NEWS – THURSDAY 16TH APRIL 2020
NEWS – THURSDAY 16TH APRIL 2020
TAX NEWS – THURSDAY 16TH APRIL 2020
Tax rises may be needed to fix public finances
The International Monetary Fund (IMF) has warned that taxes will need to be raised or spending cut to rebalance public finances once the economy recovers from coronavirus outbreak. Its biannual Fiscal Monitor report says: “Once the COVID-19 crisis is over, prudent fiscal policies call for appropriately paced, inclusive and credible adjustments to put debt ratios on a firm downward trajectory.” John Hawksworth, PwC’s chief economist, offers a similar position, saying: “It is possible that some longer-term tax rises or spending restraint may be needed eventually, but only after the economy has made a full recovery from the current crisis.” While the IMF has forecast that Britain’s national debt will climb from 85.4% of GDP to 95.8% by next year as borrowing quadruples to 8.3% of GDP, PwC expects borrowing this year of £180bn to £260bn – a figure representing 12% of GDP.
CORPORATE NEWS – THURSDAY 16TH APRIL 2020
Warehouse and Oasis fall into administration
Oasis and Warehouse have fallen into administration, with 202 jobs lost as Deloitte steps in as administrator. Over 1,800 employees will be furloughed as the Oasis, Warehouse and Idle Man brands continue to trade online in the short-term. Rob Harding, joint administrator at Deloitte, who noted that the coronavirus had had a “devastating effect on the entire retail industry”, says that the firm has seen “significant interest from potential buyers”.
Insurers told to make quick COVID-19 payouts
The Financial Conduct Authority (FCA) has urged insurers to pay out to businesses affected by coronavirus as quickly as possible, telling heads of insurance firms that there a number of policies where “it is clear that the firm has an obligation to pay out.” In the letter to executives, the City watchdog added: “For these policies, it is important that the claims are assessed and settled quickly.” The FCA also confirmed that the majority of business interruption policies make no provision for the disruption caused by COVID-19, saying estimates based on discussions with the industry suggest “most policies have basic cover, do not cover pandemics and therefore would have no obligation to pay out in relation to the pandemic.”
Warning sounded over furlough extension
London Chambers of Commerce and Industry chief executive Richard Burge has told member businesses that he is seeking “urgent clarity from the Government about the furlough scheme beyond May 31,” cautioning that without an extension “many businesses will feel they have to turn to redundancy consultation sooner rather than later.” Michael Lassman, London chairman of the Federation of Small Businesses, confirmed that many member businesses are concerned about cash-flow after furlough protection is removed and are close to making tough decisions on redundancies. HMRC chief executive Jim Harra said the website for making furlough claims should be up and running by next week.
Oil firms urged to think before job cuts
PwC has warned that redundancies across the oil industry in response to coronavirus may not be of long term benefit, with the Resilience in adversity: Emerging from the COVID-19 crisis and adapting to the new reality in oil and gas report saying planning for an upturn is as important as short-term access to cash. “All market participants across the energy value chain are being impacted. As companies mobilise their efforts, the focus is on weathering the turmoil, retaining critical operations and protecting cash flow,” the report adds.
The Scotsman, Page: 34 The Press and Journal, Page: 25
SMEs NEWS – THURSDAY 16TH APRIL 2020
More than £1bn handed out through CBILS
UK Finance has announced that a total of £1.1bn in coronavirus support funding has been loaned to 6,020 SMEs as of April 14. The total proportion of firms receiving payouts is less than one in four of those who made a claim, with 28,460 applicants. Analysis shows that just 2.6% of the money available has actually been loaned by banks. The average value of loans made through the coronavirus business interruption loans scheme (CBILS) has risen to over £185,000. UK Finance chief executive Stephen Jones said he was “grateful that so many colleagues worked through the bank holiday so that over £1bn of support has now been delivered,” adding that he expects the figure to “continue to grow rapidly.” Meanwhile, the latest coronavirus business impact tracker from the British Chambers of Commerce shows 66% of smaller firms have furloughed employees and are set to make claims for taxpayer money to pay staff wages. Elsew here, the FT looks at the impact of COVID-19 on small firms, with a report from the ACCA and Corporate Finance Network showing it has forced 10% of clients out of businesses.
Hopes rise of dividend solution for 2m businesses falling between the cracks
Small Business Minister Paul Scully says business owners who pay themselves through dividends need state-funded coronavirus relief, noting that the tax scheme does not differentiate between types of dividends.
Javid: Government should back emergency loans
Former Chancellor Sajid Javid has urged the Government to guarantee loans for SMEs in order to ensure that firms receive emergency funding. Mr Javid has said that even though he feels that banks should have “some skin in the game,” the “unprecedented” nature of the crisis means the Treasury should consider the move. Former cabinet ministers Amber Rudd and George Osborne have backed Mr Javid’s proposal, made on the BBC’s Today programme.
EMPLOYMENT NEWS – THURSDAY 16TH APRIL 2020
Unemployment set to hit 10%
The Office for Budget Responsibility has warned that unemployment is likely to surge to 10% over the coming months, with more than 2m workers expected to lose their jobs in the second quarter.
ECONOMY NEWS – THURSDAY 16TH APRIL 2020
Banks have funds to boost economy, says BoE’s Woods
Bank of England (BoE) deputy governor Sam Woods says Britain’s banks have enough funds to keep lending to the economy, despite a bleak recession warning from the Office for Budget Responsibility (OBR). He told a meeting of parliament’s Treasury Select Committee that the BoE has allowed banks to tap £23bn of their capital buffers to support up to £190bn of lending – far exceeding the £16bn net lending to firms seen in 2019. With a scenario mapped out by the OBR saying the economy could shrink 35% in Q2 and 13% over the year, Mr Woods said it is “not at all obvious” that this would be worse for banks overall than last year’s BoE stress test for lenders. “We go into this with a well-capitalised banking sector,” Mr Woods insisted, telling the committee: “Banks have ample capacity from a capital point of view.”
Spending slips at record rate
A study by the British Retail Consortium and KPMG shows that overall consumer spending fell by 4.3% year-on-year in March – the steepest decline since the study began in 1995. The first two weeks of the month saw sales climb 12% but lockdown measures designed to slow the spread of COVID-19 drove a 27% fall over the next fortnight. On a like-for-like basis, retail sales in March decreased by 3.5% compared with March 2019.
The Daily Telegraph, Page: 9 The Times, Page: 36 Daily Mirror, Page: 6 Daily Express, Page: 49
OTHER NEWS – THURSDAY 16TH APRIL 2020
Spotlight on light touch administration
The FT looks at a mooted “light touch” administration process that allows company directors to file for administration but retain day-to-day control, protecting companies from creditors as the coronavirus crisis rolls on.
Post-crisis efforts can set us on a low-carbon path
In a letter to the FT, PwC’s Dr Celine Herweijer says that while COVID-19 may slow climate-related action, the pandemic may drive increased low-carbon business practices in the long term.
Contact Paul Southward