SME optimism rebounds – business news 2 July 2021.

James Salmon, Operations Director.

SME optimism rebounds but late payment still a worry, Q1 sees surge in new firms, Increasing inflation should be temporary, manufacturing, corporation tax, income tax, financial services, furlough and other business news.

SME optimism rebounds but late payment still a worry

Further lock-downs are the number one concern for small business owners 53% are cautiously optimistic about the year ahead and 22% are very optimistic, according to a survey of 1,000 SME owners.

Worries about Brexit are also rank highly. The latest Business Insights data from the ONS also showed that paperwork remains a top challenge faced by businesses who are importing and exporting. 27% said Brexit was their top concern. However,  18% ranked late payment by customers as their most pressing worry.

49% of SME owners expect to keep their business on an level this year, while 36% are planning for growth.

Only 1% are considering closing their business in 2021. This is dramatically  down on the 46% who admitted they had considered closing down their business in 2020.

34% of the SME owners also said the  the pandemic had strengthened  employee relationships. 31% said it had lead to improvements to business/customer relationships. 29% said the pandemic had helped them become leaner and more agile and 12% said it had pushed them them to find new income streams.

For SME’s, we are not out of the woods yet but it would appear we are generally in a better position than we could have hoped for last year.  The ONS Business Insights data shows that 88% of businesses are now trading, the highest percentage since comparable estimates began in June 2020, however for 30% this is below their usual capacity. So there is still room for improvement.

For those struggling with cashflow and late payments among other issues, maintaining dialogue with lenders, creditors, suppliers and customers will remain essential.

Q1 sees surge in new firms

To underline the bounce in optimism, official statistics show 211,368 companies were incorporated at Companies House from January to March, with this equating to 98 new firms an hour being created in Q1. The total for the quarter marks the first time more than 200,000 companies have been created in the opening three months of a year.

Increasing inflation should be temporary
Andrew Bailey, governor of the Bank of England (BoE), has said that an accelerating inflation rate was expected to be a “temporary feature” of the economic recovery from the pandemic. In his annual Mansion House speech, he said that while a near term increase in inflation was likely, levels should retreat in the medium term as the economy “rebalances” itself. Mr Bailey said that the economy is “bouncing back rapidly” and this has delivered increasing inflation but said reasons to believe the climb will not last are “well-founded” and not a “vain hope or a matter of whistling in the wind”. He also suggested the Bank could raise interest rates if there are signs the increase is not temporary, saying it is “prepared to respond with the tools of monetary policy”. Mr Bailey said it is “important not to over-react to temporarily strong growth and inflation”, warning against undermining the economic recovery with a “premature tightening in monetary conditions.”


The manufacturing sector saw continued growth in June, with the IHS Markit/CIPS UK manufacturing purchasing managers’ index (PMI) coming in at 63.9. While this was down from an all-time high of 65.6 recorded in May, it far exceeds the 50 mark that separates growth from contraction. While output, new orders and employment grew at a near record pace – with businesses seeing demand climb following the easing of lockdown restrictions – manufacturers were hit with rising costs as supply chain problems hindered production.

Corporation tax

130 countries have united behind calls for a minimum 15% tax rate for multinational companies.  China and India have now joined in. Turkey. Hungary, Ireland and Nigeria are still holding out.

The 130 countries accounting for nine tenths of global GDP. The move, which aims to bring an end to tax avoidance by multinational companies, will look to ensure large businesses pay at least that level of tax on their profits, regardless of whether or not they base them in a tax haven.

The Organisation for Economic Cooperation and Development (OECD) led the negotiations and said the agreement will end the “race to the bottom” and deliver $150bn more in tax for governments each year.

Chancellor Rishi Sunak, who said the UK has been “pushing for reforms to make the global tax system fairer for years”, welcomed the agreement, saying: “The fact that 130 countries across the world, including all of the G20, are now on board marks a further step in our mission to reform global tax.”

US President Joe Biden said the deal means multinational corporations “will no longer be able to pit countries against one another in a bid to push tax rates down”, while French finance minister Bruno Le Maire said it marks “the most important international tax deal reached in a century”.

Income tax bill for UK taxpayers doubles since the millennium
HMRC analysis shows that while £93bn was paid in income tax in the 1999/2000 tax year, the total jumped to £187bn in 2018/19 and is set to hit £199bn by 2021/22.

