Thrifty Brits to spend less in 2010

An astonishing 52 per cent of Brits plan to cut back on their spending habits this year compared to just four per cent who vow to spend more money, a study by accountancy software company Accountz has revealed.

The research found that whilst 61 per cent of consumers feel that the recent VAT increase is fair, almost half believe that they will notice an obvious change in retail pricing in 2010 and will cut down on spending accordingly.

An overwhelming 41 per cent of respondents consider it fair that retailers continue to absorb the 2.5 per cent VAT increase, whereas just 29 per cent think that retailers are suffering enough and shouldnt have to shoulder the burden.

The areas where consumers believe raised prices will be most evident included grocery shopping (61 per cent), holidays and hotels (50 per cent) and restaurants and bars (39 per cent). Surprisingly, most respondents expect to see considerably less impact on larger ticket items, such as technology products (30 per cent) and furniture shopping (25 per cent).

However, when it comes to taking control of our finances, budgeting and forecasting for the months ahead, Brits are notoriously disorganised. The survey revealed that just six per cent of respondents use financial software packages, seven per cent use a spreadsheet system and a shocking 87 per cent manage their finances by simply checking their bank balance sporadically or on a regular basis.

This survey highlights the financial insecurity that is rife amongst Brits at this current moment in time. As much as we would like to support our retail industry and purchase items as frivolously as we once did, we are clearly evolving and becoming more savvy with our finances, even though we rarely budget and forecast as we probably should, commented Quentin Pain, founder of Accountz.

The VAT increase is a major bone of contention for both retailers and consumers. Whilst it was inevitable, it is quite likely that it will impact heavily on consumer spending at a time when the high street is already in disarray and customers are staying away. It looks like 2010 could be quite a challenging year all round, he concluded.

Statistics show that HMRC Time to Pay is winding down despite Government assurances

Figures from HMRC confirm that the amount of assistance being provided by the Time to Pay Scheme (Business Payment Support Scheme) is being wound down, says Wilkins Kennedy, the Top 25 accountancy firm.

The money owed by businesses under the Time to Pay scheme has shrunk from 1.15 billion in April to just 1.01 billion at the end of November, contradicting claims made by the Chancellor in the Pre Budget Report that HMRC will continue to offer the scheme to businesses for as long as they need it.

Wilkins Kennedy says that with the economy and lending by banks to businesses still shrinking it seems highly unlikely that the scaling back of the Time to Pay scheme is due to a lack of demand from businesses.

Anthony Cork, Director at Wilkins Kennedy, comments: All the signs indicate that Time to Pay is being wound down. However, HMRC seems to be overlooking the fact that historically, businesses have needed as much support, if not more, as the economy goes into recovery. This recession is unlikely to be any different.

Many businesses have seen their finances drain away through the course of the downturn and it would be unrealistic for HMRC to expect them to get back on their feet just because the economy as a whole is showing the initial signs of a return to growth.

60% of businesses given just three months or less to cover their tax bills

According to information obtained from HMRC by Wilkins Kennedy under the Freedom of Information Act 60% of Time to Pay arrangements agreed with HMRC allow businesses to defer their tax payments for three months or less. 79% are for six months or less.

Anthony Cork says: With the economy still shrinking in the Third Quarter of this year Time to Pay facilities of less than three months may seem more like a stay of execution than a lifeboat.

If a business is truly struggling and unable to secure funding from anyone other than HMRC then it is unlikely to see a meaningful improvement in its fortunes in just three months. However, HMRC is agreeing to allow less than 1% of businesses to defer their tax payments for a year or more and is failing to take into account the seriousness of the situation and the seasonality of many businesses.

Businesses now paying for HMRCs lack of diligence at start of scheme

According to the information obtained by Wilkins Kennedy it is estimated that 8% of businesses who have an arrangement with HMRC under the Time to Pay scheme have failed to make any monthly payments to HMRC.

Anthony Cork says: In the post Lehman Brothers panic when the scheme was first introduced there may have been a failure to carry out adequate due diligence on the part of HMRC, resulting in a high failure rate.

Businesses are now suffering from this lack of due diligence during the initial stages of the scheme as HMRC swings to the other end of the spectrum and becomes less inclined to sign off agreements.

Wilkins Kennedy points out that the Government has just announced in the Pre Budget Report that there will be an additional requirement for businesses asking HMRC for additional time to pay for debts of over 1 million to provide an independent review of their needs.

Anthony Cork comments: This new requirement is the first official policy change for Time to Pay but is just the thin edge of the wedge, affecting only larger businesses with a considerable turnover. HMRC has already admitted that companies are facing far tougher questions if they attempt to roll over their existing agreement and smaller businesses are likely to be facing much tougher negotiations with HMRC under the surface.

