Company and personal insolvencies at new low

A report by the Government’s Insolvency Service shows that the number of companies in England and Wales becoming insolvent has fallen to its lowest level in more than seven years.

Just 3,908 firms were declared insolvent over the last three months, which is the smallest number since the end of 2007.

Personal insolvency in England and Wales has also fallen. 18,866 individuals became insolvent between April and June – the lowest total since 2005 and a drop of 29.3% on the same period last year.

A growing economy and real-terms increases in wages have been cited as reasons for the fall in insolvency.

Phillip Sykes of insolvency trade body R3 said: ‘It has taken a long time, but with wages outstripping inflation again, people are finding it easier to repay their debts without resorting to insolvency procedures.’

However, despite the drop in company insolvencies, Bank of England figures this month show a noticeable decline in lending to businesses. Total borrowing by UK non-financial companies fell by £5.5bn in June, which represents the biggest drop for four years. This compares with an average monthly increase of £0.2bn over the previous six months.

‘Two-thirds of business leaders’ support regional devolution plans

A new survey from the Institute of Directors (IoD) suggests that the majority of its members support the Government’s plans for regional devolution.

The study, which involved over 1,000 business leaders, revealed that 65% are in favour of plans to give combined authorities additional powers in relation to housing and planning, transport, and education and skills.

However, concerns were expressed that local authorities could use additional tax-raising powers to increase taxes or increase the complexity of compliance for businesses.

Chancellor George Osborne announced plans to give more powers to cities and regions of England in the Second Budget on 8 July.

Commenting on the study, James Sproule, IoD Director of Policy, said, ‘Businesses see huge potential in devolving power from Westminster to England’s great cities and regions’.

‘The ultimate goal is to create vibrant local and regional economies, each competing to deliver efficient transport systems and workers with the right skills. However, if local authorities seek to avoid political responsibility for devolved issues or to boost their coffers by hiking taxes and creating obstacles to business, the great opportunities of devolution will be lost’.

Local authorities have until 4 September to submit a case for devolution as part of the Chancellor’s spending review.

Pension liberation fraud ‘triples’ – but new freedoms might not be to blame

It has been reported that in the month following the introduction of new pension freedoms, liberation fraud more than tripled. However, despite appearances, the rise may not be directly caused by the new rules that came into effect in April.

Figures from Action Fraud – a division of the City of London police – show that members of the public reported losses of £4.7m in May – compared to losses of £1.4m in April, and £932,000 in March.

In a typical scam, fraudsters contact people with pension pots and persuade them they can release the money for a fee, but without clarifying the tax implications, such as that following the pension reforms, those over 55 are liable for income tax on 75% of their savings. Anyone whose income exceeds £150,000 in one year – including money withdrawn from their pension pot – could have to pay up to 45% in tax.

Action Fraud figures show that, on average, victims lost £60,500, which includes the amount the victims owe in tax plus the fee they have paid to the fraudsters.

However, the actual number of reported cases of pension liberation fraud has fallen. There were 78 cases of reported fraud in both May and April, down from 82 in March, and 240 in February.

A spokesperson for Action fraud said it was ‘difficult to draw any conclusions’ about the effect of the pension reforms on fraud. Most victims do not realise until some time afterwards that a fraud has been committed, so cases reported now often occurred months or even years in the past.

The pensions minister, Baroness Ros Altmann, said she was ‘not convinced’ that the pensions freedoms have led to a rise in fraud, telling the BBC: ‘People are a lot more aware of it, and are starting to report it. It can take a long time for people to realise they’ve lost their money.’

Speak to us about how the pension reforms affect you and your tax position.

UK economic growth at 0.7%

New official estimates from the Office for National Statistics (ONS) show that the UK economy grew at a rate of 0.7% in the three months to June 2015.

This was a marked improvement on the 0.4% growth shown in the previous quarter, and the 10th consecutive quarter of sustained economic improvement.

