SME’s and the pandemic- business news 1 October 2020.
James Salmon, Operations Director.
SMEs reveal how they are coping with the pandemic, Ministers look to tackle late payments, GDP figures, IOD speaks on insolvency rules, rent arrears, job cuts, the return to the office, covid-19, market and other business news.
Sorry but I was working away from my desk yesterday so i was unable to write a blog. I have tried to include some of yesterdays news with today’s post.
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.
Poll reveals climate for SMEs
Research from Aldermore Bank shows that the average small firm believes it would only survive for four months if the UK was to enter another period of lockdown.
The poll shows that if the economy were to continue in its current state, 26% of small firms could survive indefinitely, a 36% increase on April’s survey. The average SME says it has seen a 30% loss in monthly business income, this compares to 34% in April.
It was also found that 18% of smaller firms have seen their business income decrease by more than 70%. The report also shows that 69% of SMEs have taken steps to increase income amid the pandemic, with 20% increasing the amount they communicate with customers and clients, 19% moving more of their business online and 10% diversifying into a new market. While many have sought to boost income, 67% have cut costs to help cover losses, making an average saving of 25% on business expenditure.
SMEs detail pandemic impact
Conversely, a poll of UK alumni of Goldman Sachs’ 10,000 Small Businesses programme shows that 99% believe they will survive the coronavirus crisis, assuming there are no further national lockdowns. The poll saw 64% say revenue had decreased, while 44% had reduced headcount and 75% had used the furlough scheme. It was also shown that 45% of firms have changed their business model due to the pandemic, with three quarters expecting this to be a permanent change.
Ministers look to tackle late payments
Ministers are drawing up plans that would see large firms fined or issued court orders if they fail to pay smaller suppliers promptly, with the powers of the Small Business Commissioner set to be enhanced. It is estimated that SMEs were owed £23.4bn in late payments last year.
GDP slip less severe than feared
Revised figures from the Office for National Statistics (ONS) show the economy contracted by 19.8% in Q2. Although the decline in GDP hit a record level, it is less severe than initially thought, with a previous official estimate suggesting GDP fell 20.4%. The slip in GDP across Q1 was also revised, from 2.2% to 2.5%. The analysis shows that in the first six months of 2020, the economy shrank by 21.8%, exceeding a previous estimate of 22.1%. With the coronavirus lockdown shutting much of the economy, household spending in Q2 was down £80.5bn, representing a fall of 24.2%. The ONS report also reveals that households saved a record 29.1% of their income in Q2, a steep jump on the 9.6% recorded in Q1. Meanwhile, Bank of England chief economist Andy Haldane yesterday said GDP is set for another record quarter in Q3, with the economy set to expand by 20%. Elsewhere, Howard Archer, chief economist at the EY Item Club, ha s warned that low consumer confidence, concerns over unemployment and a second wave of coronavirus could mean Q4 is “more challenging for the UK economy and growth may be limited”.
Douglas Grant, Director of Conister, said: “The confirmed sharp decline of the UK’s GDP reflects the tough landscape faced by many UK businesses, especially SMEs who are having to work particularly hard to stay afloat.
For the SME sector, which is entering the final quarter with the challenges of 2019 and 2020 – Brexit and Covid-19 – bundled into one, it is vital that we continue to open new channels for distributing much needed liquidity. SMEs have shown a great deal of adaptability and resilience in the face of changing consumer behaviour and as such it is critical that the government schemes – working in partnership with specialist lenders – continue to support the sector so that we can return to pre-crisis growth levels as soon as possible and avoid the downward spiral of output and job losses.
IoD calls for extension of trading rule exemption
The Institute of Directors (IoD) has warned that the reactivation of wrongful trading rules – which were suspended to give directors breathing space amid the coronavirus crisis – could see a number of company collapses. The rules mean directors must cease trading if their business is facing insolvency and the exemption ended Wednesday, with the institute calling for it to be extended until the end of the year. IoD director of policy, Roger Barker, said the exemption coming to an end “risks opening the door to a wave of avoidable insolvencies.”
Retail rent arrears set to exceed £2bn
Industry body Revo says retail rent arrears are set to exceed £2bn, with landlords expecting to receiv e less than half of due payments for Q3. Revo says around £1.5bn of rent payments went unpaid during the first half of the year, with retail and hospitality firms holding off payments or agreeing delays due to a ban on business evictions until the end of the year, a measure rolled out to help firms hit by the coronavirus crisis. Robert Hayton, head of property tax at Altus Group, warned that landlords are being hit by a “lack of tax parity with tenants”, saying it is unfair and warning that their tax burden is “increasing exponentially through insolvencies as more properties become vacant.”
