The Treasury has launched a review of the capital gains tax system to ensure it is fit for purpose, with Chancellor Rishi Sunak having asked the Office of Tax Simplification to investigate how capital gains are taxed for both individuals and smaller businesses. Hargreaves Lansdown analyst Nathan Long said: “It would be naïve to assume the Chancellor didn’t have his eye on tweaking taxes to refill his coffers.”

Tom Selby, senior analyst at AJ Bell, said the review “feels like the starting pistol for a tax grab ahead of the autumn Budget”, with Katharine Arthur, partner at haysmacintyre, saying the review “has potential to be a fundamental rejig of a complete area of tax.” The Treasury yesterday insisted that it is “standard practice to keep taxes under review.” The Telegraph looks at potential policy changes around CGT, including bringing rates in line with inco me tax and lowering the £12,300 annual CGT allowance to bring it in line with the £2,000 dividend allowance.

While scrapping CGT relief for people selling their main residence is said to be unlikely, George Bull of RSM UK suggests the Chancellor could introduce a limit in the form of a new lifetime allowance.

Don’t let Covid-19 bust your business!

It will if your cash flow dries up, either sooner or later.

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 sometime to come.

CPA eases cash from tardy debtors – Efficiently, Effectively, Economically and Ethically. Above all tactfully, because maintenance of goodwill is paramount.

To meet the needs of creditors in the current crisis, we have designed a “critical care” package especially tailored for the situation.

  • The annual package costs start at very low rates
  • A minimum performance warranty is provided
  • Several complimentary services included

Clients instruct CPA on-line via their PC or phone, completely user-friendly. Your late paying customers are told to pay you direct (not to us).

A very recent report shows a 23% increase in the number of unpaid invoices since March 11th THIS YEAR – are you getting a build-up of late payers?

 Right now, overdue accounts must be a concern and CPA has a great track record of encouraging slow-payers to pay their suppliers quickly.

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.

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

Read our blog here on how to crack down on the late payment culture.

Read our blog here on how to give late payers the slap they need.

The “Why” of the late payment culture.

New PM should walk the walk and back small firms over late payments

Paying late is “crack cocaine” to big business.

Late payment culture risks “spiraling out of control”

visit our late payment compensation page

See our full blog and FAQ on late payment compensation

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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Read our Cash Flow Advice

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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections