Insolvencies down, Inflation up – business news 19 May 2021.
James Salmon, Operations Director.
Insolvencies down, inflation up, long work hours increase early death risk, pandemic could deliver expenses rethink, tax cut added fuel to the house price fire and more.
Insolvencies down by 35%
Figures from the Insolvency Service show company insolvencies are 35% lower than before the coronavirus crisis, with the number of people being declared bankrupt 46% down on pre-pandemic levels. The report shows that 925 companies were declared insolvent in April compared with 1,429 in the same month in 2019 and 1,199 last year.
Christina Fitzgerald, vice-president of insolvency and restructuring trade body R3, said: “It’s clear the Government’s support measures have prevented a significant number of businesses from becoming casualties of the economic consequences of Covid-19.”
“The big question is what will happen to insolvency numbers as we come out of the pandemic”, she added.
Matt Richards, a partner at Azets, comments: “The tide is likely to turn soon. While it remains uncertain exactly when the number of insolvencies will increase, it is inevitable that they will return to at least pre-pandemic levels in the future.”
Inflation up
Business owners are always interested in the inflation figures so I thought you will have noticed that inflation announced this morning has doubled in a month with CPI rising from 0.7% (annually) in March to 1.5% for April. RPI meanwhile rose from an annual rate of 1.5% in March to 2.9% in April.
Prices were driven by Housing costs and household expenses as well as clothing and transport.
The difference was mainly due to price rises this year compared with falls at the beginning of the pandemic, the Office for National Statistics said.
A rise in the price of oil had also led to higher petrol prices, it added.
Bank of England (BoE) governor Andrew Bailey believes inflation will spike “’in the next month or so”, telling the Economic Affairs Committee that the Bank expects inflation to “pick up” with the economy improving as lockdown restrictions are eased. However, he added that any rise is likely to be temporary, saying there is currently no evidence to suggest an increase will persist in the long term. Mr Bailey said that while the Bank sees a bounce back in the economy “we don’t see that sort of, in a sense, momentum continuing forward at that pace at all.” A BoE report released earlier this month said it expects inflation to climb to 2.4% by Q4 but return to around 2% in the medium term.
Long work hours increase early death risk
Long working hours are contributing to premature deaths, according to a study which has found that working more than 55 hours a week was linked to a 35% higher risk of stroke and 17% greater risk of fatal heart disease when compared with people working between 35 and 40 hours a week. The analysis from the World Health Organisation (WHO) and the International Labour Organisation concluded that 398,000 deaths globally from stroke and 347,000 from heart disease were linked to working weeks of more than 55 hours. WHO director-general, Dr Tedros Adhanom Ghebreyesus, warned that a shift to remote working amid the pandemic may exacerbate issues, warning: “teleworking has become the norm in many industries, often blurring the boundaries between home and work”.
Pandemic could deliver expenses rethink
While the pandemic hit revenues and profits at large firms, Charlie Parker in the Times says analysis of financial records show that big companies have saved “fortunes” on travel, marketing and other administrative expenses as employees worked from home, with Google, Amazon and HSBC each reporting cost-cuts of more than $1bn. Reflecting on whether outlay on such expenses will return to pre-pandemic levels, he says analysts expect a “redirection” of costs into new expenses more pertinent to new ways of working. Sean Drury, employment partner at PwC, says companies may be looking to adjust their spending based on increasing individual productivity, pointing to the cost of items such as technology for home-based staff and reimbursement for electricity bills. Mr Smith also highlights uncertainty over whether the pandemic-driven switch to home-working will be permanent, citing Deloitte research showing that two thirds of CFOs believe the bulk of their staff would return to the office by Q3.
Tax cut added fuel to the house price fire
David Smith in the Times says there are “reasons to worry” about the extent to which house prices are rising. He notes that February’s official house price index showed annual house price inflation of 8.6%, the highest for seven years, while the e.surv Acadata index showed that house prices last month were 11.7% up on a year earlier. Mr Smith also says demand data points to “exuberance”, with the latest Royal Institution of Chartered Surveyors residential market survey showing strong buyer demand and limited supply – a combination that has seen prices “soaring”. Reflecting on the stamp duty holiday and its role in driving activity and prices, Mr Smith calls it “one of the most unnecessary tax cuts” he can remember, saying the initial tax break made sense amid the pandemic but the Chancellor’s decision to extend it in his March Budget was “strange.” He suggests that extending the stamp duty holiday is not only costing the Treasury around £1.6bn but is counterproductive as it has driven up prices, saying this neutralises the benefit of the tax cut for many buyers and “took prices further out of the reach” of many others.
Firms commit to tackle disability prejudice
Companies with combined sales of more than $8trn and 20m staff have joined the Valuable 500 initiative, a campaign which aims to tackle prejudice towards disabled people in the business world. Valuable 500 was launched in 2019 with a goal of getting 500 international companies to commit to putting disability inclusion on their board agenda. Figures released at the time showed that 56% of global company boards had never had a conversation about disability, while new data released yesterday shows there are no executives or senior managers at FTSE 100 companies who have disclosed a disability, while just 12% of firms report the number of their employees who are disclosed as disabled. Valuable 500 founder Caroline Casey says the campaign is not just about employment opportunities for people with disabilities, noting a focus on disabled customers, highlighting analysis suggesting firms are losing $13trn in sales by ignoring disabled consumers.
Investors protest against big payouts for UK bosses
Proxy Insight data shows average votes against pay reports across UK companies hit 7.3% this year, the highest level since 2014. Support for remuneration policies stood at 91.1%, compared with 94.2% last year.
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