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Opinion
Business warns of ‘perfect storm brewing’
We are advising members to have a survival plan in place as the UK goes through the Brexit negotiations. Reacting to last month’s poor Productivity
and Trade data, which show that the UK’s total trade deficit widened by £2bn between May and June of this year, we are concerned that the eyes of both the government and business are too heavily focused on Brexit and not enough on getting Britain trading. The latest data covering manufacturing, productivity and trade, together with the Bank of England’s Inflation Report are all telling us that businesses are likely to face difficult economic times in the coming two years. Yet the government appears to have just
one thing on its agenda: Brexit. Many firms have the impact of increased business rates to contend with, but the government website to help with appeals is not working. Additionally, many firms face upheaval to
comply with the new Data Protection requirements, which are being rushed through to align with European rules, but with no clarity on how they will affect them. Last month's data, released by the Office
for National Statistics, makes poor reading for the production sector, with output and manufacturing reportedly falling in the second quarter of this year. Three key aspects that need addressing are: stable conditions, opportunities, and skills. The impact of Brexit on the pool of skills
available to firms will be addressed in the negotiations.
Ian Cass Chief executive, the Forum of Private Business
Mixed signals given by insolvency stats
Total company insolvencies increased by 12.6% from the first to the second quarter of the year, according to the official Q2 2017 England & Wales Insolvency Statistics. However restrictions on what travel expenses self-employed people can claim for tax purposes led to the one-off liquidation of 1,131 personal service companies, which had been set up for tax purposes. Without these, corporate insolvencies fell 15.4%, and are 4% lower than this time last year. Adrian Hyde, president of R3, said:
“Once you strip out another one-off wave of liquidated personal service companies linked to tax changes, a recent run of quarterly increases in underlying insolvency numbers has been checked back sharply. “The figures are pretty surprising given
insolvency practitioners have been reporting a tougher time for businesses in 2017. “The unexpected drop in inflation last
month is one hint that things may have eased up for businesses since the end of 2016, and while the Bank of England has been warning about rising consumer debts, businesses will still be benefitting from debt-fuelled spending in the short-term at least.” He added there were other factors which
might explain the sharp underlying drop, including the introduction of new insolvency rules in April. Some formal insolvency processes may be being delayed while creditors, debtors, and others get used to the new decision-making procedures. He said: “As ever, it is important not to
read too much into a sudden change in one quarter. Prior to this quarter, insolvencies had been rising more consistently than they have done since just after the financial crisis and there are still lots of warning signs for businesses out there. Higher inflation means
higher input prices for businesses on the one hand and squeezed disposable incomes for consumers on the other. Added to this mix is wavering consumer confidence, while the election outcome and Brexit negotiations may cause uncertainty for businesses, too. “On top of all this, businesses have had
some significant increases in fixed costs over the last year. The pound’s travails have raised some import prices, while the 2016 introduction of the national living wage means the minimum wage is now £1 higher than it was in 2015. Some businesses have seen their business rates increase, while more and more businesses have had to com- ply with pension auto-enrolment. Although the economy is growing, it will need to grow fast enough to balance these factors out. “If this decrease turns out to be a blip in
an upward trend, it would be a warning sign for the wider UK economy, especially as businesses continue to enjoy some key advantages: interest rates remain at record lows, while creditor forbearance among traditional sources of business finance, like banks and trade creditors, is still much higher than it was before the financial crisis. “Recent research by R3 found that nearly
80,000 UK businesses would be unable to repay their debts if interest rates were to rise by a small amount. Many firms have limited room for financial manoeuvre.”
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www.CCRMagazine.co.uk
September 2017
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