Financial Independence

Britain’s chancellor, Rishi Sunak, said the government will set its own regulations for financial services . The UK is going to forge ahead with its own rules for financial services post-Brexit, seeking to increase London’s competitive advantage. The government has tried securing access to the EU financial market through ‘equivalence’  that recognize each side’s regulatory requirements but hopes of a deal are fading. EU countries instead are trying to lure business from London.

Saying Britain would diverge from Brussels’ rules on financial services, Mr Sunak said Britain now had the “freedom to do things differently and better”, adding that officials “intend to use it fully”. The Chancellor also set out a roadmap for financial sector reforms designed to boost Britain’s competitiveness after Brexit, including moves to encourage more firms to list on London’s stock market, the removal of some regulatory requirements for trading inherited from the EU and a new visa stream for people with a job offer from a recognised start-up.

More staff furloughed than initially estimated
Official figures show more than 1m workers came off furlough in the four weeks between the end of April and the end of May. Chancellor Rishi Sunak welcomed the data showing that the number of workers utilising the furlough scheme fell from 3.5m to 2.4m, saying it was a “milestone moment” that showed the Coronavirus Job Retention Scheme was “naturally winding down as the economy reopens”.

Despite the decline, analysis shows that more UK workers were furloughed in late May than first estimated, with early estimates suggesting 1.7m people were utilising the scheme. Torsten Bell, chief executive of the Resolution Foundation think-tank, said the higher than expected number of furloughed workers “does mean a bumpier ride in aggregate, and more individuals at risk of unemployment in the months ahead”.

Unions warn against ending furlough too early
Trade unions have warned that winding down the furlough scheme too early could damage the recovery and push unemployment higher. GMB  general secretary Gary Smith said ending the furlough scheme too quickly “could kill a recovery before it even starts”, adding a call for ministers to provide continued support for employers that need it, “especially in those sectors that have been hammered by the pandemic.” A Unite spokesperson warned that certain industries “are still on the ropes” and have been “hit hard” by repeated lockdowns and inconsistent government decisions. This, they argued, “is why the furlough scheme needs to match those of our competitor countries and be continued until at least the spring of 2022.”

Firms call for furlough rethink
With the furlough scheme starting to wind down as of yesterday, businesses have called for it to be extended as restrictions are still in place. British Chambers of Commerce director general Shevaun Haviland said: “The taper of government payments into the furlough scheme should be immediately deferred until we take the final step in the road map, and further grant support should be extended to the worst affected businesses.” Labour also urged ministers to reconsider the start of tapering that will see employers pick up 10% of their furloughed workers’ salaries – with this climbing to 20% in August. Labour analysis suggests 450,000 businesses will have to pay around £225m more as a result of the plans.

Fashion label rescued
British couture fashion brand Ralph & Russo has been rescued from administration by US investment firm Retail Ecommerce Ventures. Begbies Traynor and Quantuma Advisory were the joint administrators of the sales process.

US jobs

US Jobless Claims dropped to the lowest level since the onset of the pandemic, new figures released today reveal. The US Labor Department reported Thursday that jobless claims dropped by 51,000 to 364,000. The figures provide further evidence that the US labour market is rebounding strongly from the damage inflicted on it by the pandemic and measures to curb its the spread.


Ryanair reported a rebound in passenger traffic, as travel restrictions were eased last month. The Dublin-based budget airline said it flew 5.3 million passengers in June, up sharply from 1.8 million in May, 1.0 million in April, and just 400,000 in June 2020. Ryanair operated over 38,000 flights in June with a 72% load factor.

Virgin Galactic

Richard Branson said he hopes to be aboard the Virgin Galactic VSS Unity rocket traveling 90km to the edge of space on 11th July. Virgin Galactic founder hopes it might soon accommodate some of the 600 potential space tourists who have paid a deposit for a future space flight.


Crude oil futures in New York climbed above $75 per barrel, trading around the highest since 2018, after the United Arab Emirates blocked an OPEC+ deal at the last minute.

Trump’s company and CFO plead not guilty to tax fraud
The Trump Organisation and its CFO, Allen Weisselberg, have been charged with scheming to defraud tax authorities through the awarding of “off the books” benefits to company executives. Prosecutors say Mr Weisselberg was able to conceal $1.76m of income from tax authorities, with a 15-count indictment including charges of tax fraud and falsifying business records.

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