1 in 3 firms expect job cuts
A survey of more than 2,000 managers by conciliation service Acas has found that 37% of employers are likely to cut jobs before the end of the year, with the rate climbing to 60% among businesses with more than 250 staff.
More staff returned to offices in September
Analysis show s that 45% of UK office staff returned to their workplaces in September, up from 37% in August and 34% in July. The increase recorded last month came before Prime Minister Boris Johnson urged employees in England to work from home where possible to help try and contain a possible second wave of coronavirus. The data, collected by the Alphawise research unit of Morgan Stanley investment bank, reveals that the UK was lagging well behind much of Europe, where 75% of office staff had returned to the office. However, it was shown that 32% of UK office staff were working from home five days per week. Morgan Stanley said this made Britain a “notable outlier” in this area, with just 16-19% of office staff working from home five days a week across continental Europe.
Britons borrowed more and saved less in August
Bank of England figures show £21.3bn was borrowed on cards and loans in August, up from £20.9bn in July, and less was being saved. While the amount borrowed by consumers on credit cards, overdrafts and loans increased again last month, households also paid back more, meaning the net amount borrowed fell to £0.3bn. The Office for National Statistics data suggest an increasing number of Britons are finding themselves in financial difficulty and more people are having to use savings to cover their living costs or are turning to debt.
European shift continues
EY ‘s financial services Brexit tracker shows that firms in the sector are continuing to move staff and operations to Europe in the run-up to the end of the Brexit transition period, with more than 400 UK financial services roles relocated to Europe in the final weeks of the last quarter. The analysis suggests the total number of jobs leaving London is now above 7,500. The value of assets that have been transferred is estimated to be around £1.2trn, up from £1trn at the end of 2019.
Covid-19 general news
Global cases surpassed 34 million. Deaths exceed 1 million
The U.K. extended a ban on household mixing to the city of Liverpool and several other parts of northeast England.
A key public health official in London said the city is at a “tipping point.”
The U.K.’s Covid-19 outbreak is not under control with hospitalizations and death rates rising, the government’s chief scientist warned. The number of cases registered on Wednesday equaled the highest level so far in the pandemic, though there are signs that social restrictions are helping. Imperial College London said the growth in Covid-19 cases in England might be slowing down whilst the infection rate at 1 per 200 was still high. The researchers said the R number appears to have fallen since the ‘rule of 6’ was introduced.
Prime Minister Boris Johnson had to apologize after wrongly explaining his own government’s restrictions and was warned by Conservative Party rebels that he faces defeat over the government’s virus emergency powers.
The coronavirus is making a comeback in New York City as the daily rate of positive tests in the city exceeded 3% for the first time in several months.
Markets.
The FTSE 100 closed just over 0.5% lower yesterday as investors digested the latest rise in infections and deaths from COVID-19.. Overnight, the DOW rose 1.20%, the S&P 500 rose 0.83%. and the NASDAQ rose 0.74%.
Mortgage approvals hit 13-year high
UK monthly mortgage approvals hit a near 13-year high in August, supported by the release of pent-up demand as consumers resumed spending and the Government’s stamp duty holiday. Home loan approvals for August reached 84,700, the highest rate of approvals since October 2007, according to the new data from the Bank of England. So far this year, 418,000 mortgages have been approved, below the 524,000 approved in the same period last year. Howard Archer, chief economic advisor to the EY ITEM Club, commented: “August’s further rise in mortgage approvals provides ongoing hard evidence of the marked short-term pick-up in housing market activity since the easing of restrictions that started in mid-May, which released pent-up demand.” He added that the “buoyancy has been reinforced” by the Chancellor raising the stamp duty threshold until the end of March 2021.
House prices up 5% to £226,129
Data from Nationwide reveals that UK house prices were up 5% in September compared with a year ago. This marks the biggest rate of annual growth in four years. Month-on-month, prices in September were up 0.9% on August, while quarter-on-quarter, July through September saw prices climb 1.7% compared to the previous three months. The figures show that the average house price hit £226,129 in September. In London, prices were up 4.4% in Q3, with the average price in the capital hitting a record high of £480,857. Robert Gardner, Nationwide’s chief economist, said the rebound in prices “reflects a number of factors”, adding: “Pent-up demand is coming through, with decisions taken to move before lockdown now progressing.” Chancellor Rishi Sunak’s stamp duty holiday, which runs until the end of March 2021, was also noted as a factor in increased market activity. Howard Archer, chief economist at the EY Item Club, described the spike in house prices as “unsustainable”, saying he expects the market to “come under pressure” over the final months of 2020 as the furlough scheme concludes, adding that the pressure could stretch into 2021 as the stamp duty holiday comes to an end.
Charity boss leads review into property valuations
Peter Pereira Gray, chief executive of the investment division of the Wellcome Trust, will oversee an independent review of property valuations commissioned by the Royal Institution of Chartered Surveyors. He will assemble a panel that is expected to include lawyers and auditors. The Times notes that the ICAEW has voiced concern about the treatment of property valuations in accounts, saying: “We sometimes find there is very little evidence to support valuations.”
Brexit
Almost three weeks ago the European Union set Boris Johnson’s government a deadline of today to withdraw clauses in its internal-market bill. Those clauses seek to override provisions relating to Northern Ireland in the Brexit treaty that was ratified in January. But Michael Gove, Britain’s cabinet-office minister, is refusing, arguing that the clauses are a safety-net to protect trade between Great Britain and Northern Ireland if no trade deal is agreed by the end of December.
Ministers expect the bill, which has already been criticized by Johnson’s predecessors, to be savaged in the House of Lords.
Members of Parliament are set to vote once again whether to back the government’s plans to override parts of its Brexit agreement with the EU. Amid concerns that the move would break international law, ministers have agreed to give Parliament a say before ever using the powers they would be granted by the Internal Market Bill. The legislation is expected to pass before going to the House of Lords.
Bank of England Governor Andrew Bailey, meanwhile, urged the two sides to come to an agreement or both stand to see their economies suffer.
Government warned of fraud risk on loan scheme
The British Business Bank warned the Government that its Bounceback Loan Scheme carried a serious risk of fraud, with then chief executive Keith Morgan writing to Business Secretary Alok Sharma ahead of the initiative’s launch in May to voice concern that it carried “very significant fraud and credit risks”. Mr Morgan warned that the scheme, which was rolled out to support small firms hit by the coronavirus crisis, was “vulnerable to abuse by individuals and by participants in organised crime.” He cited a draft review by PwC which deemed the risk of fraud as “very high”. Mr Morgan, in a second letter later in May, also raised concerns about the Government’s Future Fund, which invests in start-ups.
5G
Finnish firm Nokia Corp has extended its strategic relationship with BT Group into the 5G arena and will become the UK firm’s largest equipment provider. Nokia will provide equipment and services at BT radio sites to help evolve the company’s radio access network to 5G. Nokia already powers BT’s network in areas such as Greater London, the Midlands and rural locations, but this will extend to cover multiple cities across the UK.
Royal Dutch Shell
Royal Dutch Shell will cut 9,000 jobs, close to 10% of its total workforce. Only 1,500 of those job cuts are through employees taking voluntary redundancy. Shell, which had 83,000 employees at the end of 2019, said the job cuts will save it as much as $2bn per year by 2022. In August Shell launched a broad review of its business aimed at deeply cutting costs as it prepares to restructure its operations as part of a shift to low-carbon energy.
Disney
Walt Disney Co. is laying off 28,000 workers in its U.S. resort business, the latest sign that travel and other communal experiences will be slow to recover from the pandemic.
Greggs
Greggs yesterday said it bounced back from a “slower August” but warned of a job losses to cut costs as the UK government’s furlough scheme draws to a close. In September, like-for-like sales in company-managed shops improved to 76% of the level seen in 2019. Greggs explained it saw “higher levels of activity” compared to a “slower August”. Since it re-merged from the Covid-19 lockdown in July, like-for-like sales in company-managed shops have on average sat at 71% of 2019 levels.
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.
You put up with the PAIN – now claim the GAIN!
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.
Did you know that your business is entitled to a minimum of £40 for every commercial invoice paid late to you over the past 6 years?
How many of your invoices are paid late each month – 20, 50, 100 or more?
At £40 per invoice that’s claim of £57,600, £144,000, £288,000 plus interest. The more invoices the bigger the claim!
At £100 per invoice it’s £144,000, £360,000, £720,000 plus interest.
For over 20 years, CPA has calculated and recovered Late Payment Compensation on behalf of Clients!
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.
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.