business news 9 September 2021
James Salmon, Operations Director.
Credit shortage for SMEs hampers “levelling up”. Over half of Scots SMEs fearful for their business. Paperchase’s unsecured creditors left out of pocket. Demand for workers is rising sharply. Driver shortage and Brexit drive haulage insolvencies. Staff shortages are holding back Britain’s recovery. More fallout from the governments tax hike and other business news.
Credit shortage for SMEs hampers “levelling up”
A report published by the All-Party Parliamentary Group has warned that a lack of trust between banks and businesses has choked the supply of credit to SMEs in the UK. The lack of finance is preventing small businesses from expanding, putting downward pressure on job creation and preventing regional inequalities from narrowing, the report, titled Scale up to level up, said. Danny Kruger MP said: “We need lenders whose interests align with those of the community as a whole…[community development finance institutions] are more flexible, don’t have blanket lending policies and can apply real human judgement to the decisions they make about lending.”
If you are looking for capital and a B2B who sells on invoice, talk to CPA about uncovering a secret source of capital within your accounts. Every time you were paid late by your business customers, you became entitled to compensation. CPA has been helping many SMEs realise that cash.
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.
Over half of Scots SMEs fearful for their business
A survey of small firms in Scotland by Klarna has found that 57% were not confident about the future of their business over the coming two years. Some 56% said their goal for the following six months was simply to survive. Klarna added that businesses north of the Border have been hit “particularly” hard by the pandemic, with 69% of SMEs stating that COVID-19 led to a longer-term negative impact on their organisation.
Paperchase’s unsecured creditors left out of pocket
Administrators at PwC have revealed that Paperchase’s unsecured creditors will receive between 1 and 4% of the £22.6m they are owed after the greeting card chain’s controversial pre-pack earlier this year. The latest administrator report said that unsecured creditors will be paid a dividend out of Paperchase’s property value of £5.83m. PwC confirmed that they are owed £22.6m but are unlikely to get back more than 4p for every pound owed. In January, Paperchase was sold in a pre-pack to Permira Debt Managers, saving 97 of its 125 shops and about 1,000 of its 1,278 employees, although the owner has renegotiated lease terms with landlords.
Demand for workers is rising sharply
The latest jobs report from the Recruitment and Employment Confederation and KPMG reveals that permanent job placements rose at a record pace in August with the number of new vacancies down only slightly from July’s record high. However, the supply of workers is dropping at a record pace with employers having to increase wages and offer signing-on bonuses to attract workers. Neil Carberry, chief executive of the confederation, warned businesses not to assume this was a short-term problem: “A number of factors mean that the UK labour market will remain tight for several years to come.” Claire Warnes, head of education, skills and productivity at KPMG, added: “Candidate shortages continue to plague businesses, which are all recruiting from the same pool of talent and struggling to fill gaps.”
UK named world’s third best regulatory base
The UK is the world’s third best jurisdiction for multinational companies to base subsidiaries or ‘entities’ from a governance and regulatory standpoint, according to the Mercator Entity Management Report 2021. Singapore took the top spot, followed by Australia. The three have “the ideal combination of low cost levels and shorter timeframes for completing a range of regulatory activities” such as board of director or shareholder decisions, officer changes and Power of Attorney activities”, according to the report. Kazakhstan ranked the worst, followed by South Korea and Indonesia.
Driver shortage and Brexit drive haulage insolvencies
June 2021 saw 31 haulage companies go into insolvency, the worst month for the industry since January 2019 according to accountants Mazars. The fall in shipments due to Brexit and the difficulty in finding drivers are behind the sharp rise. With drivers self isolating, a back log in the testing of new drivers (28,000 as of May) and as many as 15,000 returning to EU home countries, the shortage of drivers has hit many industries. All of this as seen an acceleration in haulage firms going bust.
Staff shortages are holding back Britain’s recovery
The Governor of the Bank of England has urged furloughed workers and others who have left the workforce to return to employment amid concerns that severe staff shortages are holding back Britain’s economic revival. Staffing shortages have been pushing up wages with Goldman Sachs estimating that underlying wage growth had hit 5% over the summer, threatening to put more upward pressure on inflation. Speaking to MPs on the Treasury Select Committee, Mr Bailey argued that while inflationary pressures from commodity prices and supply chain disruption will ease, he now has “a bit more concern about persistence in the labour market story”. He also told MPs that the recovery was showing signs of “levelling off” now that the immediate boost from reopening the economy had faded.
Tax on jobs will dampen economic recovery
Higher taxes on employee earnings and employer wage costs “could dampen the strength of the economic recovery” in the coming years, analysts at MUFG said yesterday. “There is a risk higher taxes will undermine household consumption and hiring by businesses,” they added, but this may in turn ease the need for the Bank of England to tighten monetary policy.
NI increase may trigger redundancies as furlough scheme ends
The increase in National Insurance introduced by Boris Johnson could trigger a wave of redundancies as the furlough system draws to a conclusion at the end of this month, experts predict. Andrew Snowdon at UHY Hacker Young said: “With the furlough scheme being withdrawn at the end of the month, the increase in National Insurance will have made the cost of keeping jobs that much more expensive. Unfortunately, this extra burden may have helped make the decision for employers who were in two minds over keeping the jobs of those on furlough. It will be the employees who suffer as a result.” John Sheehan, another partner at the firm, suggested the tax hike will work against government efforts to close the gap between taxation of the employed and self-employed. He explained: “We expect the rise in National Insurance will increase differences between employment and gig economy taxation. As a result, employers may be encouraged to make more use of self-employed workers, while shifting away from employees.”