The ONS report shows that the service industry grew by 0.7% and production increased by 1%. There was no change in construction industry output, but agriculture decreased by 0.7%.

According to the ONS: ‘The 0.7% increase in GDP growth in Quarter 2 implies that GDP per head would be broadly equal to the pre-economic downturn peak in Quarter 1 2008’.

The figures show that the economy is 5.2% higher than its pre-crisis peak.

Joe Grice, Chief Economist at the ONS, said: ‘After a slowdown in the first quarter of 2015, overall GDP growth has returned to that typical of the previous two years’.

Government announces Small Business Commissioner

The Small Business Minister, Anna Soubry, has announced plans to appoint a special commissioner to tackle late payment culture.

Small firms would be able to seek advice from the commissioner, and make complaints, when faced with the financial pressures of waiting to be paid. Current estimates put the total amount owed to small firms at £26 billion, causing millions of pounds in debt recovery costs.

In the Enterprise Bill, the Government said that a commissioner would be first contact for businesses to seek advice and support, as well as offering mediation services and investigating complaints.

The Small Business, Enterprise and Employment Act 2015 made it clear that companies which regularly fail to make payments on time will be ‘named and shamed’.

Ms Soubry said: ‘The Government is backing small businesses to grow and create more jobs and opportunity’.

She continued: ‘The small business commissioner will tackle the imbalance of bargaining power between small suppliers and large customers, and encourage them to get round the table and sort out disputes at a fraction of the cost of going to court, It will also provide advice, investigate complaints and see where further action is needed to clamp down on unfair practices’.

FCA announces shake-up of savings industry

The Financial Conduct Authority (FCA) has revealed new plans to make it easier for customers to switch savings accounts – but has stopped short of very radical changes such as banning introductory bonus interest rates.

Under proposals published by the UK financial regulator, banks will have to alert customers to changes to interest rates or the maturity of a fixed-term account. This is designed to change the current environment whereby savings accounts customers automatically move on to a worse interest rate after their initial introductory offer expires. The alert could be in the form of a text message.

Other measures include:

  • Firms having to provide consumers with jargon-free information in the form of ‘summary boxes’, which have been designed by the FCA
  • New rules to make it easy for customers to switch to better accounts offered by the same provider, such as making use of the identity information and documents already held and creating simple online switching processes
  • Publishing information to highlight firms who pay poor interest rates to longstanding customers.

Christopher Woolard, Director of Strategy and Competition at the FCA, said: ‘In a good market, providers should be competing to offer the best possible deal. Consumers should expect the information they need to shop around to be clear and easy to understand. When they wish to move accounts, they should be able to do so with the minimum of fuss.

‘Our package of measures are all about giving consumers the information they need to make an informed decision about what to do with their savings, and the ability to act on it quickly.’

The FCA is seeking feedback on these proposals and is expected to confirm finalised rules later this year.

They intend for the rules to come into force in 2016, and the FCA is also working with the savings industry to deliver seven day switching for the vast majority of cash ISA transfers from January 2017.

Car manufacturing shows strong improvement

The UK’s car manufacturing industry has shown significant improvements to production rates in the first six months of 2015, according to the Society of Motor Manufacturers and Traders (SMMT).

793,642 more cars were produced in the first half of this year compared with the same period last year, an increase of 0.3%. This is a production rate of three cars per minute.

SMMT Chief Executive, Mike Hawes, said: ‘The sector is way ahead of the game on productivity, with investment in efficient, high-tech manufacturing processes and a highly skilled workforce resulting in huge gains over the past decade’.

He continued: ‘This success has been built on significant industry investment and has also relied on a positive relationship with government’.

The Government has released figures showing that car manufacturing in 2014 achieved £100,000 in value added per employee, another step towards the goal of long-term economic recovery.

Demand for exports is believed to be driving this increase, with demand for cars in the UK falling by 7.1%.