Late payment impact more than financial – business news 1 July 2021.
James Salmon, Operations Director.
Late payment impact more than financial, Prompt Payment Code changes, Unions in furlough warning, Unemployment falls for fourth consecutive month and lots more business news.
Late payment impact more than financial
Outgoing Small Business Commissioner Philip King says the reform delivered by the Office of the Small Business Commissioner he is most proud of is a tweak to the Prompt Payment Code which means companies are now obliged to pay small businesses within 30 days — half the time previously set.
More than a million companies responded to a survey by the Good Business Pays Campaign that they had problems getting paid on time.
Mr King said that the pandemic has highlighted the stress late payments can prompt among small business owners, saying there has been “a sharp realisation that we’re not just talking about a financial impact when a small business doesn’t get paid. It’s much more than that”, saying SME leaders have flagged “wellbeing issues, mental health issues, sleep deprivation, eating disorders, you name it”.
Ahead of his departure today, Mr King admitted the office has more to do to address prompt payment concerns among small businesses.
If you suffer from late payments to your business, contact CPA, we have been assisting thousands of UK businesses to get paid since 1914.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
Prompt Payment Code changes
From today (1st July) businesses signed up to the Prompt Payment Code must now pay small businesses within 30 days with small businesses being those with over 50 employees. Those with over 50 employees can still be paid within 60 days.
However, given that the Prompt Payment Code is a voluntary scheme, it has limited sanctions. The main sanction is suspension from the scheme.
If you want late payers to be properly sanctioned, talk to CPA about how we can get you compensated by business customers you have done business with before who paid you late. They caused you pain, we are helping our clients use little used legislation to receive compensation.
Unions in furlough warning
Union leaders have warned that cuts to the furlough scheme will endanger jobs and put the economic recovery at risk. As of today, businesses will contribute 10% of an employee’s wage, rising to 20% in August, as taxpayer furlough support is cut from the current rate of 80%.
Frances O’Grady, the general secretary of the TUC, said ministers “must not pull the plug on our recovery by cutting off support too soon”, calling for a “cast-iron commitment” that the Chancellor will extend furlough “for as long as is needed, rather than ending it abruptly in three months’ time.” Warning of the impact of support being wound down while restrictions remain in place, Ms O’Grady said workers need certainty, “not a rollercoaster approach to protecting livelihoods.”
Steve Turner, assistant general secretary of Unite, said systems must be put in place “to help protect jobs as employers look ahead to continued uncertainty”, adding that there is a need for “proper furlough support for all workers, including freelancers and others excluded”.
Unemployment falls for fourth consecutive month
Figures for April show that UK unemployment fell for the fourth month in a row, with a relaxation of pandemic-induced restrictions seeing firms taking on staff. The unemployment rate fell to 4.7% in the three months to April, a slight improvement from the 4.8% recorded in the three months to March. The number of staff on company payrolls was up for a sixth consecutive month, rising by 197,000 to 28.5m. Despite the increase, the number of workers on payrolls remains around 500,000 below pre-pandemic levels.
Economy shrinks 1.6% in Q1
Data from the Office for National Statistics (ONS) shows that the economy contracted by more than was first thought in Q1, with GDP estimated to have decreased by 1.6% in the period between January and March.
This marks a slight increase on an original estimate of a 1.5%.
The revised figure means GDP is 8.8% below where it was in Q4 2019, the last quarter unaffected by the pandemic. The ONS report also shows that the household saving ratio – the estimate of the amount of money that households can put away – increased to 19.9% in the first three months of 2021. This is up on the 16.1% recorded in Q1 2020 and the second highest ratio ever recorded after the 25.9% posted in Q2 2020.
Martin Beck, senior economic adviser to the EY Item Club, said the savings ratio “reaffirms that households are emerging from the crisis with cash to fuel higher spending”.
