Insolvencies predicted to rise double the global average – business news 15 April 2021.
James Salmon, Operations Director.
Insolvencies predicted to rise double the global average, young black workers hardest hit by pandemic, productivity rises amid the pandemic, house prices hit record high and more business news.
UK Business insolvencies predicted to rise double the global average
A new report suggests UK insolvencies are to rise by 56%, more than double the global average.
The report from trade credit insurer Atradius suggests global insolvency rates are set to rise by 26% this year, with state support amid the coronavirus pandemic having delayed insolvencies that would have occurred in 2020.
The report, 2021: A turn of the tide in insolvencies, suggests that a number of markets are set to exceed the average by a significant margin, with failure rates in the UK expected to rise by 56%.
The report also says 2021 will bring “new hope” as recovery sets in after a year of global recession. Global GDP saw a 3.7% contraction in 2020 but 2021 is expected to deliver growth of 6%. While the UK saw a 9.9% drop in GDP in 2020, Atradius forecasts the UK economy will expand 5.9% in 2021.
Young black workers hardest hit by pandemic
Young black and Asian workers have been the hardest hit by the rise in unemployment during the coronavirus pandemic, a study by the Resolution Foundation think-tank has found. Over the past year, the UK jobless rate for young black people rose by more than a third to 35%, while for young people of Asian descent saw the jobless rate increased to 24%. For young white people, the unemployment rate hit 13%. Overall, the unemployment rate among 18 to 24-year-olds rose from 11.5% to 13.6% between Q2 and Q3 2020. The 18% increase marks the largest quarter-on-quarter rise among this age group since 1992. Kathleen Henehan, a senior research and policy analyst at the Resolution Foundation, said the furlough scheme “has done a fantastic job of minimising job losses amidst unprecedented shutdowns of our economy” but warned that the pandemic “has created a highly generationally unequal unemployment surge and widened pre-existing gaps between different ethnic groups”.
Productivity rises amid the pandemic
Office for National Statistics data show that productivity increased last year, with output per hour, the main measure of productivity, increasing by 0.4%. The climb comes despite lockdowns causing economic output to shrink by almost 10%, with the headline figure increasing largely because the lower-paying and least productive jobs had borne the brunt of the pandemic. Output per worker in 2020 was 9.5% lower than in 2019. Howard Archer, chief economic adviser to the EY Item Club, said that “the sectors which saw a fall in their relative share of hours worked typically had lower productivity levels”, while higher productivity industries “increased their relative share of hours worked”.
House prices hit record high
Analysis from Halifax shows that house prices have hit a record high despite rising at a slower rate than a year ago, hitting an average of £252,765. The report reveals a 5.7% year-on-year increase in Q1, with this down from a nearly five year high of 7% recorded last year. On a quarterly basis, prices rose 0.3% in the first three months of the year, marking a slowdown on the 2.5% increase seen in Q4 2020. Reflecting on the figures, AJ Bell analyst Laith Khalaf was optimistic about the outlook for the sector, saying: “While there might be a few bumps along the way, particularly at the end of the stamp duty…the property market has proved itself to be unbelievably resilient.” He notes that much of this “comes down to the efforts the Government and the Bank of England have made to make mortgage borrowing incredibly easy and cheap.”
Financial services firms see optimism increase
Financial services companies are seeing confidence in the economy surge at the fastest pace in more than seven years, according to a report from the CBI and PwC. The analysis shows that optimism rose at the fastest rate since December 2013 in March. A net balance of 52% of respondents said that they felt confident about the future, up from 44% in December. While businesses were hit during the most recent lockdown, a net balance of 43% said that they expected volumes to improve over the next three months. Businesses in the financial services sector expect profitability to rise in the next quarter, with a net balance of 32% forecasting higher profits. While employment fell for a fifth consecutive quarter in March, with a net balance of -12% reporting increased headcount, the pace of decline is expected to ease in Q2. Rain Newton-Smith, chief economist at the CBI, said: “It’s encouraging that financial services firms are feeling optimistic about the months ahead, likely warmed by the prospect of a phased reopening of the economy.”
Deliveroo
Deliveroo said that, during the first quarter, growth accelerated, with progress in the UK driven by lockdown restrictions, which saw restaurants open for takeaway services only. For the three months to March 31, total orders rose 114% on a year before to 71 million, while gross transaction value was £1.65 billion, up 130%.
Madoff
Bernie Madoff, the disgraced financier, died in prison aged 82. Mr Madoff had been sentenced to 150 years behind bars after admitting in 2009 to running the largest Ponzi scheme in history, involving tens of billions of dollars, in which investors were paid out of incoming funds from newer ones rather than investment returns.
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