Social care tax rise puts 50,000 jobs at risk – FSB
The Federation of Small Businesses has warned that the total annual cost of the rise in National Insurance to small businesses would be about £5.7bn, and put more than 50,000 jobs are at risk. FSB national chair Mike Cherry described the policy as a “regressive jobs tax hike that will put jobs at risk, stifle start-ups and prevent new jobs from being created”. He went on: “Combined with other rising employment costs – and firms having to make tough decisions about the futures of those who have been supported by the job retention scheme – that 50,000 figure could easily end up being a good deal greater.”
Government suspends pensions triple lock for a year
Thérèse Coffey, the work and pensions secretary, has confirmed that the pensions triple lock will be suspended next year to avoid a bumper pay rise for retirees of 8.8%. The Government will temporarily abandon its manifesto commitment to ensure pensions rise by whatever is highest out of average earnings figures, inflation or 2.5%. Mel Stride, chairman of the Treasury select committee, backed the move, stating: “A potential almost double-digit percentage rise is unrealistic and unfair, with knock-on effects for the public finances.” Caroline Abrahams, charity director of Age UK, said: “If suspending the triple lock for a single year helps get a government deal on social care over the line, then I believe it’s a price worth paying. But only if it really is just a one-off measure and not a sneaky way for ministers to ditch the triple lock altogether.”
Johnson’s tax hike passes Commons vote
MPs have voted through Boris Johnson’s proposals for a 1.25% rise in National Insurance for workers and employers to help fund health and social care. The PM won a House of Commons vote by 319 to 248, with Labour voting against the plan along with five Tories, while 37 others abstained. A massive backbench rebellion did not materialise. But former minister Steve Baker called on the Conservative party to “rediscover what it stands for” rather than “every time there is a squeeze on the public finances, coming back for higher taxes”. Keir Starmer, Labour leader, argued that the increase fell disproportionately on “working people”. Taxes on dividends will also rise by 1.25% with both increases raising a combined £12bn a year. Under the reforms, anyone with assets worth more than £100,000 will have to pay the cost of their care until they hit an £86,000 cap, with critics saying that will mean that some people will have to sell their homes. Those with assets worth less than £100,000 will have their care costs subsidised, with anyone who has less £20,000 set to have their costs covered entirely by the state. Torsten Bell, chief executive of the free-market Resolution Foundation think tank, commented: “Stepping back and looking at what was announced yesterday, what have we learnt? We’ve learnt that low-tax Conservatism is dead. This is the biggest set of tax rises since the 1970s if you take this together with the tax rises in the March budget.” Elsewhere, the Adam Smith Institute labelled the plans “morally bankrupt” and accused the Government of asking “poorer workers to bail out millionaire property owners”.
Tax hikes send London markets down
The tax increases pushed through by Boris Johnson sent London markets down yesterday with traders spooked by the hike in dividend taxes, which they fear will make it relatively less attractive to hold shares in UK listed companies. The 1.25% increase will also make it more costly for small business owners and company directors to pay themselves through dividends. Moira O’Neil, head of personal finance at Interactive Investor, said: “Targeting dividends is a kick in the teeth for people who are prudently investing for the long term in companies that reward shareholders with regular payments.”
Johnson’s tax raid will cost young graduates 52% of wages
Boris Johnson’s National Insurance increase will mean young graduates will lose up to 52% of their pay packets. According to figures from Blick Rothenberg, the 1.25% rise in NI takes the effective tax rate paid by the average graduate to 42.25%, but higher-earning graduates will lose more than half of their earnings, once income tax and indirect levies such as student loan repayments are factored in, and will pay a rate of 52.25%. Separate calculations show people with student loans and incomes above the threshold to repay them will see 49.8% of any increase in pay from their employers taken away in income tax, NI and student loan repayments.
Brexit
The European Union rejected renewed calls from the British Government to renegotiate the Northern Ireland protocol as Britain claimed the arrangement was not working and announced that it was further postponing the implementation of border checks on goods crossing into the province from the mainland.
WM Morrison
WM Morrison Supermarkets has begun talks with the Takeover Panel over the prospect of arranging an auction resolve the bidding battle for the Bradford-based supermarket chain. Clayton, Dubilier & Rice and Softbank Group Corp-owned Fortress are the two suitors in the running to acquire the company, though Morrisons noted that neither have made final offers.
The retailer also reported a drop in first half pre-tax profit of 43.4% to £82 million as it faced Covid-19 costs and lost profit in its cafe, fuel and food-to-go business. Revenue including fuel was up 3.7% to £9.05 billion but group like-for-like sales ex-fuel and ex-VAT was down 0.3%. Second quarter group like-for-like sales ex-fuel and ex-VAT were down 3.7% with retail making a -4.6% contribution compared with 11.1% in 2020.
B&M
B&M European Retail raised its interim earnings forecast above current analyst consensus estimates. The discount retailer said it now expects adjusted earnings before interest, tax, depreciation and amortisation for the first half period to September 25 to be between £275 million and £285 million. The market expectation is currently around £235 million.
Halfords
Halfords reported sales growth underpinned by a strong trading performance but cautioned that significant supply chain constraints were impacting the business. The retailer, best known for selling bikes and cycling equipment, posted sales growth of 11% year-on-year for the 20-week period ended August 20, and a rise of 19% compared to two years ago. Growth in Retail Motoring and Retail Cycling were listed as factors behind the improvement.
EasyJet
EasyJet has announced it is planning to raise £1.2 billion in a fully underwritten rights issue in order to emerge from the pandemic on the front foot. The budget airline added that it recently rejected an unsolicited preliminary takeover approach that undervalued the business. The bidder has since confirmed it is no longer eyeing the company.
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.
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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
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.