Newsletter 10th October 2022

Insolvencies on the Rise as Energy Bills Bite

The Office for National Statistics (ONS) documented 5,629 company failures between April and June, the highest figure since the third quarter of 2009.

According to the ONS, the construction, manufacturing, lodging, and food service industries were the most insolvent.

More than one in ten organisations indicated a moderate-to-severe danger of insolvency in August, indicating the burden on businesses.

The dismal results reflect an increase in prices, notably rising gas, and electricity rates, putting further strain on companies when most were still recuperating from the two-year COVID-19 interruption.

Insolvencies were reduced in 2020 when the government sought to assist companies in surviving the epidemic, but they have grown since 2021.

Increased demand for products and services and supply chain instability have contributed to a more complex environment for businesses to manage.

The latter issue has subsided, but Russia's war in Ukraine has worsened gas and power prices spike. It has increased the cost of lighting, heating, and manufacturing, and businesses are under pressure to pass those expenses on to customers.

It wasn't until last month that the Truss government announced corporate assistance, like that provided to consumers, through the Energy Bill Relief Scheme, which would restrict wholesale rates per unit of energy.

The scheme will last through the winter, with limited assistance beyond that.

Bank of England's ￡50bn Bond Sale Sparks Emergency

Following the mini-budget, entities associated with the pensions sector may have conducted a fire sale of ￡50 billion worth of UK government bonds .

The Bank was concerned that these funds would be forced to liquidate their holdings of government debt, further agitating the market. According to the Bank, the cost of borrowing increased at record rates for two days.

After the mini-budget created financial market chaos and the pound fell, the Bank of England offered to purchase up to ￡65 billion in government bonds. Two days saw borrowing costs rise in the market for long-term government loans spanning three decades.

The Bank of England has lowered its emergency involvement in the bond market, which it warned may jeopardise pension funds. A bond sale of ￡50 billion would have been four times the market's usual daily volume, and this would have increased the effective cost of borrowing, or yield, above 5%, causing additional concerns.

The emergency intervention is set to conclude next week, and it has purchased only ￡3.7 billion in government bonds.

Benefits of hiring an Accountant for your Small Business

When your company has begun to grow, you may feel that it's time to hire an accountant. This is a common assumption, but it isn't always the case.

Having a good accountant on board can benefit your small business at all stages of growth — even during its early days. Read on to find out more!

Payments on Account Explained

Understanding payments on account is a critically important topic for the self-employed.

We prepared this comprehensive guide to explain the ins and outs of this tax burden. So, you can prepare yourself, understand the implications and ensure you fully comply with HMRC regulations.