According to Wilkins Kennedy HMRC does not track whether businesses allowed to defer their tax payments then proceed into insolvency. Instead HMRC says that it only reviews cases if they are individually significant and says that last year anything below 29 million in unpaid taxes was not deemed to be individually significant.

We hope HMRC does not bring Time to Pay to a premature close in order to compensate for its failure to kick the tires properly of companies joining in the initial stages of the scheme.

Londoners The Most Hopeful For A Pay Rise In 2010 But Also Amongst The Most Worried About Job Security

According to the latest research from leading instant online credit information provider, Equifax, consumers from London and the South East are more optimistic about their finances in 2010 than those from any other part of the country. They are the most hopeful of a pay rise next year too!

But, according to the Equifax research, they are also amongst the most worried about job security. And that could be the reason why they are keen to make financial resolutions for the New Year to keep their debts and outgoings under control.

Equifax is the sponsor of the Financial Resolution for Londons New Years Parade. We therefore wanted to find out how consumers from the region felt about their finances for 2010, compared to the rest of the country, confirmed Neil Munroe, External Affairs Director, Equifax.

The North-South divide is often quoted, suggesting that consumers in London and the South East fare better than their friends in the North. But our survey suggests that the reality is somewhat different. Certainly the North East recorded the most consumers concerned about job security for next year. But London and the South East was close behind. And, interestingly, it was the Midlands where the least number of consumers said they were worried about their job for next year, followed by the North West and the Scottish.

When it came to financial resolutions, the North West ranked the highest with 66% of consumers from this region saying they would be making these, closely followed by those from Scotland at 63% and then London and the South East at 59%.

The top financial resolution right across the country is to reduce debts. But Londoners and those from the South East seem to be the most concerned about saving more in the coming year, with 51% of these consumers ranking this as one of their top three financial resolutions compared to a national average of 44%.

The findings of this survey show that financial worries still weigh heavily on the minds of consumers right across the country continued Neil Munroe. With more than half of all consumers seeing an increase in monthly outgoings this year and 58% not getting a pay rise, its not surprising they want to be able to manage their finances as well as possible in 2010. They also want to make sure they are getting the best deals with over a third saying that another of their resolutions for 2010 is shopping around for better deals.

Sponsoring the Financial Resolution for the New Years Parade gives us an opportunity to remind consumers that it just takes a few minutes to check all their commitments for the year. Our message is Get your finances in order and after the inevitable Christmas spending spree it will be even more important for consumers to know exactly what they have to repay so that they can avoid a real New Year financial hangover and get the best credit deals going forward. We believe getting a copy of their credit report is a key step in that process.

Equifaxs goal is to help consumers manage their finances by giving them the insight and control of their credit information. We make it easy for consumers to access their credit information online and we provide advice and support so that they can understand what they can do to ensure they have the best possible credit rating to get the best credit deals in the future. Now more than ever, consumers need to take stock of their finances and make sure they maintain a healthy credit file and we aim to get that message across through our co-sponsorship of the New Years Day Parade.

The Payments Council has created an online, interactive map

The Payments Council has created an online, interactive map to demonstrate the varied payment attitudes, preferences and behaviours that can be seen in the different regions across the UK

Payments Council research reveals:

Plastic cards: If you live in the South East you are most likely to have a plastic card (97%), whereas if you live in the West Midlands you are least likely to have one (86%).

Phone or internet banking: If you live in the South East you are most likely to use phone or internet banking (59 per cent), whilst if you are in the North East you are least likely to (46%).

Cash: Adults in East Anglia make the lowest number of cash machine withdrawals (51 per person annually).

Cheque usage: Fewer Scots write cheques* than in any other region (20% compared to the average for Britain of 31%), whilst Londoners depend on cheques the most (39%). The national average of people using cheques regularly fell by 6% between 2008 and 2009.

Taking a broad North-South view, more Southerners hold plastic cards (95%) compared to their northern neighbours (91%); when it comes to cash withdrawals there isnt a significant North South divide – Northerners and Southerners tend to make a similar number of cash withdrawals, both in terms of volume (59 and 58 respectively) and value (3,855 and 3,920 respectively).

There are however, more cheque users in the South as 35% of adults regularly use cheques for spontaneous payments, compared to 27% in the North.

Sandra Quinn, director of communications, says:

“This research, on the whole, confirms long standing trends; increasing reliance on debit cards and phone or internet banking and a noticeable decline in use of cheques. That said, while there are clear nationwide trends there are also parts of the country which stand out in comparison to the national statistics, for example the proportion of adults in the North East using internet or phone banking, which at 46 per cent is 7 per cent below the national average.

