Insolvencies rise in March – business news 16 April 2021.
James Salmon, Operations Director.
Insolvencies rise in March, But growth upgrades pour in, there is a boom in new businesses and vacancies hit pre-pandemic levels plus other news.
Insolvencies rise in March
The economic toll of the covid pandemic is finally starting to be reflected in the levels of people and businesses going insolvent.
With government support, including payment holidays on loans and furloughing, the pain has been postponed rather than prevented but now it is starting to emerge.
According to the Insolvency Service, there were 1,028 bankruptcies, 1,591 debt relief orders (DROs) and 8,322 individual voluntary arrangements (IVAs),recorded in March.
This made a total of 10,941 personal insolvencies, marking a 60% increase compared with 6,828 in February.
The total was also 40% higher than the 7,815 personal insolvencies in March 2020.
The Insolvency Service added that 992 company insolvencies were registered across England and Wales in March, which was 20% lower than in March 2020, but up from 685 the previous month.
Christina Fitzgerald, vice president of R3, said: “The economic damage caused by the pandemic is starting to be reflected in levels of insolvency, but Government support has postponed rather than prevented the true picture being shown in insolvency levels to date. Twelve months ago, the economy was struck by the pandemic, and it has yet to fully recover.
“The monthly rise in corporate insolvencies comes after 11 months of relatively low levels of company insolvency procedures, as the Government’s support has provided many businesses with a vital lifeline and removed many of the traditional prompts and triggers for seeking financial advice. As lockdown restrictions continue to unwind, there are reasons to be optimistic.
“Many businesses have adapted and reinvented themselves during the pandemic and may be in a better position for the coming months as a result. We may also see consumer spending increase, but companies need to be aware of the risks of over-trading if they don’t have the cash flow needed to cover the full costs of reopening and restocking. They need to plan for a sustainable reopening of their businesses.”
She added: “The demand for workers in sectors gearing up for a return to pre-pandemic levels of work will offset some of the jobs lost in the companies worst-hit by Covid, but it will take some time for unemployed people’s economic and mental wellbeing to recover.”
Growth upgrades ‘pour in’ as recovery accelerates
The Daily Telegraph’s Ambrose Evans-Pritchard says that while Britain’s “accelerating” recovery may not be an economic miracle, it does mark a “breath-taking turn of fortunes for the much denigrated Brexit economy.”
He highlights that output may return to pre-pandemic levels before year-end, while noting that upgrades to growth forecasts “are pouring in”. UBS has raised its UK forecast from 3.8% to 5.5%, Bank of America and Barclays have both raised theirs to 5.9%, while a “very optimistic” Goldman Sachs has said growth of 7.1% may be on the cards.
Philip Shaw of Investec – which expects eurozone growth of 4.4% – forecasts 7.3% growth for the UK this year but says an 8% increase is possible. David Owen from Jefferies says a “coiled spring” recovery could see the UK outperform the US in 2022 with growth of 7.6%. On post-Brexit trade, Mr Evans-Pritchard reflects that while exports to the EU slipped 12% year-on-year in February, over two-thirds of this was offset by a rise in exports to the rest of the world. Overall, he argues, the British economy “is doing just fine”.
Boom in new businesses
Figures show an increase in the number of entrepreneurs setting up businesses, with 25,320 new companies registered to report VAT last month, the biggest increase since August 2016.
Vacancies hit pre-pandemic levels
Job vacancies surged last week, with the number of positions on offer at 99.5% of the level seen in February 2020, according to the Office for National Statistics and job search engine Adzuna. The increase was driven in part by a surge in hiring for catering and hospitality businesses ahead of the partial reopening of the retail and hospitality sectors. The analysis shows that there are currently more than 900,000 advertised roles, the second consecutive week the milestone has been passed. Andrew Hunter, co-founder of Adzuna, said: “This is the healthiest hiring environment we have seen in a year.” Howard Archer, chief economic adviser at the EY Item Club, comments: “It does appear that the opening up of the economy and marked increase in business confidence is lifting near-term employment plans.” Meanwhile, the Sun highlights big firms seeking employees, noting that EY has 963 roles up for grabs while PwC needs 952 new starters.
OECD recommends stamp duty cut
Stamp duty should be permanently axed as part of a radical overhaul to boost investment in the wake of the pandemic, the Organisation for Economic Co-operation and Development (OECD) has said. The think-tank believes the tax cut should be combined with reforms to boost construction and additional infrastructure spending to help boost the UK economy. The OECD’s Going for Growth 2021 report said stamp duty should be permanently reduced, arguing that the coronavirus crisis has “emphasised the need to retrain and up-skill the population, secure access to affordable housing by reducing bottlenecks to supply and to revive investment.”
Coronavirus triggers epidemic of cyber fraud
The FT looks at an increase in cybercrime, with KPMG’s Mark Cordy saying that while fraud losses were once viewed as operational costs, “now, for all the high street banks, it’s a board-level issue.”
China
China’s economy grew a record 18.3% in the first quarter of 2021 compared to the same quarter last year. It’s the biggest jump in gross domestic product since China started keeping quarterly records in 1992. However, Friday’s figures are below expectations, with a Reuters poll of economists predicting 19% growth. The record growth underlines just how well the country has managed the covid pandemic. However, the comparison with Q1 of 2020, when China was mostly locked down, explains a lot of the jump.
GlaxoSmithKline
GlaxoSmithKline’s share price jumped yesterday on reports that activist investor Elliot had taken a significant stake in the pharmaceutical giant. Activist investor Elliot Management has taken a multi-billion-pound stake in GlaxoSmithKline according to the Financial Times.
Global minimum tax rate could be 15%
Daniel Bunn, vice president of global projects at the US-based Tax Foundation, says a global minimum tax rate between G20 countries could be around 15%. This would mark a compromise between the current Irish rate of 12.5% and United States’ proposed 21%. President Joe Biden’s administration wants to raise the US corporate tax rate to 28%, so it has proposed a global minimum of 21%, but Mr Bunn said this “will be too high to get agreement either in a purely US legislative context or at the Organisation for Economic Co-operation and Development (OECD)”. The Mail notes that the average corporate tax of the 37 countries in the OECD group is 23%. Mr Bunn added that it was unclear if such a tax would be prescriptive or binding, saying there is the chance that countries could have separate domestic tax rates for purely local businesses, with these possibly lower than the global minimum tax rate. This would mean multinational firms could face a larger tax burden “just because they operate across borders”, he added.
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