Insolvencies rise 63% – Business news 18 November 2021
James Salmon, Operations Director.
Insolvencies rise 63%. Consequences of IR35 reform. SMEs predict strong festive trading period. Inflation surges to highest rate in ten years. And more business news.
Insolvencies rise 63% as cash flow pressures hit
The October 2021 insolvency figures released by the Government’s Insolvency Service show a 63% increase in corporate insolvencies compared to the same month last year (1,405 in October 2021 compared to 864 in October 2020). However, they were still 5% lower than pre-pandemic figures from October 2019 (1480).
In October 2021 there were 1,248 Creditors’ Voluntary Liquidations (CVLs), which is above pre-pandemic levels. The number of registered company insolvencies was similar to pre-pandemic levels, driven by this higher number of CVLs, although other types of company insolvencies, such as compulsory liquidations, remained lower.
Of the 1,405 registered company insolvencies in October 2021, there were 1,248 CVLs, which is 85% higher than in October 2020 and 19% higher than in October 2019; 46 were compulsory liquidations, which is 31% lower than October 2020 and 81% lower than October 2019; 16 were CVAs, which is 24% lower than October 2020 and 56% lower than October 2019; and there were 95 administrations, which is 8% lower than October 2020 and 40% lower than October 2019.
The rise in corporate insolvency numbers was expected as protections against insolvency were removed and many businesses had to start repaying BBLS and CBILS loans as well as deferred HMRC liabilities
The loan repayments and the end of furlough have naturally lead to cash flow pressures. Not to mention inflationary pressures on wages and costs. staff shortages, energy prices, supply chain challenges.
Any business that was in difficulty before the covid pandemic will have had a brief reprieve due to the support measures but no those issues are resurfacing. You need to watch out among your customers for any evidence of them being in pressure and in risk of insolvency.
If you are struggling with cash flow and sold B2B, have you considered claiming late payment compensation regarding late payments you have incurred in the past, to boost your cash flow
Consequences of IR35 reform
Self-employment trade body, IPSE, has released research showing that 35 per cent of contractors have either moved into employment, taken retirement, moved overseas or have stopped working altogether since IR35 reform came into effect in April earlier year.
Of those who are still self employed workers, 34% are now operating through unregulated umbrella companies, while another 36% have been engaged in contracts deemed inside IR35.
The survey also revealed that contractors working on inside IR35 contracts have as a result have had to accept a significant fall in their income, with the majority (80%) reporting a 30 per cent drop, on average, in their earnings. A quarter of those surveyed went further, however, reporting that their income had sunk by more than 40 per cent.
SMEs predict strong festive trading period
The latest Barclaycard payments SME Barometer has found:
· More than half of SMEs (54%) believe the pandemic has helped future-proof their business and made it more resilient
· Barclaycard Payments’ data shows quarterly SME transactions have risen by 38.1 per cent (compared to 2019) as Christmas shopping gets underway
· Business owners are starting to feel more optimistic about their own performance, with almost a third (29 per cent) expecting their most successful festive period since 2015
· Only 11 per cent say the pandemic will be their greatest challenge of the year ahead, down from 31 per cent who said it was the most significant barrier of the last 12 months
Over half (54 per cent) of UK SMEs are expecting revenues to increase in Q4, compared with performance in Q3 2021. Yet concerns about inflation and rising bills are having a broader impact, with 64 per cent feeling neutral or optimistic about the UK economy, down from 76 per cent in Q3 2021.
As the Christmas shopping rush gets underway, data from Barclaycard Payments, which processes £1 in every £3 spent using credit and debit cards in the UK and services over 350,000 SMEs, shows that in the three months up to 31 October, transaction volumes among this group were up 38.1 per cent (versus 2019)*.
Encouragingly, following last year’s restrictions, the research also shows that almost three in 10 (29 per cent) SMEs predict the upcoming festive trading period will be their most successful since 2015.
Year-on-year payments volumes are also showing strong growth – up 21.9 per cent across the board – with the retail, food & drink and leisure & entertainment sectors benefitting from 15.58 per cent, 27 per cent and 54 per cent uplifts respectively**.
While consumer confidence has declined against a backdrop of inflation and rising utility bills***, business owners which anticipate a rise in revenue attribute this to: an expected boost in sales as they believe Brits will be having larger celebrations after spending Christmas 2020 apart from many of their families and friends (25 per cent), an increased preference for small businesses among shoppers (14 per cent) and customers choosing to spend more with small businesses (10 per cent).
The majority of businesses also remain relatively confident (56 per cent) in the resilience of their supply chains, despite a small decline in sentiment compared to Q3 2021 (59 per cent). Reassuringly, as Christmas shopping peaks, over seven in 10 SMEs (71 per cent) have put measures in place to limit the impact of supply chain challenges, which includes 85 per cent of retailers when looking at specific sectors.