Payment Regions brings together these regional variations and offers a fascinating insight into how our payment habits compare with those of our neighbours. It also demonstrates how as a nation our payment habits have evolved to take advantage of new technology and to meet the needs of our ever more demanding lifestyles.”

Trade credit insurers pay out record amount in claims

Latest ABI figures show that trade credit insurers have paid out a record amount in claims in Quarter 3 (Q3) 2009. The total amount paid in claims was 125m, an increase from 38m in Q3 2008, a 227% increase year-on-year. This is a reflection of the global recession and the liquidity crisis affecting UK businesses.

These latest figures demonstrate the real value trade credit insurers add to businesses that are facing particularly challenging times during the recession.

Nick Starling, the ABIs Director of General Insurance and Health, said:

This year has seen a record number of claims and payouts by insurers, with trade credit insurers continuing to insure well-managed businesses. This provides reassurance to clients that they could cope if a company they are supplying to gets into difficulty, especially vital for trading in a recession. Trade credit insurance often makes the difference between a good business staying afloat or going under.

Christmas spending plunges 4 million people into debt

Almost 4 million people (3,989,272) have already gone into debt to pay for Christmas this year, according to research released today by R3, the insolvency trade body. The research also finds that over 6 million people (6,483,567) fear they wont have enough money to pay their bills at the end of the month due to Christmas spending, and 3 million (2,991,954) admit theyre still paying off debts from Christmas last year.

Peter Sargent, President of R3 says, Christmas can be a treacherous time for people who are struggling already to make ends meet. While many people have been careful in their spending throughout the year, worrying numbers are set to break these good habits resulting in a financial nightmare for the New Year.

R3 suspects that that peer pressure has a significant part to play, as research shows that a third of people (33%) feel guilty if they fail to live up to the expectations of family and friends at Christmas time.

The impact of Christmas over-spending usually hits in the New Year. R3 members are expecting 154,355 personal insolvencies in 2010 in the UK, and the first few months of the year are likely to see the greatest number of casualties.

Personal insolvencies hit record levels in 2009 and we usually see a rise in the New Year due to festive over-spending, Peter Sargent says. Were urging people not to spend more than theyre earning and to seek professional advice as soon as possible if debts start mounting up.

CML Comments On FSA Third Quarter Mortgage Statistics

The latest mortgage statistics from the FSA show that the proportion of mortgages with arrears of more than 1.5% of the balance have decreased slightly in the third quarter to 2.57% from 2.63%, with possessions slightly up from 13,600 to 14,000. Figures from the Council of Mortgage Lenders released last month show a larger decrease in arrears – down from 2.80% to 2.61% in the first mortgage market.

The FSA statistics cover a large proportion of second charge lending, which is excluded from the CML’s equivalent figures (11,400 to 11,700 in the last quarter), and for this reason FSA possessions will always be substantially higher than the CML’s.

According to the FSA, 60% of outstanding mortgages are on variable rates, compared to 51% one year ago. This demonstrates partly how popular tracker rates are now, but also – given the low volumes of new business over the past year – that those reverting off fixed rates are staying on standard variable rates because they are currently attractive.

Commenting on the data, CML director general Michael Coogan said:

“The FSA data reflects what our numbers have already portrayed. Arrears and possessions are lower than expected earlier in the year, and the majority of the population have been choosing to stay on their SVRs or move to trackers, rather than take out fixed rate mortgages.

“The fact that the CML figures on arrears fell faster than the FSA’s may indicate that regulated and buy-to-let arrears are improving more quickly than arrears on secured loans which are not regulated in the same way.”

The latest mortgage statistics from the FSA show that the proportion of mortgages with arrears of more than 1.5% of the balance have decreased slightly in the third quarter to 2.57% from 2.63%, with possessions slightly up from 13,600 to 14,000. Figures from the Council of Mortgage Lenders released last month show a larger decrease in arrears – down from 2.80% to 2.61% in the first mortgage market.

The FSA statistics cover a large proportion of second charge lending, which is excluded from the CML’s equivalent figures (11,400 to 11,700 in the last quarter), and for this reason FSA possessions will always be substantially higher than the CML’s.

According to the FSA, 60% of outstanding mortgages are on variable rates, compared to 51% one year ago. This demonstrates partly how popular tracker rates are now, but also – given the low volumes of new business over the past year – that those reverting off fixed rates are staying on standard variable rates because they are currently attractive.

