News in brief
3 June 2020: UK household borrowing at record low; house prices fall 1.7%; Bounce Back Loan Scheme borrowing hits £21bn; new dawn for solar power projects; Government sets out ESEF Regulation position; COVID-19 pension scheme auditor guide launched.
British household borrowing retracted at a record rate in April while mortgage approvals plunged to their lowest since 1993 as consumers reduced their appetite for debt while the economy faces coronavirus. Instead of borrowing, households repaid their debts at a record pace, returning £7.4bn to banks in the largest net repayment since records began, Bank of England figures reveal according to City A.M. Meanwhile, mortgage approvals fell to just 15,800 in April, some 80% below the February level.
House prices fell 1.7% in May from the previous month, the biggest monthly drop for 11 years, according to the Nationwide. Annual house price growth halved from 3.7% to 1.8%, as the coronavirus crisis hit market activity, while residential property transactions fell 53% in April compared with 2019, according to the BBC.
UK small businesses borrowed over £21bn through a government-guaranteed coronavirus programme in May, far outstripping other support schemes. The Treasury confirmed that lending under the Bounce Back Loan Scheme had risen to £21.3bn by 31 May, up from £18.5bn pounds on 24 May, Reuters reports.
Building new solar power projects would generate cheaper electricity than running most of the world’s existing coal power plants would, according to a report from the International Renewable Energy Agency. The figures show that more than half of the world’s coal plants could be undercut by the falling cost of new large-scale solar projects, which are now more than 80% cheaper to build than in 2010, according to the Guardian.
The government has now set out its position on how the European Single Electronic Format Regulation requirements will affect the directors' sign-off process for accounts of UK-incorporated issuers. The FRC says the government's note also addresses whether directors must consider the Inline eXtensible Business Reporting Language tagging when confirming the accounts meet the requirements of the Companies Act 2006 and give a true and fair view of the company’s financial position.
A new guide has been launched to support pension scheme auditors navigate the additional challenges they face as a result of the COVID-19 pandemic. Pension scheme trustees and accounts preparers should also find the ICAEW guidance helpful.
2 June 2020: business wants green COVID-19 recovery plan; manufacturing industry in emergency bailout call; Smith & Williamson/Tilney merger nears completion; pandemic to accelerate technology uptake; pubs with beer gardens to open first.
More than 200 top UK firms and investors such as Lloyds Bank and Asda are calling on the government to deliver a COVID-19 recovery plan that prioritises the environment. In a letter to the prime minister, the companies urged ministers to use lockdown as a springboard to propel a green economy. Proposals included driving investment in low carbon innovation, infrastructure and industry, the BBC reports.
Manufacturing industry leaders have asked the government for an emergency bailout as COVID-19 forces UK factories to a virtual standstill. Industry group Make UK says the ongoing crisis has pummelled production levels, putting more firms on the brink of collapse. It requested ministers step in with direct state support to ensure the short-term survival of firms, according to the Guardian.
The £44bn merger between Tilney and Smith & Williamson is nearing completion under a revised transaction structure, which will see private equity firm Warburg Pincus co-invest in the business alongside existing investor Permira. The move follows intervention earlier this year by the Financial Conduct Authority which, in addition to disruption caused by the coronavirus pandemic, held up the merger as the regulator identified "a number of issues" with the previous terms of the deal, Professional Advisor reports.
The coronavirus crisis is likely to accelerate the adoption of technology within financial services, according to an EY poll of more than 200 financial services firms. Almost two thirds of respondents think the workplace will fundamentally change after the pandemic with a further 30% expecting moderate change, reports City A.M.
Pubs with beer gardens are tipped to be among the first wave of hospitality sector venues to reopen when the COVID-19 restrictions are eased, the Environment Secretary has confirmed. George Eustice said there would be no changes until “at least” July when he expected pubs and restaurants with outdoor areas to be the only ones able to welcome customers again, according to ITV.COM.
1 June 2020: MPs call for extended SESS; UK car manufacturing down 99.7%; Chancellor tipped to extend furlough scheme; British manufacturers face mass redundancies; lenders approve 1.5 million payment holidays; new micro business loans launched
A cross-party group of 113 MPs have urged Chancellor Rishi Sunak to extend support for the self-employed during the coronavirus pandemic. The letter, penned by Labour MP Siobhain McDonagh, said the scheme is “a lifeline for millions of locked-down workers right across the country,” City A.M reports. The programme was originally planned for only three months, to end in June, but there has been speculation it could be extended to October like the government’s furlough scheme.
