UK business insolvencies to spike – business news 8 October 2021

James Salmon, Operations Director.

UK business insolvencies to spike. Staff shortages push pay higher.  Furlough’s end has not led to wave of job cuts. New Bank of England chief economist warns of long-lasting inflation. And more business news.

UK business insolvencies to spike at 33% on pre-pandemic levels

UK business insolvencies are set to rise 33% on pre-pandemic levels, reveals new economic research by trade credit insurer Atradius. UK business insolvencies declined 27% in 2020 during the pandemic as a result of unparalleled fiscal support schemes and emergency blocks on creditors putting companies into insolvency.

These measures are only now being unwound so the artificially low insolvency rates are set to rebound, peaking in 2022.

The Insolvency Forecast warns UK business failures will begin to rise in the second half of 2021, resulting in a year-on-year increase of 7%. In 2022 however, annual insolvencies are forecast to spike by as much as 70% year on year.

The analysts forecast UK insolvencies will be 33% higher in 2022 than they were pre-pandemic in 2019. One of the highest rates in the world!

Only Italy is forecast to be higher at 34%

Globally they predict insolvencies will rise year-on-year 33% in 2022,  having fallen by 14% in 2020 and risen by only 1% in 2021 despite the pandemic fueled recession  due to global governmental responses and support packages.

The surge is down to three causes

1) There is the delayed effect of the insolvencies that would have been expected normally in 2020 but were delayed due to the support measures.

2) The withdrawal of the various support schemes will trigger an increase in insolvencies

3) The systematic and structural effects of the pandemic with the falls in GDP will trigger further insolvencies.

Damien Dawson, Southern Regional Manager, of Atradius UK, commented: “It is simple economics that insolvencies come hand in hand with economic recession which was inevitable as global economies recoiled as the pandemic hit. However, governments worldwide were quick to break this correlation and support businesses through the hardest trading period since the Great Depression. As the economy rebounds and support schemes are gradually withdrawn, the escalation of insolvencies is, unfortunately, inescapable.

“The most important thing businesses can do now is to be prepared. In such an uncertain and potentially volatile trading environment, information is critical. Businesses must build up comprehensive insights into buyers and their ability to pay, through real-time monitoring alongside a robust credit management strategy, flexibility to adapt should warning signs arise and non-payment protection. ”

If you need to review your credit management, talk to CPA about how we can provide the tools to help you ride out the coming difficulties.

Staff shortages push pay higher
A monthly survey by KPMG and the Recruitment & Employment Confederation showed that recruiters were reporting the most intense pressures on pay for 24 years in September.

Recruiters said that higher demand for staff, a high employment rate, fewer EU workers and a lack of confidence among employees to switch roles because of the pandemic contributed to a big fall in the number of candidates for job vacancies, driving increases in pay.

The salaries index rose to 75.7 in September, up from 73.5 in August, while the temporary wages index hit 69.1, up from 66.8. Any reading above 50 indicates growth. The latest pay readings are the largest ever recorded by the survey.

Claire Warnes, head of education, skills and productivity at KPMG, said: “While higher salaries are good for jobseekers, wage growth alone is unlikely to help sustain economic recovery because of limited levers to bring people with the right skills to where the jobs are and increase productivity.”

Furlough’s end has not led to wave of job cuts
Figures from the Insolvency Service show the end of the furlough scheme did not lead to the wave of job cuts many expected. Around one million workers were still on the programme when it finally closed last week, but official data suggests the number of businesses planning redundancies was still close to record lows last month. Tony Wilson, director of the Institute of Employment Studies, told the BBC: “With estimates of actual redundancies and of real-time online searches related to redundancy both lower than before the pandemic, it looks like the worst is well and truly behind us now on job losses.”

New Bank of England chief economist warns of long-lasting inflation
The Bank of England’s new chief economist has admitted that high levels of UK inflation could persist for longer than expected.

In his first public remarks since taking office last month, Huw Pill told MPs that “balance of risks is currently shifting towards great concerns about the inflation outlook, as the current strength of inflation looks set to prove more long-lasting than originally anticipated.”

Andrew Goodwin, economist at consultancy Oxford Economics, said Pill has “placed himself on the hawkish side” of the Monetary Policy Committee, suggesting he could vote in favour of an early rise in interest rates.

