Business News Round Up (24/07/2023)
Insolvencies In Scotland jump as businesses battle rising costs
The number of Scottish companies filing for administration has soared as the nation feels the effects of rising costs and economic uncertainty. A study by Interpath Advisory of notices in The Gazette showed a total of 23 companies based in Scotland fell into administration in Q2 2023 – up from 3 companies in Q2 2022. Interpath Advisory said this showed Scottish insolvency activity was back to pre-pandemic levels following record lows seen during 2020 and 2021. Administrations also rose across the UK, with 315 companies falling into administration in Q2 2023 – up from 212 companies in Q2 2022. Interpath said companies operating in the building and construction, food and drink and professional services saw a “notable” number of appointments. High-profile administrations in Scotland in Q2 included construction industry supplier Adastra Access and recycling scheme operator Circularity Scotland. Blair Nimmo, chief executive of Interpath Advisory, said: “It’s no surprise that a sluggish economy, stubbornly high inflation and tightening monetary policy are increasing the pressure on businesses up and down the country. Indeed, the interest rate conundrum appears to be the number one concern for many of the businesses that we are speaking to at the moment. With the expectation that it will take some time before we see rates start to come back down, the overall cost of borrowing is now hitting double figures – something which we’ve not seen in the UK for at least 15 years. This will have an impact on any business which relies on debt finance, and particularly those which are highly leveraged. At the same time, companies continue to contend with rising input prices, as well as walking the wage inflation tightrope. And consumers are cutting back on discretionary spending as the impact of those 13 consecutive interest rate rises puts a squeeze on disposable income.”
https://www.insider.co.uk/news/insolvencies-scotland-jump-businesses-battle-30524598
UK economic growth nearly stalls in July, PMIs show
Activity levels in the UK’s manufacturing and services sectors slowed sharply in July, closely followed survey results showed. The latest survey readings led S&P Global chief business economist, Chris Williamson, to conclude that: “The UK economy has come close to stalling in July which, combined with gloomy forward-looking indicators, reignites recession worries.” The S&P Global/CIPS ‘flash’ Composite Output Index plumbed a six-month low of 50.7 and was down from a June reading of 52.8. In parallel, the Purchasing Managers’ Index for manufacturing fell from 46.5 to 45.0 (consensus: 46.0). The PMI for services retreated from 53.7 to 51.5 (consensus: 53.0). “An upside to the deteriorating growth and demand picture is a further cooling of inflationary pressures,” Williamson added. “Manufacturing prices are falling at an increased rate and service sector inflation is continuing to moderate. Although ongoing upward wage pressures mean service sector price growth remains elevated, the survey data signal further, potentially marked, falls in consumer price inflation in the months ahead.”
SMEs see 150% increase in monthly energy expenses
A NEW report has revealed that more than a quarter (26%) of small business owners in the UK believe that they will be forced to cease trading if the outlook for their business does not improve – a potentially detrimental blow to the UK economy. The SME Insights Report, published by small business insurance provider Simply Business, also found that 48% of SME owners believe the rising cost of living is the most glaring challenge facing their business. Over half (63%) say that rising taxes, interest rates, and inflation are eating into profit margins, with many also grappling with trying to claw back thousands of pounds in unpaid bills. Over half (52%) of SMEs anticipate a decrease in profits by up to 20% in 2023, with customer retention (26%) and lack of funding (25%) cited as factors affecting business. It comes as the Bank of England drives up interest rates to the highest level since the 2008 financial crisis, making access to financing near impossible for many small firms.
UK mid-market sets sights on further India expansion
In spite of mounting human rights concerns relating to India’s incumbent nationalist government, UK businesses are clamouring to get tap into the country’s market. A new study suggests that of mid-market firms looking to invest in international expansion, almost three-quarters see India as a top priority. India is seen as a major economic opportunity by many business leaders. The country’s GDP is anticipated to expand by 6.5% in the current fiscal year, despite risks emerging from a global slowdown – and its huge population of 1.4 billion people, alongside its historically low income economy, means there is plenty of room for further wealth creation in the coming years. At the same time, the country’s geo-political positioning seems to have boosted its standing – with both the US and Britain viewing it as a counterweight against the growing economic influence of China across Asia. This has seen India also benefit from the US and UK both trying to underscore their strategic alliance with business ties – meaning investing in India now looks likely to pay off for firms on multiple levels. To that end, a growing number of UK businesses are looking to India, to boost their own growth ambitions in the coming months. With economies continuing to stagnate across Europe, 36% of 608 mid-sized businesses Grant Thornton polled said they were investing in international expansion over the next six months. Of that, 73% of respondents identified India as a focus international growth market. As negotiations around a UK-India free trade agreement progress, those numbers are likely to grow – especially as firms hear of competitors already thriving in the market. Grant Thornton found that the UK’s mid-market is already very familiar with doing business in India. A 64% majority of those surveyed said they already have a business presence established in the growing economy, while 94% of those firms have plans to grow that presence – mostly in the next two years – amid suggestions rates of UK-India trade could double before 2030.
https://www.consultancy.uk/news/34882/uk-mid-market-sets-sights-on-india-expansion