UK car manufacturing came to an abrupt halt in April, down 99.7% against the same month last year – the lowest level since World War II. Industry body the Society of Motor Manufacturers and Traders said just 197 premium and luxury sports vehicles rolled off British factory lines, with 45 of those sent to UK customers, according to the BBC.
Chancellor Rishi Sunak is due to make an announcement on the furlough scheme, with reports suggesting employers will be asked to pay 20% of workers' wages as well as national insurance and pension contributions. It is understood the government will pay 60% of each wage up to a cap of £2,500 a month from August, Sky News reports.
Britain’s manufacturers are on the cusp of making tens of thousands of workers redundant after a worse-than-expected COVID-19-driven collapse in orders that has left many firms struggling to survive. A survey by manufacturer lobby group Make UK found that 25% of companies are already drawing up plans to cut jobs in the next six months, while a further 45% say they are considering redundancies, reports the Guardian.
Lenders have approved almost 1.5 million payment holidays on credit cards and personal loans, UK Finance revealed. The findings by UK Finance – the body representing the banking and finance industry – said that as of 21 May, around 877,800 customer accounts had been given a payment freeze on their credit card, with almost 608,000 payment holidays granted on personal loans.
Small and micro businesses are being encouraged to apply for the coronavirus Local Authority Discretionary Grants Fund. The scheme supports those businesses that are not currently eligible for other grant schemes with awards up to £25,000, according to GOV.UK.
29 May 2020: EasyJet to axe up to 30% of workforce; 40% of SMEs face permanent closure; print advertising plummets 70%; more women out-earn male partners; IASB grants firms leasing property an exemption
EasyJet is set to axe up to 30% of its workforce following a dramatic fall in demand for air travel caused by the coronavirus pandemic. The airline, which employed 15,000 people at the start of 2020, did not confirm how many jobs would go, according to the BBC. Pilots' union Balpa dubbed the move as an "ill-considered knee-jerk reaction".
The COVID-19 crisis will cost UK SMEs an average of around £12,000, with two-fifths at risk of closing permanently, a new survey reveals. A poll of 3,700 SMEs showed that 40% of firms feared they may have to permanently close, while a further 4% have already stopped trading indefinitely, reports City A.M.
The Daily Mail, the i and Metro have seen advertising revenues plummet in April and May as the coronavirus lockdown battered the newspaper industry. Daily Mail & General Trust, which also owns the Mail Online and the Mail on Sunday, said that in April its circulation revenues fell by 17% with total advertising revenue down 46%. Print ads were down 69% and digital advertising fell 16%, the Guardian reveals.
Women out-earn male partners in almost a quarter of households, up from a fifth 16 years ago, research from the Office for National Statistics reveals. The findings, on behalf of mutual insurer Royal London, show a shift in the traditional earning dynamic between couples and reveal the common assumption that male partners are the higher earners is becoming outdated.
Companies leasing property will be granted an optional accounting exemption for rent reductions during the COVID-19 pandemic by the International Accounting Standards Board (IASB). IASB Chair Hans Hoogervorst said in a statement on Thursday that “the amendment is designed to make it easier for lessees, especially those with a lot of lease contracts, to account for covid-19-related rent concessions,” Reuters reports.
28 May 2020: €750bn EU recovery fund proposed; around 8.4m UK employees are now furloughed; FTSE100 up as lockdown eases; Johnson picks Eurosceptic as business head ; British Land in £1.1bn loss; SSE boss issues climate change warning over lack of green investment.
A €750bn (£670bn) COVID-19 fund to help Europe Union member states recover from the pandemic has been proposed by the EU's executive Commission. Dubbed the Next Generation EU plan, it will be made up of grants and loans for every EU country subject to all 27 nations ratifying the plan.
Around 8.4 million UK employees are now covered by a state wage subsidy scheme for temporarily laid-off workers, up 400,000 from last week, finance minister Rishi Sunak has confirmed. The cost of the subsidies filed by employers rose to £15bn from £11.1bn in one week, the finance ministry said. Britain’s job retention scheme is the centrepiece of its attempts to cushion COVID-19’s hit to the economy by preventing a surge in unemployment, reports Reuters.
The FTSE 100 extended gains made on Tuesday as investors focused on the phased reopening of the economy. London’s blue-chip index nudged up 1.07% higher at 6,132 points as investors took some comfort in increased hopes of a recovery after Prime Minister Boris Johnson set out plans to reopen parts of the economy from next week, City A.M reveals.
