Category Archives: Economic Climate

Business, Business Headlines, Economic Climate, News, Other News

44% Of Hospitality Businesses Operating At A Loss

Leave a comment

A new survey of 250 senior decision-makers within UK hospitality businesses has found that:

  • 44% of businesses are operating at a loss, with 53% impacted by rising cost of goods and 50% by higher energy bills
  • 70% feel they will have to increase prices to survive, while a third (34%) do not think their business will survive the next 12 months

Over two fifths of the UK’s hospitality businesses are operating at a loss, with the vast majority eyeing price increases during the next year, new research by Peckwater Brands has found.

Europe’s largest virtual food brand operator commissioned an independent survey of 250 decision-makers in senior management positions within UK hospitality businesses (restaurants, takeaways, cafés and bars). It found that 44% are currently operating at a loss.

A third (34%) of hospitality leaders do not think their business will survive the next 12 months, while 70% expect they will have to increase prices within that timeframe.

The study found that more than half of hospitality firms have been negatively impacted by the rising cost of goods (53%), with a similar number affected by record energy bills (50%). A third (34%) are struggling with higher interest rates, while 29% struggle with increased commercial rents. Most (55%) are struggling to find enough staff to operate effectively.

Inflation is not just ramping up hospitality businesses’ costs – the majority (70%) say customers are spending significantly less than they were 12 months ago.

Sam Martin, CEO of Peckwater Brands, said: “Conditions for hospitality businesses are undoubtedly tough, with record food inflation, skyrocketing energy bills and falling consumer spending all having a notable impact. Our research shows lays bare the stark reality; so many establishments are loss-making and many fear for their survival.”

“Unfortunately, the challenges facing the hospitality sector will not disappear any time soon. Raising prices might be the only option available to many businesses, but with consumers wrestling with a cost-of-living crisis and seeking out lower prices wherever possible, this action could damage their customer bases.”

“Just as during the pandemic, hospitality businesses must rely on ingenuity, efficiency and innovation to survive, let alone thrive – they must seek out all opportunities available to them, whether that is to lower costs or find ways of boosting revenue and order volumes, such as improved marketing or operating secondary virtual food brands out of their kitchens. One can only hope that in the coming months, inflation falls sharply and overheads drop, ensuring hospitality firms are not forced to close their doors. If they were, local high streets would be greatly diminished, as would the UK economy.”

Economic Climate, News, Wakefield

Wakefield To Host Its First Climate Summit

Wakefield Council is hosting its first Net Zero summit as it continues its aim of reducing carbon emissions across the district, to help address the climate emergency.

‘Wakefield District Partnership For Net Zero’ will take place on 7 March at Tileyard North, Wakefield.

Around 100 people, representing a range of organisations and businesses are expected to attend. LNER, OE Electrics, Enfinium, Ardagh Glass and housebuilders, among them Barratt Homes, Redrow and pure Haus, will be there, along with community groups including Just Transition Wakefield and Wakefield Cycle Forum.

The Council has also announced it has signed the Yorkshire and Humber Climate Action Pledge, one of only a handful of councils to have done so.
Councillor Jack Hemingway, Cabinet Member for the Environment and Climate Change, said: “We are already seeing the effects of climate change and we have no time to waste.”

“We have set ambitious carbon reduction targets, both for the Council and the district, and we know that to make progress we need to work together.”

“I am delighted that this event will bring together businesses, charities and voluntary groups to share ideas, learn from each other and set out how we can work collaboratively on our shared path to net zero.”

Wakefield Council declared a climate emergency in 2019 and published its Climate Change Action Plan in 2020, which set a target of becoming a carbon neutral organisation by 2030 and helping the district reach the same goal by 2038.

The Council commissioned an expert report, Pathway To Net Zero, published in 2022, which sets out how the district can reach net zero. The report’s recommendations will be discussed at the summit, followed by targeted workshops focusing on specific sectors.

Organisations attending the event will be encouraged to sign the Yorkshire and Humber Climate Action Pledge, as the Council has done.

The pledge, developed by the Yorkshire and Humber Climate Commission, is the first regional pledge of its kind in the UK. The aim is to create a movement of organisations who recognise action needs to be taken, to protect the region from climate impacts and unlock the benefits of a green economy.

Those signing the pledge commit to action in four areas:
• Becoming climate resilient
• Reducing carbon emissions
• Enhancing nature and biodiversity
• Ensuring jobs are protected

For more information visit here.



Business, Economic Climate, Other News

Record Liquidations A Warning To Company Owners

Record numbers of company liquidations should serve as a warning to business owners bracing for a recession to act early, according to one of the country’s leading restructuring and insolvency (R&I) advisors.

