Is Corporate debt unsustainable? Business news 3 July 2020.
3 July 2020.
James Salmon, Operations Director.
Is Corporate debt unsustainable? What is the latest on Covid-19 & the markets? Will we see tax cuts or tax reform? the latest on brexit, consumer confidence figures, unemployment predictions, car sales, retail, audits insolvencies and lots more
Here are CPA we want to share the business news stories we have seen that we think will affect our members and readers. Many of us are busy fighting to protect our businesses and therefore might have missed some of the news that could impact small businesses, their owners and those that sell on credit.
Covid-19 general news
Pubs and restaurants are opening tomorrow! Lets hope we don’t mirror what is happening in the US after they rushed to re-open.
The Department for Transport has confirmed people will be able to go on holiday to Germany, France, Spain and Italy from 10 July without needing to quarantine on return.
The US voice of the pandemic, infectious disease expert Anthony Fauci has warned that covid-19 is showing some signs of mutating in a way that may make it easier for it to spread
Tokyo reported 107 new covid-19 infections, the most on any one day since Japan lifted its state of emergency on 25th May.
The Republican governor of Texas, Greg Abbott, mandated that face-masks be worn in public across the state, other than in counties with fewer than 20 cases of covid-19.
Markets.
Markets are generally trading in risk-on mode. The FTSE 100 climbed 1.5% and European markets were up over 2%. The NASDAQ surged to new record highs overnight following solid US job data with both the NASDAQ and S&P500 uo around 0.5%. Better than expected China services data continue to support sentiment with strong agains in Asia overnight.
The US Economy added 4.8 million jobs in June, the biggest increase since records began in 1939, in the latest sign that the country is rebounding sharply from the depths of the covid-19 crisis in April. The unemployment rate fell to 11.1% in June which is still extremely high by historical standards but below the 13.3% in May. Analysts had predicted a fall to 12.3%. The economy has replaced 7.5m of the 22m jobs it has lost since March. However, a new surge in covid-19 cases has since forced many states to reinstate restrictions, which could trigger a new wave of job losses.
Corporate debt levels unsustainable?
David McIlroy in an opinion piece for City AM warns of growing concern that levels of corporate debt are unsustainable. He says companies have been loaded up with levels of debt via Bounce Bank Loans and the Coronavirus Business Interruption Loan Scheme which would be unthinkable were interest rates not close to zero.
He points to a report from TheCityUK’s Recapitalisation Group, which last month predicted that UK businesses would have £100bn of unsustainable debt by March 2021, with around half of this owed by SMEs. This, he suggests, “will be a significant barrier to economic recovery.”
On taxation, Mr McIlroy notes that companies receive tax relief on the interest payments on their debt, whereas money paid to shareholders as dividends is taxed, arguing that there is no economic rationale for this “tax bias”.
Sunak damps hopes of big UK tax cuts
Looking ahead to Rishi Sunak’s economic statement next week, the FT notes that the Chancellor has told MPs not to expect big tax cuts to boost the economy.
O’Donnell foresees tax reform
Former civil service head Gus O’Donnell believes the coronavirus crisis has created “a clear burning platform” for tax reform, arguing that a wealth tax is now more likely than ever.
Speaking at an online event organised by the Institute for Fiscal Studies, the former cabinet secretary said that while people may once have favoured spending reductions over tax increases, “people now mostly say they prefer tax increases to spending reductions.”
Meanwhile, Martin Sandbu in the FT suggests wealth taxes could provide a new way of raising government revenue as ministers seek to address the financial effects of the pandemic.
Brexit
The UK and EU said serious differences remain over a post-Brexit trade deal, following the latest negotiations in Brussels. EU negotiator Michel Barnier said the bloc’s position needed to be “better understood and respected” by the UK if an agreement is to be found.
Consumer Confidence
UK Consumer Confidence is slowly beginning to pick up as lock-down restrictions ease, a new survey has found. According to Growth from Knowledge’s fourth flash report, consumer confidence increased three points over the last two weeks to -27.
Executives expect unemployment to rise and sales to dip
A Bank of England poll of British business executives suggest that unemployment will rise to 3.5m this year. Across the 2,776 people surveyed, the average expectation was that the jobless rate would hit 11% by year end, far exceeding the official unemployment rate of 3.9% recorded in April. Firms taking part in the survey also said that, on average, 30% of employees had been furloughed in June, down from 36% in May, with this expected to fall to 18% in Q3 and 5% in the final three months of the year. The poll also found that executives expect sales to be 38% lower than they would have been had there been no coronavirus outbreak, foreseeing a 26% dip in Q3 followed by a 16% hit in Q4 and a 10% slide in Q1 2021. The firms quizzed also said they expect costs to be 7% higher in the next quarter than they would have been had the pandemic not occurred.