The Prime Minister has anointed a co-founder of Open Europe to be the key business figure in Downing Street. Sky News reports that Alex Hickman, who has been a Downing Street adviser since March and consistently opposed closer integration between the UK and European Union, will become head of the Prime Minister's business team in July.
The impact of COVID-19 has led British Land to write down the value of its retail portfolio by more than a quarter. The introduction of a nationwide lockdown in late March helped push the company, which owns London office properties as well as Sheffield’s Meadowhall and the Plymouth Drake Circus shopping centres, to a £1.1bn loss for the year to the end of March – up from its £320m loss the previous year, according to the Guardian.
Energy giant SSE’s boss has warned that a failure to deal with climate change could eventually have a greater economic impact than coronavirus. Alistair Phillips-Davies says he wants the UK government to encourage private investment in renewables – such as hydrogen and carbon capture plants and electric vehicles - by giving the green light to big new projects, the BBC reports.
27 May 2020: plans for opening non-essential shops; WHO warns of second coronavirus peak; government may rescue large British companies; new online SME SSP service opens; Hertz files for bankruptcy.
The Prime Minister has outlined his plans for the second phase of easing lockdown restrictions from next week, including opening non-essential shops from 15 June. This includes a formal assessment of easing COVID-19 lockdown restrictions on Thursday as part of the review. Boris Johnson has already revealed plans to allow outdoor markets and car showrooms to open from 1 June, City A.M reports.
Countries where coronavirus infections are falling may still face an “immediate second peak” if they ease lockdown measures too quickly, the World Health Organisation (WHO) warns. While the world is still in the middle of the first wave of the coronavirus outbreak, WHO emergencies head Dr Mike Ryan told an online briefing that fresh outbreaks could return later this year in places where the first wave has subsided, especially if measures to halt the first wave are lifted too soon, according to Reuters.
The UK government has suggested it is prepared to step in and rescue large British companies severely affected by the COVID-19 crisis if a firm's failure would "disproportionately harm the UK economy". The move follows indications that several big firms are seeking government help to survive, most notably Jaguar Land Rover, which is in talks to secure a £1bn loan, reports the BBC.
SMEs with fewer than 250 employees can now use a new online service to recover Statutory Sick Pay (SSP) payments made to their staff, after the government scheme went live yesterday. The move means companies will receive repayments at the relevant rate of SSP that they paid to current or former employees for eligible periods of sickness, starting on or after 13 March 2020, GOV.UK has announced.
Car rental company Hertz has filed for bankruptcy due to debt and the crippling of global travel by the COVID-19 pandemic, according to court documents. The 102-year-old firm – which has more than 400 outlets across the UK and Ireland – was £15.3bn in debt at the end of March with only £820m of available cash, and started missing debt payments in April, ITV.COM reveals.
26 May 2020: UK borrowing hits £62bn in April; impact of COVID-19 will ‘change business forever’ - Deloitte; mortgage payment holiday scheme extended; retail sales plummet; new insolvency legislation introduced.
Government borrowing rose to £62bn in April, the highest recorded monthly figure, following heavy spending to ease the impact of COVID-19. The BBC reported that the deficit was larger last month than the forecast for the whole year at the time of the Budget. The Office for National Statistics data revealed the soaring cost of support, such as furlough schemes, but Chancellor Rishi Sunak said things would be worse without government aid.
The economic and cultural impact of the coronavirus pandemic is so severe that it will change business forever, a top Deloitte executive has said. David Sproul, the Big Four firm’s global deputy chief executive, told City A.M. that the rapid and dramatic changes in working habits and use of technology since the pandemic began would likely never be reversed.
The government has extended its mortgage payment holiday scheme by a further three months and its ban on home repossessions until the end of October. Treasury figures show over 1.8 million homeowners have taken a mortgage holiday since the scheme was announced in March to help borrowers in financial difficulty due to the coronavirus pandemic, according to the Guardian.
Retail sales in April fell by a record 18.1% as stores were forced to close their doors due to lockdown. The figures, from the Office for National Statistics, follow a 5.2% fall in March, which was a record at the time, reports SkyNews.
New insolvency legislation to help businesses struggling from the coronavirus pandemic has been introduced by the government. The Corporate Insolvency and Governance Bill will introduce temporary easements on filing requirements and AGMs, as well as new corporate restructuring tools to the insolvency regime to give companies the time needed to maximise their chance of survival, according to GOV.UK.