Pill’s comments come as a survey of more than 8,000 UK companies by the Office for National Statistics found 29% of firms reported a sharp rise in prices of materials, goods and services bought in the last two weeks – up from 21% of firms reporting unusually rapid growth in costs in May, and 14% in late December 2020

Irish Corporation Tax

Ireland has abandoned its 12.5% corporate tax rate and signed up to a minimum 15% global rate after Dublin persuaded the OECD to ditch a commitment to a global rate of “at least 15%”. Paschal Donohoe, finance minister, also secure a concession allowing Ireland to keep the 12.5% rate for domestic companies with a turnover of less than €750m. He said: “This agreement is a balance between our tax competitiveness and our broader place in the world.” He added that the move “will ensure that Ireland is part of the solution in respect to the future international tax framework.” The move will cost the country around €2bn in lost revenue in the coming years. Tom Woods, head of tax at KPMG, points out that large corporates “would have been paying this additional tax anyway, irrespective of whether Ireland signed up to the deal, as the tax would be collected by other countries.”


The Government reduced the number of countries from which travellers must quarantine on arrival, from 54 to 7. It will also consider more people given jabs abroad to be fully vaccinated. Colombia, the Dominican Republic, Ecuador, Haiti, Panama, Peru and Venezuela remain on its “red list”. Soon they will also replace the required PCR test on arrival with a cheaper antigen one.

US Economy

The US Senate voted to temporarily extend the country’s debt ceiling, less than two weeks before it was due to be reached. The Senate decided on Thursday by a vote of 50-48 to extend the debt ceiling until early December. The bill will now be sent to the House of Representatives for approval before it can be sent to President Biden for his signature.

Tesco pays out £193m to settle accounting scandal
Tesco has paid out £193m to investors who sued the supermarket company last year after it misreported supplier income, leading to a drastic share price fall and losses for the shareholders. The Serious Fraud Office had fined the supermarket giant £129m, while three Tesco executives who were prosecuted by the watchdog were eventually acquitted in 2019.

Tories become the party of tax hikes
Tony Diver writes in the Telegraph on how the Conservatives are now considered more likely to raise taxes than the Labour party. A YouGov survey found 64% of respondents thought the Tories would raise taxes if they won the next election, but only 56% said that Labour would. The poll came as Tony Danker, the chief executive of the CBI, said the Labour Party was looking “better on business taxes” after Rachel Reeves, the shadow chancellor, promised to scrap “unpopular” business rates. “The crisis we have is, every single piece of business taxation seems to be going up, and I don’t think that’s a great plan for growth,” Mr Danker said. The Times also carries the story noting that a majority (54%) think the Government is managing the economy badly compared with 34% with the opposite view.

Investment inequality harms small business growth
The British Business Bank has found that a disparity in equity funding opportunities across the UK is holding small businesses back. The bank said that the UK’s uneven distribution of growth finance was not driven by a lack of high-growth potential businesses in certain areas, but by the absence of local investors

HMRC rejects holiday let crackdown claims
HMRC has denied claims made by accountants that it plans a crackdown on owners of UK holiday lets. Tax specialists at UHY Hacker Young said owners of UK holiday lets face fresh investigations by HMRC after Britain’s record staycation boom of the last two years. Neela Chauhan, partner at UHY Hacker Young, said: “HMRC will be checking tax returns from people who have let property for a jump in declared income to reflect the staycation boom. Their algorithms will fairly easily identify those holiday homeowners who they think are under-declaring income.” But an HMRC spokesperson responded to the claims by saying no such plans are in the pipeline: “HMRC believes that the vast majority of customers want to pay the right amount of tax, including owners of UK holiday lets, and we will continue to work with such customers to help them to get their tax right.”

Average UK house prices hit record high in September
House prices rose at their fastest monthly pace since 2007 in September, according to the Halifax, with more than £4,400 added to the average price of a home. The monthly growth of 1.7% pushed the average price up to a record £267,587 with annual house price inflation now at 7.4%. “Looking at price changes over the past year, prices for flats are up just 6.1% , compared to 8.9% for semi-detached properties and 8.8% for detached. This translates into cash increases for detached properties of nearly £41,000 compared to just £6,640 for flats,” Russell Galley, managing director of Halifax, said.

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.

CPA eases cash from tardy debtors – Efficiently, Effectively, Economically and Ethically. And we provide credit information so you can monitor and assess your key customers.

Unlike other credit management companies, we charge our members a fixed annual subscription irrespective of how high the debt value is!

It takes less than 17 minutes to see how you would benefit, do you have the time now?

No face-to-face meeting required – just call Peter Uwins, CPA’s National Sales Manager, on 020 8846 0000 (business hours) or email today.

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.