Commenting on the data, CML director general Michael Coogan said:

“The FSA data reflects what our numbers have already portrayed. Arrears and possessions are lower than expected earlier in the year, and the majority of the population have been choosing to stay on their SVRs or move to trackers, rather than take out fixed rate mortgages.

“The fact that the CML figures on arrears fell faster than the FSA’s may indicate that regulated and buy-to-let arrears are improving more quickly than arrears on secured loans which are not regulated in the same way.”

 

 

Time running out on HMRC time to pay scheme

January is all about making resolutions and getting the decks clear to make a good start to the year. However, businesses making use of HM Revenue and Customs (HMRC) Time to Pay scheme could be faced with more than theyd bargained for, warns cashflow specialist Bibby Financial Services.

Time to Pay, which launched a year ago, has helped more than 150,000 businesses delay their tax payments. However, with the Governments tax deficit increasing by the minute, the HMRC is, understandably, looking for ways to recoup some of these unpaid taxes.

Edward Rimmer, Bibby Financial Services chief executive, UK and Ireland, said: It comes as little surprise that the HMRC is looking to take a tougher line with businesses to claw back some of these unpaid taxes and, even if the scheme does not completely come to an end as has been reported in some circles business owners should be prepared to have their finances and tax payments scrutinised much more rigorously.

But the last thing businesses need at the moment is to have the rug swept from beneath their feet so we urge all businesses owners to check as soon as possible they will be able to meet any payments and, more generally, that their finances are in order.

Indeed, many believe that the scheme has only delayed the inevitable failure of some businesses the removal of the scheme now will mean its impacts are felt in the first quarter of next year, traditionally the toughest time for many businesses following the Christmas rush. With predictions from Begbies Traynor showing that the first quarter will see an increased number of insolvencies, and with time running out to make the most of other Government credit schemes, many businesses could be facing a very challenging start to 2010.

Bibby Financial Services is on hand to help small and medium sized businesses who think they might be faced with a big tax bill come January. Bibby Financial Services can work with business owners to look at all cash flow options and put together a remedial plan.

Edward Rimmer added: January is always a crucial month for businesses and it can often be make or break. With large amounts of excess stock from Christmas often left over, financial liquidity can take a big hit as cash flow is tied up in unsold stock, and many customer invoices are left outstanding.

We would urge businesses to ensure they do all they can including keeping stock to a minimum to ease pressure on their cash flow and allow them to flourish, rather than fail, this coming new year.

Lending weakness threatens recovery despite stronger retail sales

Commenting on the Bank of Englands latest Trends in Lending report, and on the retail sales figures released today by the ONS, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said:

The Bank of Englands report confirms our assessment that the flow of lending to UK firms remains negative. While some larger firms reported that credit availability had eased, many others had concerns about access to finance. We believe that persistent weakness in lending poses very real threats to a sustained UK economic recovery.

Mr Kern added, Octobers retail sales figures are positive. They reinforce hopes that the economy will return to growth in the fourth quarter, and that the initial GDP estimate for the third quarter will be revised upward.

Yet, any positive developments will prove to be temporary unless business has the capacity and finance needed to respond to rising demand. The Monetary Policy Committee and the Government must implement measures to improve access to finance and boost confidence

Projected pace of recovery looks implausible

Hetal Mehta, Senior Economic Advisor to the Ernst & Young ITEM Club, comments on the inflation report:

* The Banks forecast still suggests that economic growth will pick up swiftly, which seems highly optimistic.
* Inflation target raises questions over why the Bank did not go further than increasing the asset purchase programme to 200bn
* Regardless of whether or not there is more quantitative easing, policy is unlikely to be tightened in the short term.

“In August, the Bank of Englands GDP projections looked relatively optimistic. Now those projections have been pushed up to suggest that economic growth will pick up very swiftly, which seems highly optimistic. The Bank is clearly hoping that the boost from weak sterling kicks in and that the quantitative easing programme feeds through into more lending by the banks.

“But the Banks projections do not factor in the extra fiscal tightening likely after the next general election, making the central forecast of 4% GDP growth in early 2011 look implausible and that is even with the quantitative easing programme kept at 200bn, and not being pulled out at all over the forecast horizon.

“But despite the rapid growth the Bank expects, the inflation projections look very weak. As with the August report, the acknowledgement that inflation is likely to undershoot the 2% target for most of the forecast period raises the question of why the Bank did not think it necessary to go further than increasing the asset purchase programme to 200bn. But with the pace of purchases slowing considerably, it seems the programme is being wound down.

“Regardless of whether or not there is more quantitative easing, policy is unlikely to be tightened in the short term.”