On the Spot

The Bank of England raised its expectations for inflation but reiterated its view that the coronavirus crisis-linked spike in price rises of recent months does not represent a materialising crisis for the economy. Last Thursday's report was the Bank's first official reaction to data released earlier this month that showed the consumer prices index (CPI) breaking through the bank's 2% inflation target in May - a lot sooner than the MPC had forecast. Also covered are business rates, with support beginning to wind down in July. Many small businesses are urgently calling for more financial support from the Government due to extended lockdowns.

The UK Treasury has extended a ban on commercial evictions until March 25th, 2022, as the government seeks to protect businesses through the final stages of the Covid-19 pandemic. Nick and Jo explain why this is just kicking the can down the road, into an inevitable minefield of insolvencies. When landlords are finally allowed to evict tenants, there will be upwards of £10bn collectable. Also covered are sky high freight shipping rates. Where is the ceiling for box shipping and just how close are we to topping out in terms of today’s record freight rates?.. High freight rates are being driven by equipment and space shortages.

The UK economy grew by 2.3% in April as retail and hospitality reopened. The biggest contributing sector to the rise in GDP was accommodation. Latest figures showed a 68.6% growth in the accommodation sector. And with this year set to be a staycation bonanza, this looks set to keep growing. Food and beverage was up 39% and health and beauty up 63%. The word on everyone’s lips continues to be inflation - economists across the globe are obsessed with the likely course of rising prices, and how central banks will react. Finally, lockdown easing has prompted employers to start recruiting - UK job vacancies have hit their highest level since the start of the pandemic. An estimated 1.3 million foreign workers left the UK during the pandemic, due to a combination of Brexit and Coronavirus, leaving industries such as retail and hospitality with a shortage of staff.

Jo and Nick are once again joined by Company Watch Data Scientist, Adam Stones. Adam explains Company Watch’s latest release - information on claims made by employers under the furlough scheme, which is now available to users in the Angelia platform. He talks about how the data was gathered and how it can be of use when conducting financial risk analysis on companies. Also discussed in the episode is some job vacancy data - that shows large increases in the number of job vacancies compared to February 2020 (pre-pandemic). Government borrowing figures are astronomically high and the Office for National Statistics (ONS) now estimates that the government borrowed a total of £300.3bn in the financial year to March. Finally, the trio look at the ONS business confidence index and European economic data.

The UK unemployment rate unexpectedly fell from 5.1% to 4.8%, between January and March, official figures showed last week. Economists predict that unemployment will however rise later in the year, peaking at 5.9% - with the rise likely to come as a delayed response to employees exiting the Job Retention Scheme. Temporary measures preventing the use of winding up petitions expire at the end of June, which carries the risk of a wave of insolvencies business groups have warned. There are many zombie companies operating in the UK that will become insolvent on a cash flow basis when government support ends and employees come off furlough. The business secretary, Kwasi Kwarteng, is being urged to work with HMRC to help those businesses at risk of collapse. 

UK GDP contracted 1.5% in the first quarter of the year, which was less than most analysts were predicting, no doubt helped by a strong March performance. Although UK GDP is still 8.7% below where it was before the pandemic in December 2019. There are still ongoing inflation concerns and stock markets slid this week on fears of a rise. It has been a tough week for landlords too. New Look defeated a legal challenge in a landmark case that experts say will clear the way for other retailers to use Company Voluntary Arrangements to combat the impact of the pandemic. Some argue the decision will unfairly labours landlords with the financial burden of retail failures going forward...

The Bank of England's Monetary Policy Committee (MPC) report was released yesterday, with the central bank now forecasting a stronger outlook for GDP growth and inflation. The MPC is predicting a 7.25% rise in GDP in 2021 and voted unanimously to hold its key interest rate at 0.1%. The Government has flagged further insolvency reform as part of the federal budget, offering small businesses further protection. Also covered are some figures from the closely followed Chartered Institute of Procurement & Supply (CIPS) index on the outlook for growth. UK construction firms reported a strong increase in activity as coronavirus restrictions continue to ease. 

Is there a ticking time bomb hiding on corporate balance sheets?.. Yes, it’s called goodwill. Nick and Jo pick apart what goodwill actually means and what the implications are of having lots of it on a balance sheet. They also discuss the fast-approaching cliff edge that is the end of June – which is when landlords will once again have the ability to enforce against their tenants. What will happen to those commercial tenants that have been unable to pay during the pandemic? Also covered are predictions for insolvencies, with the European financial supervisor this week warning a ‘tsunami’ of corporate insolvencies is on the way once government support schemes are withdrawn...

Nick and Jo bring up the podcast half-century, but there is no time to take the warm applause of the crowd. Instead, the partnership faces an onslaught of fast bowls into the corridor of economic uncertainty... Public borrowing rose from £57bn in March 2020 to £303bn in March 2021, UK unemployment sits at 4.9%, with 813,000 jobs lost since the start of the pandemic, and 4.9m people remain on the government furlough scheme. With plans to wind down the scheme in September, some analysts are predicting as many as 850,000 of those 4.9m people will never go back to work - pushing the UK unemployment rate much higher. Also covered are zombie companies and why growth and overtrading issues could impact the recovery phase of the economy.

Nick and Jo are straight back to business after the Easter break, with plenty of news to cover! First up are GDP statistics for February, followed by insolvency numbers for March - of which there were 992 corporate insolvencies in England & Wales, a 45% increase from February. Also discussed is Atradius' report on the outlook for 2021, with economic recovery rates expected to vary across the globe. Finally, they take a look at a couple of company news stories involving Greensill and Virgin Active.