Latest quarterly insolvency statistics for October to December 2022 (Q4), reveal the total number of company insolvencies registered in 2022 was 22,109 – the highest number since 2009 and 57% higher than 2021.

Robert Young, R&I Director at Azets, the UK Top 10 accountancy firm expects insolvencies to keep rising throughout 2023 but is urging companies to seek help before an ‘end-of-life’ liquidation becomes the only option.

The liquidation rate in 2022 was the highest since Q3 2015, with one in 202 active companies (at a rate of 49.5 per 10,000 active companies) entered insolvent liquidation in 2022. This is higher than the previous year (2021: 32.9 per 10,000 active companies) and pre-pandemic levels (2019: 41.9 per 10,000).

Of the 5,995 registered company insolvencies on Q4 2022, there were 4,891 CVLs, 720 compulsory liquidations, 359 administrations and 25 company voluntary arrangements (CVAs).

The annual number of Creditors’ Voluntary Liquidations (CVLs) in 2022 is the highest on record, approximately 21% higher than if the pre-pandemic trend had continued.

Robert Young said: “The IMF predicts that the UK will be the worst performing of the big economies in 2023. The alarming statistics and gloomy outlook are driven by a perfect storm of working capital and supply chain pressures, as well as rising interest rates and reducing consumer confidence. Business leaders must remain alive to the pressures and must manage their finances – and their stakeholders – very closely.”

“In times of economic decline, we expect to see the number of insolvencies increasing. However, it is the number of liquidations that is of particular concern as this highlights the high number of businesses ceasing to trade. Liquidation is an end-of-life process and should be avoided at all costs, as this is very rarely of benefit to the creditors and employees.”

“Spotting the warning signs and seeking early advice is absolutely crucial as this will ensure that the widest range of options is available and will maximise the chances of survival.”

Business, Economic Climate, News, Other News

Administrators Appointed At Bluespot Furniture Ltd

James Sleight and Oliver Collinge of PKF GM were appointed as Administrators of Bluespot Furniture Ltd on 20 January 2023.

Bluespot Furniture was a long-established UK furniture manufacturer in the commercial interiors, student accommodation, build-to-rent and house building markets. The Company designed, manufactured and installed furniture from production facilities in Dewsbury.

Following a sustained decline in turnover and the sale by its landlord of its trading premises the Company ceased trading, with the redundancy of its entire workforce, prior to the appointment of Administrators. The Administrators are now arranging for a sale of the Company’s remaining assets.

James Sleight, Joint Administrator said: “Unfortunately the demand for office furniture was understandably very low during Covid and is not expected to recover to pre pandemic levels.”

“The Company had obtained support under various government schemes during the pandemic and with low demand, rising costs and pandemic debt to repay, the directors did not feel the business was sufficiently viable to justify continued trade.”

“Following our appointment we are now supporting employees in accessing government redundancy support and seeking to maximise realisations through a disposal of the remaining Company assets and collection of its book debt ledger”

“This is the second appointment over an office furniture manufacturer we’ve had since the pandemic. This sector is clearly experiencing significant challenges with the rise in hybrid and home working.”

Business, Economic Climate, Other News

Yorkshire Firms Need Flexibility During Challenging Times

Rising inflation, increased geopolitical risks and talent shortages all form part of the perfect storm facing business over the next 12 months. Business leaders must maintain a dual focus on short-term priorities to survive, and longer-term priorities to thrive, according to HLB’s annual Survey of Business Leaders 2023.

This year’s research explored how businesses across the world are grappling with a series of ‘low-probability, high-impact’ events.

KEY FINDINGS:

  • 82% see inflation as the top risk to business with 35% naming talent acquisition as the primary weakness they need to improve this year.
  • Almost half (48%) of business leaders are focusing on operational efficiencies while at the same time investing to innovate and grow.
  • Flexibility is seen as the top leadership behaviour in times of crisis, followed by integrity and accountability.
  • 51% are rethinking their ESG responsibilities but there is still a way to go for business leaders to embrace the opportunities of effective ESG.
  • 52% plan to accelerate new technology adoption to improve workforce productivity. Respondents identified AI (50%), cloud (47%), and renewable energy technologies (40%) as the most important for businesses over the next 5 years.

Marco Donzelli, HLB Global CEO said: “The pandemic coupled with the knock-on effects of the War in Ukraine has challenged the resilience and agility of companies, with many having to swiftly adapt their strategy, business model and ways of working. What is clear from the research is that stakeholders demand that a company guides the way forward with a flexible mindset based on a clearly defined purpose and a strong emphasis on ESG matters.”