UK current account
UK Current Account Deficit narrowed to £12.7 billion in the first quarter of 2021 as the reintroduction of lockdown restrictions to curb the spread of covid-19 hit the economy and dampened import demand. Figures from the ONS published yesterday show the current account deficit in quarter one was the equivalent of 2.3% of GDP.
Inflation prediction
Andy Haldane, the Bank of England’s outgoing chief economist, has warned that inflation could approach 4% this year. He said he expects inflation to be nearer 4% than 3%, warning that this “increases the chances of a high inflation narrative becoming the dominant one, a central expectation rather than a risk.”
While the Bank’s Monetary Policy Committee last week said it anticipated inflation to peak at 3% by the end of 2021 before falling back in 2022, Mr Haldane said a speech to the Institute for Government think-tank that there are reasons to believe rising prices in parts of the UK economy would translate into a wider “significant and persistent” rise in inflation.
He warned that if inflation were to surge, “everyone would lose”, saying central banks would need to “execute an economic hand-brake turn”, businesses and households would face higher costs for borrowing and living, and the Government would see rising debt-servicing costs. The most recent figures show that inflation rose to 2.1% in May, with Consumer Price Index inflation up from 1.5% a month earlier.
Factories set to raise prices
A quarterly survey of 5,800 businesses by the British Chambers of Commerce (BCC) shows that a balance of 58% of manufacturers plan to raise prices to pass on raw material costs.
This not only marks a 27% increase on the previous quarter but is the highest figure since the survey began in 1989. The share of companies reporting an increase in domestic sales rose to 44%, up from 28%, while two thirds of firms said turnover was likely to increase in the next 12 months.
Just over one in ten said they foresee a fall in sales. It was also found that a balance of 31% of services companies planned to raise their prices – a two year high. Suren Thiru, head of economics at the BCC, said that the “survey points to a striking rebound in underlying economic conditions”, with the economy “in a sweet spot”.
It is noted that PwC has upgraded its growth forecast, saying the UK could post growth of more than 7% this year and see GDP hit its pre-pandemic level in Q1 2022.
Nissan gigafactory
Nissan has announced a major expansion of electric vehicle production at its car plant in Sunderland which will create 1,650 new jobs. The Japanese carmaker says it will build its new-generation all-electric model at the site. Its partner, Envision AESC, will also build a new electric battery plant.The new electric vehicle hub, launched with £1bn worth of investment, will also support thousands of jobs in the UK supply chain. Production of the new model will create 909 new jobs and more than 4,500 in its UK supply chain. The new gigafactory will eventually provide batteries to power up to 100,000 Nissan electric vehicles a year. It will create 750 new jobs and secure 300 existing roles.
Associated British Foods
Associated British Foods raised its guidance on annual profit due to an improved outlook for Primark and its sugar division following a strong third quarter of performance. ‘Our outlook for the adjusted operating profit for the group, stated before repayment of job retention monies, is now in line with last year,’ the company said.
JD Sports
JD Sports is set to deliver profit of at least £550 million following encouraging reopening in the UK and enhanced demand in the US as the government rolled out further stimulus payments. In markets across Europe where stores were closed in the early part of the year, sales retention was slightly ahead of that seen in the first closure period in Spring 2020.
PZ Cussons
PZ Cussons is confident its pre-tax profits will be ahead of consensus and the prior year, with revenue currently up 7%. In a trading update in respect of its financial year ended May 31, 2021, the company said its overall gross margin has improved, driven by positive price/mix in each of its core categories.
EU VAT hits small ecommerce exporters
The introduction on of new EU VAT rules that come into force today will hit small ecommerce exporters, with analysis suggesting that the change will cost at least £6,900 a year to comply with. VAT compliance specialist Avalara estimates that 26,000 firms face having to register in an EU member state for the first time. Royal Mail has teamed up with Deloitte and tax management tech firm Taxamo to provide support to customers. Deloitte will register UK exporters and prepare and file VAT returns for an initial £300 fee and then £2,000 a year for the returns.