The long-term outlook for British SMEs appears promising. While three in 10 (31 per cent) say the pandemic and associated restrictions was their greatest challenge of the last year, looking forward into 2022, just 11 per cent expect this to remain the most significant barrier to performance, while almost one in 10 (9 per cent) cite access to talent as a significant obstacle they expect to experience.
More than half of SMEs (54 per cent) believe the pandemic has helped future-proof their business and made them more resilient, as many look to invest in the year ahead. Close to four in 10 (36 per cent) plan to hire more staff, with businesses in Wales (47 per cent) being the most active in their recruitment drive. A further 29 per cent intend to upgrade their technology and more than a fifth (22 per cent) will extend their product range.
Inflation surges to highest rate in ten years
Data from the Office for National Statistics shows that inflation has surged at its fastest pace in almost 10 years, hitting 4.2% in the year to October. The rate, which is the highest since November 2011, is far higher than the 3.1% rise recorded in the year to September and more than double the Bank of England’s target of 2%. The increase in Consumer Prices Index inflation was driven by a sharp increase in gas and electricity prices and can also be attributed in part to an increase in hospitality prices following the partial removal of a VAT cut for the sector. The increase comes just days after Bank of England governor Andrew Bailey told MPs that he was “very uneasy” about rising inflation, with the jump to 4.2% adding to pressure on the Bank to raise its key interest rate. KPMG economist Yael Selfin believes October’s figure “may seal the Bank’s resolve to raise rates in December.” The Institute of Directors’ chief economist, Kitty Ussher, has urged the Bank to act and “show it means business and get inflation expectations back in line with their mandate.” Reflecting on the figures, Chancellor Rishi Sunak said: “Many countries are experiencing higher inflation as we recover from Covid, and we know people are facing pressures with the cost of living.” Meanwhile, Labour says households will be left more than £1,000 worse off next year due to higher levels of inflation. Shadow Chancellor Rachel Reeves accused the Government of “looking the other way” instead of taking action, saying ministers are “blaming ‘global problems’ while they trap us in a high tax, low growth cycle”.
Eurozone inflation also jumped to 4.1% in October from 3.4% matching market expectations due to sharply higher energy prices.
House prices climb to record high
The average house price has hit a record high of £269,945, with figures from the Office for National Statistics (ONS) showing £28,000 has been added to the typical property price over the past year. Values increased by 11.8% over the year to September, with this up on the 10.2% annual growth recorded in August. Wales has seen the steepest climb, with the average price up 15.4% over the year, while Scotland added 12.3%, England saw a 11.5% increase and prices in Northern Ireland rose 10.7%. Regionally, North West England led the way, with values up 16.8% in the year to September, while London saw the lowest growth, at 2.8%. On a month-by-month basis, UK house prices climbed 2.5% between August and September.
Campaigners call for end to previous salary questions
Campaigners have urged employers to stop asking new recruits for their salary history, saying it not only discriminates against women, people of colour and people with disabilities, but also reinforces the gender pay gap. A survey by the Fawcett Society found that asking details about previous earnings was also unreliable, with four in 10 working adults having lied about their past salary. The survey of 2,000 workers found that 58% of women and 54% of men said that disclosing their past earnings meant they were offered a lower wage than they would have got otherwise. It also shows that 61% of women said being asked about their salary had damaged their confidence to ask for better pay, while 53% of men said the same. Fawcett Society chief executive Jemima Olchawski said: “Asking about salary history can mean past pay discrimination follows women, people of colour, and people with disabilities throughout their career. It also means new employers replicate pay gaps from other organisations.” The poll was conducted to mark Equal Pay Day today – the date women in effect start to work for free because they are paid less than men on average. This is calculated using the mean hourly pay gap for full-time workers from the Office for National Statistics. The gap this year stands at 11.9%, up from 10.6% in 2020.
Amazon & Visa
Amazon warned it will stop accepting payment by Visa credit cards in Britain from January, and may also drop Visa as a partner on its co-branded American credit card. The online retailer said that Visa’s transaction fees are too high and hinder businesses “striving to provide the best prices for customers”. Visa in turn accused Amazon of restricting consumer choice.
Apple
Apple said it will make it easier for its consumers to fix their own devices, by selling spare parts for selected products through a self-service repair programme. The tech giant has long faced pressure to do so from customers and regulators in America and Europe.
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Get compensated for previous late payments
Have you been paid late by business customers in the last six years?
Maybe you no longer work with them. Under legislation, you are entitled to compensation you for those late payments you have suffered.
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.