Through almost 600 responses from over 60 countries, HLB looked at some of the critical leadership behaviours needed during a crisis, the type of actions CEOs should prioritise for 2023, and the benefits of longer-term thinking for future success.

Corporate Agility
The findings show that flexibility is the top leadership trait needed in times of crisis and must be seen in areas such as talent acquisition, digital capabilities, and supply chain management. 47% are focusing on short-term and longer-term priorities simultaneously. Almost half of business leaders are juggling operational efficiencies for today with investing to innovate and grow for tomorrow.

Fostering Credibility And Trust
Integrity is the second highest rated leadership behaviour selected by respondents in our survey. Leaders must be credible to foster trust among their stakeholders. 69% agree that they have clearly defined, communicated purpose and 43% are making progress on their journey to become carbon neutral over the next five years.

Sustainable Thinking
Accountability is the third highest-ranking essential behaviour for successful leadership in times of crisis. Leaders surveyed are well along the maturity curve towards a more purpose-led business strategy and are looking to redefine ESG goals. Among our survey respondents, 15% claim to be entirely purpose-led and 37% try to meet wider stakeholder expectations in their ESG goals.

Yet, our data also suggests that not all leaders are as committed. 40% of respondents only do what is required by regulators. 8% disregard ESG entirely, rather than use it as an opportunity to innovate and grow.

Business, Business Headlines, Economic Climate

Directors Need To Get A Grip Or Risk Ship Sinking

Leave a comment

Business directors in UK SMEs need to get an urgent grip on financial forecasting if their companies are to better weather the economic downturn.

The call to action is sounded by Chris Tate, a restructuring and insolvency partner with Azets, the UK Top 10 accountancy firm.

He said: “While many company directors are switched on with finances, there are others who labour under the misapprehension that they are untouchable – and wrongly think there are no legal consequences to their failings.”

“What my profession is seeing are businesses, including ones with potential, burning up because directors failed to do core ‘dashboard’ cashflow forecasting and other management information (MI).”

“Directors urgently need to get an urgent grip on the financials – or run the risk of sinking the ship.”

“That includes raising their game with forecasting, including understanding that profit on the monthly profit-and-loss spreadsheet is not profit until the money is banked, the invoices having been paid by debtors.”

“With cashflow forecasting, the aim is to ensure there is money set aside to meet peak liabilities, such as suppliers’ bills, quarterly VAT demands and rent, in particular months.”

“It is shocking how many directors don’t even know their own company’s actual monthly or weekly costs and the level of cash headroom they have – that is a good starting point with MI.”

Latest insolvency figures show the number of registered company insolvencies in December 2022 was 1,964, a 32% increase on the previous year (1,489 in December 2021) and 76% higher than in December 2019 (pre-pandemic; 1,119).

Of those, there were 183 compulsory liquidations in December 2022, more than three and a half times as many as in December 2021 and 8% higher than in December 2019.

Chris added: “Amid acute pressures, the UK economy is reportedly set to be the second worst performer in 20 of the world’s largest economies over the next two years.”

“These pressures have been caused by the severest energy crisis since the 1970s and other corrosive factors such as 41-year high inflation, the pandemic, increased borrowing costs, labour shortages, supply chain disruption and what is set to be the biggest fall in living standards in six decades.”

“According to data, the UK economy will only regain its pre-pandemic level by the last quarter of 2024, such are the confluence of impacts. Given this perma-crisis backdrop, it is going to be a rough ride for many local businesses in 2023.”

“Therefore, directors cannot afford to take their eye off the ball – they have a duty to their employers, customers, suppliers, and the wider community. It is a responsibility that cannot be taken lightly or nonchalantly shrugged off.”

Chris raised concerns about directors who leave it too late to call in turnaround and restructuring experts.

He said: “I’m increasingly having conversations where directors are burying their heads in the sand. You get this panicked call, you attend the meeting, and you say ‘we need to do X, Y and Z’ – then it goes deathly quiet. Then, almost always, it is followed up by a panicked call three weeks later where the position has deteriorated further.”

“The problem is time is a key element when we are producing a strategy and we need time to implement it, so leaving things to the last minute does not help. It simply narrows the options even more.”

“I also get approached with ideas from directors as to ‘maybe we could do this’ – but often it is not compliant and must therefore be disregarded. Directors need to act appropriately, take advice at the right time, and they need to act on that advice. They are personally liable for certain actions, or a lack of actions – personal guarantees being an example as they are the hook for the debt.”