Car sales driven online?
Tim Kiek looks at car sales, noting that some analysts predict an increase in online activity. Andrew Burn, head of automotive at KPMG, expects a “step change” to online sales, saying: “A number of dealership groups have been trying to transition to internet sales models.”
IPPR: Youth unemployment set to exceed 1m
Analysis by the Institute for Public Policy Research (IPPR) think-tank has warned that youth unemployment is set to hit a record high of more than 1m this year. It says 410,000 18 to 24-year-olds are already jobless and expects 620,000 to be added to the total by the end of 2020. Harry Quilter-Pinner, senior research fellow at the IPPR, warned that this would be “a huge waste of talent and potential”. The IPPR has urged the Government to set up a £3bn job guarantee scheme to get every under 25 in work, on an apprenticeship or in training, while also suggesting a £1.5bn apprenticeships fund and reform of unemployment benefits should be rolled out.
Sales down in June despite online surge
BDO ’s high street sales tracker shows that total like-for-like sales were down 14.4% year-on-year in June, despite online sales rising by 102.6%. The 14.4% fall marks an increase on the 18.3% dip seen in May but still represents the fifth consecutive month of negative like-for-like sales. Sophie Michael, head of retail and wholesale at BDO, said: “Despite the opening of non-essential retail and a strong performance of non-store sales in June, retailers have a long way to go to claw their way back following three months of closure.”
Pandemic forces audit firms to tighten viability checks
The Financial Reporting Council (FRC) says the UK’s audit firms have strengthened their tests of the financial viability of companies as a result of the coronavirus outbreak, with a review by the watchdog gauging emergency measures that have been rolled out. These, the review found, include significantly increasing the number of consultations on going concern assessments. The FRC said one firm has required audit teams to give an explanation if going concern is not a significant risk, while another has identified sectors facing the steepest challenge from the pandemic to assess whether extra support would be needed. The watchdog’s review covered the procedures of the seven largest audit firms, which include the Big Four. The FRC says it will consider the challenges of the present environment when it carries out its audit quality review for the period.
Brydon calls for urgent audit reform
Sir Donald Brydon, who led a government-commissioned review into the auditing industry, has urged ministers to proceed with an overhaul of the sector. His call comes in the wake of the Wirecard scandal, which saw EY declare that it was unable to verify €1.9bn in the firm’s accounts. Sir Donald said: “We must not wait until there is a market failure, there has to be a whole mindset change on what is the purpose of an audit,” going on to say: “Another couple of big scandals and suddenly you have a global audit profession that is entirely in disarray because choices become more limited or there are knee-jerk reactions.” Sir Donald added: “Given the focus on Wirecard, making it clear that auditors have an obligation to find fraud rather than stumble over it would be a smart move to change auditor behaviour.” Meanwhile, an FT editorial says improving the quality of audit will require cultural, not just structural change, arguing that “the need for trustworthy auditing is greater than ever”. Elsewhere, the paper’s Kate Burgess calls for a swift improvement of audit, saying recommendations in the Brydon Review should be actioned and auditors “must become more independent, more investigative and more suspicious”.
Digital tax call from internet advocacy
The Internet Association has published a six-point plan for a future UK-US trade deal which urges policymakers to guarantee against unilaterally imposing taxes on digital services companies. It argues that any potential new taxation on digital services should be set up in “an internationally coordinated manner”. Internet Association director of trade policy Jordan Haas commented: “The US and the UK lead the world in digital technology and this agreement should include policies that will bolster that success. The provisions in our white paper would strengthen both countries’ digital trade leadership – at a time when other nations are pushing very different, closed visions of the internet.”
Restaurant owner falls into administration
Casual Dining Group, the owner of restaurant chains Café Rouge and Bella Italia, has gone into administration. More than 90 outlets will close immediately, with 1,900 of the firm’s 6,000 staff losing their jobs. Some 159 of the group’s 250 outlets will remain open. Administrators Alix Partners are seeking offers for all, or parts, of the remaining business. The firm says it has already received “multiple offers” for the business. Turnaround fund Aurelius Equity Opportunities has reportedly made an offer to take over Cafe Rouge and Bella Italia, while Endless is said to be competing with private equity investor Trispan for control of the Las Iguanas brand. Considering the hit COVID-19 has dealt the sector, Julie Palmer at Begbies Traynor comments: “The casual dining sector was in distress before this crisis, but this is what will tip many over the edge and towards collapse.”
Prezzo considering sale after appointing advisers
Italian restaurant firm Prezzo is seeking new funding to survive the coronavirus pandemic, appointing FRP Advisory to lead an auction of the business. Leadership at the company, which is part-owned by US buyout firm TPG, is believed to favour simplifying its ownership structure.
