SMEs concerned over shortages – business news 4 August 2021

James Salmon, Operations Director.

Output jumps but SME manufacturers concerned over shortages. Fraud cases double. BoE set to hold rates and back QE. Civil servants will continue to work from home and more.

Output jumps but SME manufacturers concerned over shortages
A CBI survey shows that while output at SME manufacturers grew at the fastest rate on record in the three months to July, firms are increasingly concerned about inflation and shortages in staff and materials.

The survey of 234 smaller manufacturers shows new orders jumped at the highest rate since the first survey in 1988, with those polled expecting strong export growth in Q3. Growth in business optimism slowed slightly compared with the previous three months, although sentiment about export trading stabilised after five consecutive quarters of decline.

While employment numbers grew at a record pace in Q2, the proportion of businesses that said a shortage of skilled labour may limit output was at a joint-record high.

Fraud cases double
The number of fraud trials nearly doubled in the first half of this year, with 151 cases of alleged fraud heard in UK courts in the first six months of 2021. KPMG’s fraud barometer shows that the value of the cases in the period was about £140m. The research related to serious fraud cases involving individual values of more than £100,000 and KPMG said that there had been 50 such cases in H1, compared with 13 in the same period of 2020.

While the number of fraud cases rose significantly year-on-year, their value fell by about 70%. KPMG’s Roy Waligora attributed the decline in value to a lack of “super-cases” appearing in the data, suggesting their absence could “point to more complex cases being delayed”.  The report notes the impact of the coronavirus crisis, saying: “The extraordinary conditions created by the pandemic saw professional criminals take full advantage of the general public”.

BoE set to hold rates and back QE
With the Bank of England’s Monetary Policy Committee (MPC) making its latest policy announcements today, experts are expecting it to vote in favour of the Bank’s current bond buying programme and to keep rates at 0.1%.

However, some analysts believe the quantitative easing (QE) measures may see some disagreement among members. Philip Shaw, an economist at Investec, said: “It is possible that the ongoing robust nature of the UK economic recovery triggers a significant debate of the design of the current QE programme.”

Yael Selfin, chief UK economist at KPMG, offers a similar stance, saying that while rates are set to be left unchanged, there will be “dissenting voices on QE.” With it possible that the Bank may reduce the size of its balance sheet before it raises rates, Martin Beck, senior economic adviser to the EY Item Club, reflects: “Although a tightening in policy is probably more than a year off, the MPC may judge that – with the economic recovery in play and inflation rising quickly, if temporarily – this is a good time to talk about sequencing.” He warns, however, that this “risks tightening monetary conditions at a time when there are still big risks to the recovery”.

Analysts at ING believe there is “an outside chance” that the Bank details its future balance sheet reduction plans in today’s update. The Bank will also publish its updated inflation outlook and many commentators expect the Q3 forecast to be much higher than May’s Q2 prediction. ING believes Consumer Price Index inflation will hit 3.5% this year, 1.5% higher than the Bank’s target.

Civil servants will continue to work from home
Despite the Government dropping formal advice to work from home – and the Chancellor recently lauding the merits of being in the office – civil servants are not being ordered back to their desks in Whitehall, with Government departments being left to decide for themselves whether staff return to the office.

The Times reports that while staff in ministers’ private offices have been working continuously on location, in other parts of government, departments are still mostly working remotely. A Government spokesman said: “The civil service continues to follow government guidance, as we gradually and cautiously increase the number of staff working in the office.”

This contrasts with the stance taken last summer, when permanent secretaries were told to “move quickly” to get 80% of their staff back to their desks, with then Cabinet Secretary Sir Mark Sedwill telling civil servants that the Government was “strongly encouraging” staff to go back to their desks.

Morgan Sindall

Morgan Sindall posted a large rise in first-half profit and hiked its dividend after it boosted sales and margins. Pre-tax profit for the six months through June increased to £52.4 million, up from £13.6 million, as revenue climbed 14% to £1.56 billion.

Taylor Wimpey

Taylor Wimpey swung to a first-half profit and upgraded its guidance, as construction bounces back following an easing of lockdowns. Pre-tax profit for the six months through June amounted to £287.5 million, compared to a year-on-year loss of £39.8 million.


Ibstock lifted its guidance on performance after swinging to a profit as revenue jumped 74% thanks to cost cuts an ongoing recovery in the UK construction sector from the pandemic.The company said it now expects adjusted earnings before interest, taxes, depreciation, and amortisation for 2021 to be modestly ahead of its previous expectations.

Bidding for UK firms at highest since 2007
With private equity firms and overseas buyers increasingly targeting UK companies for acquisitions, analysis shows bids for British businesses have hit their highest level since 2007. Research from financial information provider Refinitiv shows that the total value of takeover attempts involving UK targets has reached $217bn in 2021 so far. This is up on the $58bn in the same period last year and the highest year-to-date total in 14 years. The number of bids for UK companies, including takeovers of private companies and bids for British groups by UK firms, has also risen. There have been 2,463 deals this year, the highest number since the late 1990s. They included 220 takeover proposals last month with a total value of about $35bn and 349 in June, with these worth a combined value of about $37bn.

Private equity investment hits five year high
Research by KPMG shows that private equity deal value and volumes in the first half of the year hit a five year high. Between January and June, 785 private equity deals were completed with a combined value of £73.7bn – an increase of 61% in volume and 48% in value compared to H1 2020. Across mid-market private equity dealmaking, the first six months of 2021 saw 377 deals at a combined value of £20.7bn. This represented the highest levels of activity since H1 2017 and marked a significant increase on the 260 deals at an overall value of £14.9bn recorded in H1 2020. Looking ahead, Jonathan Boyers, head of KPMG’s UK corporate finance practice, commented: “Confidence, pent-up demand and sheer relief is likely to lead to an increase in GDP and ensure a healthy market for mid-market PE transactions, albeit with substantial variation between sectors”.

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