“But there are less obvious ones, such as wrongful trading and misfeasance and other antecedent transactions which may be open to challenge once a company enters an insolvency process. You also have new measures, including powers by the Insolvency Service to pursue directors of dissolved companies if there is evidence of wrongdoing.”

“There are also personal liability notices, where HMRC can pursue directors personally in respect of non-payment of employers’ national insurance contributions.”

“Directors can be emotional – they do not want to admit their business is failing, it is a sense of pride, and they don’t want to accept when things go wrong. It is great when everything is doing well and hunky dory but when things slide, there is this sense of panic and if they don’t have help the stress of the situation will only worsen. We actively encourage early engagement.”

With economic data increasingly pointing to a protracted downturn, Azets produced a financial defence toolkit to help businesses. Find out more here

Business, Economic Climate, Economic Climate Headlines

Calm Before The Storm For Yorkshire Businesses

‘Calm before the storm’ as Yorkshire businesses warned to brace themselves for crippling impact of inflation and energy bill support cuts.

Businesses in Yorkshire and across the country are being warned to expect severe financial difficulties as record-high inflation and a sharp rise in energy costs are set to compound the recession and worsen economic prospects for the year ahead, with smaller businesses at the highest risk of financial collapse.

The latest Red Flag Alert data, published by leading independent business rescue and recovery specialist Begbies Traynor, reveals that business distress had flatlined in the final quarter of 2022, with buoyant pre-Christmas retail sales, the World Cup and government support for energy costs helping to boost retail sales and the wider economy.

Some 35,000 Yorkshire companies suffered early stage financial problems, such as having county court judgements of less than £5,000 served against them, in Q4 2022, the same as in the previous quarter and 2% up on the final quarter of 2021.

Nationally, more than 610,000 businesses suffered ‘significant’ distress in Q4 2022, equal to Q3 2022.

Julian Pitts, regional Managing Partner for Begbies Traynor in Yorkshire, said: “Unfortunately, despite some pre-Christmas consumer optimism, Britain is now mired in what looks certain to be at least a year-long slump, driven by rising prices and escalating business costs that are putting the brakes on economic activity.”

“The government’s plan to cut support to most businesses for their energy bills from April will compound the reined-in consumer spending and ensuing slowdown in demand that is now very likely to cause widespread and serious financial problems, particularly for smaller businesses, across Yorkshire and beyond.”

Sectors that have been worst hit by financial distress and have the largest number of firms in financial difficulty include construction, real estate and property services, and support services, each of which account for almost 5,000 of the 35,000 distressed businesses in Yorkshire.

Industries which saw significant increases in distress since Q3 2022 include manufacturing (a 9% rise) and printing and packaging (a 15% rise).

Julian Pitts added: “These are perilous times for small firms and it is essential for owner managers to be alert to financial problems, and seek professional help sooner rather than later if they begin to struggle, to avoid problems escalating.”

Business, Business Insights, Economic Climate, People

Salaries Fall Despite Cost Of Living Crisis

Data suggests UK businesses feeling the pinch, but firms’ competitive standing could be at risk

Employers are feeling the pinch as economic uncertainty remains in place across the UK, with salaries falling across the professional labour market. However, firms risk being on the back foot once the recovery begins if they don’t invest in talent now. That’s according to the latest data from the Association of Professional Staffing Companies (APSCo) – the trade body for the professional recruitment sector.

The data – provided by the global leader in software for the staffing industry, Bullhorn – revealed an expected seasonal decline in hiring towards the end of last year. Permanent jobs dropped 15% and contract vacancies fell 22% between December 2021 and December 2022.

Although this decline is to be expected, it is the fall in remuneration which paints a more concerning picture at a time when skills shortages are rife. According to APSCo’s data, average permanent salaries also fell in December 2022, down 6% when compared to the same period in 2021.

While this drop in salaries is indicative of the economic uncertainty the country has faced, with staff across the UK facing a cost of living crisis this fall will be cause for concern for households. According to APSCo, businesses need to look at wider remuneration packages to attract and retain the highly skilled resources they need both now, and once the UK economy recovers.

Ann Swain, Global CEO of APSCo comments: “December has long been a quieter month for recruitment activity. However, while there has certainly been a decline in hiring noted, the fall in average permanent salaries paints a more concerning picture. There is still significant pressure on the labour market, particularly for highly skilled professionals.”

“Businesses and recruiters alike shouldn’t fall into the trap of believing the labour market has swung back in favour of the employer just yet. The power is still very much in the hands of the candidates, and without appropriate remuneration packages in place, access to crucial resources will become increasingly limited for firms.”