Wage concern for Wigan
The administrator for Wigan Athletic has admitted there is no guarantee that the club’s players and staff will be paid. Gerald Krasner of Begbies Traynor also said that there was only a 75% chance that the club would be able to fulfil its remaining six fixtures as it struggles to meet running costs. Begbies Traynor says it will probe the circumstances of the administration and the club’s ownership.
Talking testing
The Times looks at COVID-19 testing, noting that as it looked to scale up testing, ministers created a network of commercial labs run by Deloitte but overseen by the Department of Health. It highlights that Deloitte is not obliged to share data with Public Health England.
Housing bosses call for stamp duty cut
Business leaders from the housing sector have written to Rishi Sunak calling for a new Help to Downsize scheme they believe will boost the property market, driving its recovery by freeing up larger homes. In a letter to the Chancellor, the signatories argue that waiving stamp duty for older homeowners moving to smaller, more suitable homes will help open up space on the property ladder for families seeking larger homes and first-time buyers. The letter says that a quarter of people will be 65 or over by 2040, with this equating to 18m people – up 5m on the current number. However, it adds, the UK’s housing stock “is not adequate to meet this change.”
Don’t let Covid-19 bust your business!
It will if your cash flow dries up, either sooner or later.
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 sometime to come.
CPA eases cash from tardy debtors – Efficiently, Effectively, Economically and Ethically. Above all tactfully, because maintenance of goodwill is paramount.
To meet the needs of creditors in the current crisis, we have designed a “critical care” package especially tailored for the situation.
- The annual package costs start at very low rates
- A minimum performance warranty is provided
- Several complimentary services included
Clients instruct CPA on-line via their PC or phone, completely user-friendly. Your late paying customers are told to pay you direct (not to us).
A very recent report shows a 23% increase in the number of unpaid invoices since March 11th THIS YEAR – are you getting a build-up of late payers?
Right now, overdue accounts must be a concern and CPA has a great track record of encouraging slow-payers to pay their suppliers quickly.
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 nsm@cpa.co.uk today.
When you see your money come in, you will be so glad you used CPA.
Do you sell on credit?
With pressures on the cash flow it is essential that you stay on top of the credit limits you grant customers and watch carefully for any late payments.
Those customers will look for the easiest option to boost their cash-flow. Don’t let it be you.
You can’t just assume your customers can and will pay you eventually, no matter how big their name is.
It is essential to have credit management systems in place to monitor and check your customers credit worthiness.
It is also best practice to use a trusted third party like CPA to make sure you are paid on time by customers, no matter how good a name they have.
About CPA
The Credit Protection Association can help!
Formed in 1914, CPA has been providing credit management services to SMEs for over 100 years.
At the Credit Protection Association, we provide first class credit information that can help you avoid being over extended to customers who are at risk. Our monitoring service can flag up warning signs long before the end, giving you the chance to adjust and reduce your exposure. We provide recommended credit limits and credit scores on a traffic light system and can help you set appropriate credit policies for your customers.
We regularly publish lists of the latest insolvencies but by then it is too late. Our credit reports however predict approximately 96% of company insolvencies long before they arrive.
Companies in trouble usually have very bad cash flow and they try to deal with it by delaying payment to their suppliers, increasing your exposure to them.
If you supply on credit, help us help you identify the risks.
Why use a third party collector?
As a third party collector, we can also get your payments prioritised over those who are not as hot on collections. When your customer receives a letter from the Credit Protection Association regarding their outstanding account, they are going to want to get that resolved as a priority. Our overdue account recovery service can get your unpaid invoices to the top of their “to do” list and get your invoice paid.
Over the years we have collected billions in overdue invoices for our customers.
Our debt recovery and credit management services give our members the financial freedom needed to grow and prosper, while our new Late Payment Compensation department could unlock hidden potential and offer the compensation needed to springboard your business to success.
You might be hesitant about contacting a debt collection agency. What are they going to be like?
Can they help your particular type of business?
There is no need for concern. CPA are courteous, helpful and very probably have had direct experience of working with your type of business.
Debt collection agencies are not all alike.
Success lies in both recovering money and keeping customers happy. The Credit Protection Association was founded in 1914 and has helped tens of thousands of UK businesses to collect outstanding payments and reduce the risk of incurring bad debt. We believe that creditors deserve to be paid for the work or goods they have supplied but we fully understand the need to maintain
the best possible relationship with customers!
At The Credit Protection Association, we provide solutions, advice and back-up in all areas relating to the supply of services or goods on account. Client-members receive everything they need from a single source to reduce debtor days and write-offs.
The Credit Protection Association has helped has assisted tens of thousands of UK businesses with their credit control requirements, since the First World War.
We are polite, firm and efficient when it comes to recovering outstanding debt.
“We have used CPA for a number of years now. The website is easy to navigate around with lots of helpful reports. The staff are always at hand and very friendly. CPA has helped us reduce our debt over the years and keep track of potential issues with our customers.”
