SMEs exposed to substantial debt stress – business news 15 July 2021.

James Salmon, Operations Director.

SMEs exposed to substantial debt stress, Scottish SME finance demand outstrips supply, Inflation hits 2.5% in June, Back-to-work advice criticised and more business news.

SMEs exposed to substantial debt stress
The Financial Policy Committee (FPC) – the financial system watchdog – has warned that SMEs are exposed to substantial debt vulnerabilities as a result of the pandemic, saying that while UK corporate debt vulnerabilities have only increased modestly, they have been “more substantial” among small and medium-sized businesses.

If you sell to SME’s on credit, how sure are you that they will be able to pay? CPA can help support your credit management with our credit reports and overdue account recovery service all including in the subscription for members. Talk to us today about becoming members. No face-to-face meeting required – just call Peter Uwins, CPA’s National Sales Manager, on 020 8846 0000 (business hours) or email today.

The warning came in the FPC’s latest Financial Stability Report, a review published every six months that is intended to identify possible threats to the economy. The latest edition flags that SMEs “may be more vulnerable to increases in financing costs”. It said that SME debt has risen by about a quarter, although much of this is in low-interest government guaranteed loans.

If your business is exposed to debt stress talk to us about how we can help.

Scottish SME finance demand outstrips supply

Debt stress is being raised by the shortage of available  finance.

A study by the British Business Bank suggests that demand for finance among small businesses is exceeding the level of supply across Scotland. The poll saw 71% of the Scottish business advisory community say demand outweighs supply, while 84% of the accountants, lawyers and business finance advisors quizzed believe there are gaps in the supply of finance through all stages of company growth and development.

Just over 85% of respondents said smaller businesses would require additional debt finance over the next 12 to 18 months due to the pandemic, while 79% said the same about growth stage equity or venture capital. While 45% of UK respondents said the small business finance ecosystem offers adequate support for start-ups, north of the Border the rate hit 63%.

If you are sold to businesses in credit and are in urgent need of finance, CPA has being helping SMEs get compensation from former customers who regularly paid late when they were customers. Using little utilised legislation, we have been helping SMEs tap into that hidden source of capital. Talk to us today. No face-to-face meeting required – just call Peter Uwins, CPA’s National Sales Manager, on 020 8846 0000 (business hours) or email today.

If your business is exposed to debt stress talk to us about how we can help.

Inflation hits 2.5% in June
Office for National Statistics (ONS) figures show that inflation continued to rise in June, with the Consumer Price Index (CPI) rising to 2.5% last month. The figure exceeds May’s 2.1% and analyst forecasts of a 2.2% climb. It also marks the highest level since August 2018. On a monthly basis, the CPI rose by 0.5% in June, up from a 0.1% increase recorded in June 2020. The increase recorded in June was driven by higher food and fuel costs, the ONS said.

ONS deputy national statistician for economic statistics Jonathan Athow said the rise in prices was “widespread”, adding that while some of the increase “is from temporary effects … much of this is due to prices recovering from lows earlier in the pandemic.”

Reflecting on the ONS data, KPMG’s chief economist Yael Selfin said inflation would likely peak at 3% this year.  She commented: “The prospects of cooling inflationary pressures next year, as firms adjust to new levels of demand, should provide the Bank of England with room to keep interest rates unchanged for a while longer”.

Outgoing BoE chief economist Andy Haldane last week suggested said that inflation was on track to hit 4% – double the Bank’s 2% target level. Bank of England Deputy Governor Dave Ramsden also estimated the reading may peak around 4%, double the targeted level in the U.K., indicating monetary policy might need tightening. The comments will fuel speculation that the pace of the economic recovery will cause the BOE to start debating when to unwind its stimulus program as early as their next meeting in August. Ramsden also forecast a likely surge in wage growth.

Rising interest rates will only add to the debt stree being experienced by SMEs.

Back-to-work advice criticised
The Government’s back-to-work advice to companies has been criticised by businesses and unions. Roger Barker, policy director at the Institute of Directors, said that while businesses have been “awaiting ‘freedom day’ with bated breath”, they have been presented with “a series of mixed messages and patchwork requirements from government that have dampened enthusiasm”. Saying that guidance has done “little to dispel” uncertainty about what is expected of staff and employers, he commented: “Business leaders are understandably confused as to the legal status that this guidance has”, adding: “Government needs to inspire confidence in businesses and the workforce that we can all return to work safely.”

TUC general secretary Frances O’Grady warned that back-to-work safety guidelines, “published without proper consultation with unions or employers”, are a “recipe for chaos and rising infections”. She believes that instead of providing “clear and consistent” guidance on how to keep staff safe, the government is “abandoning workers and employers.” Ms O’Grady fears that the “inadequate” guidelines will leave many employers “with more questions than answers.”

EU Climate reforms

The European Union today unveiled a huge package of climate-based reforms including an effective ban on the sale of new petrol and diesel vehicles from 2035. Under the proposals, the European Commission said it was targeting a 100 per cent reduction in emissions from cars by the middle of the next decade.

Ireland details global tax deal concerns
Irish finance minister Paschal Donohoe says the country will need more detail over proposed global corporate tax rules before deciding whether to back the reform. Ireland is among nations yet to sign up to an agreement outlining a minimum rate of at least 15%, with this higher than its own 12.5% rate. The deal has been backed by 132 of 139 countries negotiating a universal rate and Ireland said it hopes to be in a position to endorse it by an October deadline. Mr Donohoe says issues about what the base and rate would be need to be clarified. He added that another “deeply important issue” and one that required a lot of further clarification was how any agreement will be enforced and when it will be implemented.

CEOs: Cyber-attacks biggest threat to financial services growth
A PwC poll of financial services CEOs shows that they consider cyber-attacks the greatest threat to growth prospects in the industry, with 56% saying cybercrime presents the biggest challenge. This put digital crime ahead if the pandemic (51%) and over-regulation (50%). The number pointing to cyber threats as a key concern marks a jump on the 33% who flagged it as a primary challenge in 2016. John Garvey, PwC’s global financial services leader, said: “In an increasingly digital world a cyber-attack can be debilitating for any company.” The survey also saw 36% of global CEOs say they are very confident about their company’s prospect over the next 12 months.

House prices climb 10%
The average property price climbed by 10% in the year to May, with Office for National Statistics data showing that the typical value hit £254,624 as the stamp duty holiday drove demand. The figures, which are based on sales that have been completed and registered, show that homeowners making a move saw the biggest increase in prices, paying an average of £296,872 – 10.7% more than in May 2020. First-time buyers also saw an increase, paying an average of £213,336 in May – 9.5% more than May last year. PwC economist Jamie Durham said stamp duty relief was not the only factor pushing prices up, saying household savings which grew during the pandemic and continued low interest rates have supported the market. “We expect that these forces will support price growth over the coming months, though at a lower rate than we have seen in the first half of 2021,” he added, noting that he expects growth of 5-7% across the year.

Why should you become a CPA member!

Do you suffer from debt stress? 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

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. Ease your debt stress!

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!

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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.