Business Headlines, Economic Climate, News

One In Ten UK Small Businesses Struggle To Meet HMRC Tax Deadline

Leave a comment

For business owners in the UK, January is marked by the height of the tax return season – and the associated stress and confusion. As of November 2022, only one third of SME owners had submitted their tax return, with a tenth (9%) saying they’ll struggle to pay their tax bill on time.

A survey of over 600 small business owners from small business insurance provider Simply Business found that 5% of small business owners in the UK take a week or more to complete their tax return. One tenth (11%) state that there is not enough support available for small business owners who are struggling to fill their tax return effectively, and well over half (58%) of small business owners have always forked out for accounting services to aid in the process.

Tax returns are just one of the many challenges facing SME owners in the New Year, with a quarter (26%) worried that, quite simply, they will not be able to pay their tax bills in 2023.

Concerns including a decline in sales in the new year (43%) and spiralling inflation and interest rates continue to mar the SME landscape, while a fifth (22%) of respondents stated their worries about the supply and material shortages caused by the ongoing geo-political unrest.

As a result, 15% have no confidence in their business heading into the New Year with the reality of the cost-of-living crisis also affecting the way that SMEs can prepare for 2023. Three in ten (28%) say they’re unable to plan or budget due to uncertainty, a tenth (10%) have been unable to order stock and three in five (60%) say their profit margins are down.

Alan Thomas, UK CEO at Simply Business, commented: “The tax return season can be a really stressful period for small businesses in the UK, specifically because they don’t feel they have the necessary support from HMRC. As a result, many are being forced to hire external support, adding to the list of outgoings.”

“Of course, it is a vital part of being self-employed, but more time spent on complicated tax returns takes away from investing time and money in their businesses. More guidance is needed from HMRC to make sure that the process is straightforward and as painless as possible.”

Business, Economic Climate, Leadership, News, People

Businesses That Fail To Prioritise Talent Will Struggle To Survive

The UK is in the midst of an employed recession where the economic climate is tough but skills are in short supply. According to a recent report by APSCo OutSource – the trade association for Recruitment Process Outsourcing, Managed Service Providers, Statement of Work and Managed Projects – businesses need to strike the right balance between cutting costs and retaining, growing and attracting skills.

As part of its newly launched OutSource Knowledge Hub – which brings together insight from experts across Adecco UK&I, Allegis Global Solutions, AMS, LinkedIn, Page Outsourcing, Magnit and Resource Solutions – APSCo OutSource has analysed how businesses can best survive an employed recession.

According to the Hub, there are five immediate actions that employers need to focus on in the current environment to stay ahead of the curve:

  • Don’t let fear-mongering influence decisions: The knee-jerk approach to cost and resource cutting that happened at the start of the pandemic and in previous recessions has had a long-term detrimental impact on economic growth. During this employed recession, businesses need a skills-led strategy, rather than a procurement-led approach.
  • Focus on the skills agenda: Maintaining a focus on skills growth is crucial even in a tough economy. Companies need to focus on redeploying and retraining resources rather than losing them altogether in order to bolster crucial skills that are in increasingly short supply.
  • Stop ignoring what candidates are saying: Authenticity is key in today’s economy and employers need to not only show that they are listening to what talent pools are saying, but are also making tangible changes as a result.
  • Accept that flexibility is here to stay: Demand for flexibility won’t go away, regardless of the preferences of the C-Suite. Firms need to embrace fluid working styles rather than trying to shoe-horn candidates into old-fashioned setups that simply won’t work.
  • Change leadership styles: Leading and inspiring a workforce that’s more flexible requires a new management style that’s led by a ‘trust contract’ where staff are given the autonomy to choose how and where they work.

Melanie Forbes, Managing Director, APSCo OutSource, commented: “For the first time ever, the talent acquisition and outsourcing market is facing a scenario where it isn’t reflecting broader economical trends.”

“History has shown that a sudden contraction of the recruitment market is a precursor to economic uncertainty, recession or a financial crash. In the final quarter of 2022, the UK economy – and indeed many global markets – were facing high inflation rates and economic instability. In comparison, demand for talent remained above pre-Covid levels while skills shortages were still being widely reported. In this climate, we’re all facing a rebalancing of the workforce where talent commands more control of when, where and how they work.”

“The year ahead may be an uncertain one, but there’s one fact we can all agree on: the ball is very much in the court of talent. As businesses face a rebalancing of the workforce during the employed recession, those that keep talent top of the list of priorities will be the ones to bounce back stronger.”