Record numbers in top tax bracket
Official figures show that a record number of workers are paying the top 45% rate of income tax, with 440,000 people now charged the additional rate. This marks a 10% increase on the number recorded in 2018/19. The increase comes due to a decade-long freeze on the £150,000 starting threshold, which has been in place despite steady inflation. The data also shows that income tax payments have more than doubled in the past 10 years to almost £200bn, with it shown that 32.2m people will pay income tax this year, up from 31.6m in 2018/19. The report also reveals that in 2018/19, the Government pulled in £283m from the 7,130 pension savers who breached the £1,073,100 lifetime allowance. The figure marks a £26m increase on the total recorded the year before.
Financial services set for exemption from new global tax rules
The UK’s financial services sector is reportedly set to win an exemption from new global proposals for taxing multinational companies. The UK has argued for the exemption as current regulation sees banks separately capitalised in every jurisdiction in which they operate, declaring profits and paying tax in the countries where they do business.
With the UK seemingly securing backing for an exemption amid talks led by the Organisation for Economic Co-operation and Development, sources say that in turn, it will have to scrap its digital services tax. The agreement came in the first session of talks, with these focused on defining where the largest multinational firms would have to pay tax. The second half of the negotiations will see the nations involved look to agree a global minimum corporate tax rate, with a 15% bar having been mooted.
Meanwhile, Jonathan Black, Britain’s G7 and G20 sherpa, says there are challenges ahead as officials look to secure backing for G7 plans for a global minimum corporate tax rate. He told an online forum hosted by the Centre for Strategic and International Studies that the G20 is a group with far more varied interests and values than G7 countries. He said: “I think we are sort of optimistic, actually, that we will make progress on this but there’s still important work to be done,” noting that “the prize is huge”.
Stamp duty holiday tapers as market moves toward normality
Experts believe that the property market will remain strong despite the stamp duty holiday tapering as of today. The nil rate stamp duty threshold which had been temporarily set at £500,000 since July 2020 has now decreased to £250,000 and will revert to its normal level of £125,000 on October 1.
Lawrence Bowles, an analyst at estate agents Savills, said that while “some of the urgency is expected to come out of the market” in the coming months, tapered stamp duty relief “will support activity in more affordable parts of the market”. Savills analysis suggests 85% of buyers intend to continue with their purchases even if they missed the June 30 tax relief cut off. One in ten might try to renegotiate on price while only 5% will consider withdrawing.
Rightmove warns that those pulling out of deals now may miss out on tax relief entirely, with sales currently taking around four months to complete.
Meanwhile, Tom Bill, head of UK residential research at Knight Frank, believes the stamp duty holiday “hasn’t just squeezed transactions into artificially short periods of time, it has also put people off entering the market”, saying some buyers have been deterred by “a tax deadline there is no guarantee of meeting”. He added that while there will be “a financial hit” from ending the stamp duty holiday, “the wider point is that it signals a return to normality”.
UK to replace EU state aid rules
The Government has announced new laws to replace EU rules on taxpayer-funded bailouts and business support, giving ministers more power to intervene in failing industries. The Subsidy Control Bill is set to replace EU state aid rules that require its members to seek approval for government support for businesses. In rolling out new rules, the UK must follow commitments on subsidy controls set out in free trade agreements and adhere to World Trade Organisation procedures.
Reflecting on the plans, Business Secretary Kwasi Kwarteng said: “While the UK’s new system will be more agile and flexible, I have been clear that we will not return to the failed 1970s approach of the government trying to run the economy, picking winners or bailing out unsustainable companies.” He added that every subsidy “must deliver strong benefits for local communities and ensure good value for money for the British taxpayer”.
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 nsm@cpa.co.uk 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
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.
You put up with the PAIN – now claim the GAIN!
Claim late payment compensation (LPC) from former business customers who paid you late in the last six years!
CPA (LPC) Recoveries is using our bespoke software and decades of experience to do just that for our clients
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.