~ CPA client in Buckinghamshire
“The service from CPA has proved to be everything that you said it would be. We have already seen a huge benefit. We have had a number of overdue accounts paid promptly and directly to us. It is also a huge weight off our mind to know that once we have passed an overdue payment over to you, you take care of everything whilst keeping us informed.
~ Credit Controller client in Warrington
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
Ready to speak to an advisor?
For help or advice on credit management, entirely without obligation.
Call us today
0330 053 9263
CPA is passionate about late payment
The Credit Protection Association has been protecting smaller firms against poor payment practices for over 100 years.
We are extremely passionate about breaking the late payment culture that holds back the UK economy and threatens many SMEs with cash flow difficulties being the single biggest killer of Britain’s small businesses.
If you were regularly paid late we can help. Those former customers used you to boost their own cashflow, regularly paying you late.
As a result you had extra costs, you had the distraction of having to chase payment, you had opportunity costs because your capital was tied up in their late invoices.
Under little used legislation, you are entitled to compensation for those late payments.
Now you can boost your own cash-flow.
CPA can help unearth the those hidden treasures.
We have the technology to reveal the compensation you are due and we have the extensive experience and expertise to then turn those claims into cash.
Yes, CPA can help you boost your business cash-flow.
Don’t let your bankers control you, contact CPA today.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
Do you realise you could be sitting on a fortune?
Late payments often result in a cash flow crunch and leave SMEs in need of a cash injection.
If you sold B2B on credit then there may be a hidden source of capital you can call on.
If you fancy an bit of extra cash in your business, rather than jumping through hoops with your bank, you could look to uncover the resources from an unexpected source within your own business.
Not many are aware but there could be a hidden fortune within your business, sitting there, just waiting to be uncovered and released.
We can help you uncover the pile of gold, you didn’t even know you were sitting on.
If you trade with other businesses and were often paid late then you could be entitled to significant compensation.
Under little known and under-utilised legislation your business could be due huge amounts in compensation that you didn’t even know about.
Let’s be clear – this is not a way to weaken any customer relationships you value. It is one that identifies who’s been paying late and then recover the potentially significant sums in compensation using Late Payment Legislation from businesses where the relationship has already ended.
You can pick and choose who you want us to follow up – but once we’ve agreed which companies you’d like to pursue compensation from it’s a fast process and there’s no financial outlay to you whatsoever. My team at CPA put its expertise to work to recover the compensation due and fight late payment culture.
That compensation could provide the cash boost your business needed.
But don’t delay, that compensation evaporates if not claimed within six years of the late payment.
How can CPA help?
CPA has developed a unique technology to dig into your accounting records and discover the cash injection you are due by means of compensation. The software does all the hard work. Our software interacts over the cloud with over 300 different software packages, working directly with your accounts package, just so long as it’s stored on a computer.
We recognise that most companies do not have the resources to spend time on the identification and calculation of Late Payment Compensation. Our service can produce an Analyses within just a few days with (usually) less than 30 mins of co-operation from our clients. We work directly with over 300 accounting packages but can also work with bespoke accounts packages. Indeed, speed is essential as the oldest invoices may fall foul of the 6-year time limit.
Once the Sales Ledger Analyses is made available to clients, all that is required is that management decide which commercially sensitive ex-customers to remove from the list and return it to us.
CPA then uses its years of collection experience to explain and recover the Late Payment Compensation Claims. Clients do not handle any part of the recovery process as our team will take all communications from the companies against who the claims has been made. Often, it’s simply a case of explaining the legislation, sometimes we have to go all the way and enforce the legislation through the courts.
The result is that we are realising clients’ claims worth tens and sometimes hundreds of thousands of pounds which, of course, is pure net profit. You may also be among the recipients of “hundreds of thousands of pounds” should you elect to take advantage of our services.
We do the work, you receive the cash.
If you have supplied goods and services to businesses on credit and were regularly paid late then you could be due significant sums in late payment compensation.
We are talking to companies and unearthing claims in the hundreds of thousands from former business customers who paid them late. Large business customers who abused their power to inflict unfair and sometimes illegal payment practices.
We are helping business owners who are looking to boost the returns from their business before they retire. We are helping businesses who have lost major clients after years of loyal service to get properly compensated for systematic late payment. We are helping companies that were looking to close down, who looked insolvent and finding that cash injection they need to avoid insolvency.
Those former clients who regularly paid you late can finally be made to pay.
Ready to speak to an advisor?
For help or advice on credit management, entirely without obligation.
Call us today
0330 053 9263
The Credit Protection Association is a credit management company established in 1914. If you supply goods or services on credit then we can help you!
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
Keep up to date with the latest news by following us on social media:-
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections