UK insolvencies rise – business news 2 August 2021
James Salmon, Operations Director.
UK insolvencies rise 31% in second quarter. Furlough changes set to prompt redundancies. 1.1m vacancies as pingdemic drives staff shortages. Ministers back ‘no jab, no job’ policies. Private sector optimism dips. Firms optimistic but inflation fears persist. And more!
UK insolvencies rise 31% in second quarter
The Insolvency Service latest figures show company insolvencies in England and Wales increased 31% in the second quarter of 2021.
Insolvencies for the quarter ending June were comprised of 90% Company Voluntary Liquidations, 5% administrations, 3% liquidations and 1% company voluntary arrangements (CVAs).
The news comes as businesses worry how they will repay the debts that they have accrued from government loan schemes during the pandemic, with the first repayments for the Bounce Back scheme and Coronavirus Business Interruption Loan Scheme (CBILS) now due.
In the year ending June 30 2021, the construction sector saw the highest number of insolvencies with 1,801. This was followed by accommodation and food services, with 1,474 and wholesale and retail trade with 1,366 insolvencies.
The announcement of rising insolvency rates has coincided with the Begbies Traynor report we reported on last week. That report indicated that there are currently 650,000 UK companies in serious financial distress. The insolvency specialist said that, despite the ending of restrictions, businesses had struggled with regular changes to the roadmap out of lockdown.
The Begbies Traynor report also found an increase in companies with unsustainable debt levels as a result of receiving government-backed loans that they are unable to pay. It also noted increased creditor activity against companies in debt, with 14,460 county court judgements in the second quarter of the year – nearly double the figure for the same period in 2020.
If you are worried about your customers going insolvent, talk to CPA about how we can provide the credit management tools you need to avoid unnecessary exposure to insolvent companies.
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Furlough changes set to prompt redundancies
With fears that people will lose their jobs as the furlough scheme is gradually phased out, ministers are being urged to offer greater support for those made redundant.
As of yesterday, employers will contribute 20% towards the salaries of those on furlough, with the Government paying 60% whereas it had been covering 70%. A poll suggests that almost one in five companies still using the Coronavirus Job Retention Scheme (CJRS) plan to let staff go in response to the change.
The British Chamber of Commerce (BCC) surveyed 250 businesses with employees still on furlough, with 18% saying they were now likelier to make staff redundant, while 25% would reduce working hours or move staff to part-time patterns.
Jane Gratton from the BCC said the increased burden on employers as their contribution increases “will likely result in many thousands of people being released back into the labour market”. She added that it is crucial that employers and the Government “give them the support and training they need to be re-engaged and productive.”
Stuart Lewis, founder of Rest Less, a digital community for older people, has made a similar call for support for those facing redundancy and warned that he expects “a fresh wave of redundancies and another spike in unemployment levels” when the CJRS draws to a close at the end of September. HMRC data shows that 1.9m people were still furloughed by the end of June.
Union calls for furlough scheme rethink
Rishi Sunak has been urged to extend the furlough scheme beyond its planned cut-off at the end of September. This comes with the amount employers are expected to contribute set to change tomorrow, with the Government cutting wage support from 70% to 60% and employers’ contribution of the 80% furlough payment climbing from 10% to 20%.
There is concern that the shift could see some of the estimated 1.9m workers still receiving furlough payments made redundant. Union Unite has urged the Chancellor to rethink plans to wind the scheme up completely on September 30, with assistant general secretary Steve Turner saying that ending the scheme in a cliff-edge manner will “pull the rug from under the feet” of businesses and workers.
He has suggested that the initiative be reformed into a short-time working scheme to support critical sectors “through peaks and troughs, serious supply-chain problems and the transition to a greener future that’s now underway.”
1.1m vacancies as pingdemic drives staff shortages
The so-called pingdemic, which has seen a surge in the number of people told to isolate via contact through the NHS Covid-19 app, has been blamed for staff shortages.
Analysis by employment platform Adzuna shows that there are more than 1.1m positions available, with 72,000 adverts labelled as “urgent” or with companies wanting an “immediate start” for workers.
Adzuna co-founder Andrew Hunter said: “The pingdemic has hit just as businesses start to get to grips with filling open roles.” He added that while employers have struggled to fill vacancies due to workers still being on furlough, fewer overseas workers available, and a lack of skilled staff in some sectors, “the pingdemic has compounded these issues, as many jobseekers are forced to self-isolate over attending interviews or starting work.”
The Adzuna analysis also shows that almost 5,000 roles currently advertised are offering signing-on fees, with some as high as £10,000. It is noted that the 1,116,454 vacancies advertised in the week to July 25 marks the 11th consecutive week of vacancies exceeding 1m.
Ministers back ‘no jab, no job’ policies
Transport Secretary Grant Shapps has backed firms who say staff will need to be fully vaccinated before they can return to the office. He told Sky News: “It is a good idea and, yes, some companies will require it”, but said that the Government will not make it a legal requirement.
Foreign Secretary Dominic Raab has also expressed support for firms saying staff must be double-jabbed before re-entering the workplace, describing it as a “smart policy”. While the ministers have backed the so-called “no jab, no job” policy, questions have been raised over the legal ramifications, with advice from the Chartered Institute of Personnel and Development telling employers it could be “an intrusion on an employee’s body and may discriminate on the basis of disability, or religious or philosophical belief”.
Guidance to employers from the Advisory, Conciliation and Arbitration Service said bosses should be careful to avoid discrimination with vaccine policies. Unison’s Christina McAnea said the Government should not encourage “coercion” when it comes to employees getting the vaccine and Rob Miguel of union Unite said the matter is “embroiled with issues such as equalities, human rights, privacy and ethical breaches”.
Private sector optimism dips – Lloyds
A survey by Lloyds Banking Group shows that while firms are stepping up recruitment plans and increasing wages, optimism in the private sector has peaked. Its monthly business barometer found that hiring intentions climbed for a sixth consecutive month, hitting the highest level since November 2018.
It was also found that 27% of respondents expect pay growth of 2%, compared with 24% last month. However, of the 1,200 companies polled, the proportion of those feeling confident was 30% higher than those who were pessimistic – with this a decline on the 33% recorded previously. Optimism in the economic outlook fell from 36% to 32%.
Firms optimistic but inflation fears persist
A BDO poll of 500 medium-sized businesses shows that 74% plan to invest and 58% expect sales to return to pre-pandemic levels in the next 12 months.
It was also found that 99% expressed concerns about rising inflation, with 19% saying it may delay growth plans, 24% warning it may result in higher prices, and 15% suggesting it may mean staff cuts. On employment, 58% have roles they cannot fill and 34% warned of a skills shortage.
BDO’s Kaley Crossthwaite commented: “While the resilience of medium-sized businesses means their outlook is more upbeat, the pressures of staff shortages, creeping inflation and long-term infection trends should provide a heavy dose of realism to any forecasts.”
BoE set to stick with QE despite inflation fears
The Bank of England is set to keep pumping money into the economy despite fears over rising inflation, Tom Harmsworth in the Mail reports. While the UK economy is on course to expand by 7% this year, inflation is climbing, hitting 2.5% in June and forecast to go further beyond the Bank’s 2% target, with some analysts saying it could climb to 4% later in the year. Mr Harmsworth says the rise has put the Bank’s quantitative easing (QE) programme in the spotlight, with its Monetary Policy Committee (MPC) “increasingly at odds over what to do next”. The debate, he suggests, “is a tricky one”, as pulling support too quickly could hurt the post-pandemic economic recovery. Despite concerns being voiced by some members, analysts expect the MPC to continue with the current policy until QE reaches £895bn in December.
Pandemic drives remote working revolution
Louise Eccles and Sabah Meddings in the Sunday Times reflected on the impact the pandemic has had on working patterns, saying it has prompted a revolution that will see the 3:2 model – where staff spend three days in the office and two at home during the working week – likely become the norm for many workers.
A YouGov poll of 1,061 senior decision-makers shows that just 19% of bosses say their company will require all staff to come in five days a week after the pandemic, while another 19% plan to let staff choose whether to come in at all and 69% will allow workers to do at least some of their work remotely.
The Institute of Directors said two-thirds of business leaders will allow at least one day a week of remote working. PwC said it expects workers to be in the office or with clients between two and three days a week from September, with flexible working set to be the “norm rather than the exception”. Chairman Kevin Ellis said: “We expect the balance will be two to three days a week in the office, giving people sufficient time to learn, network and socialise”.
Labour eyes employment status reform
Writing for the Observer, Shadow Secretary for Employment Rights and Protections Andy McDonald says the weakness of employment rights and an imbalance of power between workers and employers “has gone unaddressed for too long”, with the pandemic making the “need for urgent change clear”. He argues that a “root cause” of issues is the UK’s system of separate employment statuses, voicing concern that each of the four groups has different rights. Mr McDonald details Labour’s plans to create a single status of ‘worker’ for everyone but the genuinely self-employed, with this removing qualifying periods for basic protections “to give workers rights in their job from day one”. The reform, he notes, would see all workers receive sick pay, national minimum wage entitlement, holiday pay, paid parental leave, a right to flexible working as a default and protection against unfair dismissal.
Amazon
The European Union fined Amazon €746m ($886m) for failing to comply with the bloc’s data-protection GDPR rules. The penalty is the latest blow in a few days of rough news for the E commerce giant On Friday its share price fell after it revealed that sales growth had slowed by more than expected as the world emerged from lockdown.
Meggitt
The UK defence firm has agreed an American takeover by Parker-Hannifin for £6.3billion. The employer 0f 9000, 2300n the UK produces specialist components has been promised jobs will be protected.
HSBC
HSBC said its first half profit has more than doubled, as it benefited from an economic rebound in Britain and Hong Kong. Europe’s biggest bank by assets saw pre-tax profit for the period rise to $10.8bn (£7.8bn), compared to $4.32bn for the same time last year. The UK-based bank said all regions had been profitable in the period.
Victoria’s Secret UK goes into liquidation
Victoria’s Secret UK has gone into liquidation. The UK arm of the lingerie retailer went into administration after sales plummeted during the coronavirus lockdown. A spokesman for administrators Teneo said a judge at the Insolvency and Companies Court has approved a move into liquidation, noting that this will enable dividends to be paid to creditors. Announcing the retailer was going into administration last year, Rob Harding, joint administrator at Deloitte, said it highlighted the toll the pandemic was taking on the retail industry.
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