Company insolvencies jump 40% in England and Wales
The number of company insolvencies in England and Wales has risen by 40% year-on-year, as more firms are forced under by tough economic conditions.
There were 1,691 company insolvencies in June, the Insolvency Service reports, up from 1,207 in June 2021. That’s also 15% more than before the pandemic, although lower than in May.
Most of June’s insolvencies (1,456) were Creditors’ Voluntary Liquidations (CVLs), in which a firm takes the decision to be liquidated because it can’t pay its bills.
But there were also 3.6 times as many compulsory liquidations in June 2022 as in June 2021, and the number of administrations was 2.3 times higher than a year ago.
John Bell, director of licensed Insolvency Practitioners Clarke Bell, warned that the race to replace Boris Johnson will unsettle businesses:
The economy is in a state of flux as the Government goes into freefall and clamours to find a new leader and Prime Minister.
The uncertainty is set to stall the economy and unsettle UK plc.
Bell adds that companies have been hit by the pandemic, the economic uncertainty caused by Brexit, along with other current events such as the Ukraine war
Due to the heavy impact and persistence of these problems, it’s no surprise that many directors of struggling companies are facing compulsory liquidation. However, it is the worst type of liquidation, stripping directors of any control and often ending in personal consequences for directors.
As such, it should be avoided at all costs. My advice to struggling businesses is to confront your financial issues before liquidation is forced upon you. There are many methods and steps to take to close down a company before you reach compulsory liquidation stage.”
Nicky Fisher, Vice President of insolvency and restructuring trade body R3, says inflation is driving up company costs and adding to the strain on bosses:
Not only are directors facing immediate strain to deal with this inflationary pressure, but they will also be looking at re-evaluating investment decisions and wider business strategies in the medium-term. This is likely to act as a further drag on the economy in the months ahead.
“At the same time, consumer confidence has hit its lowest point since the start of the pandemic, bringing down consumer spending, which could mean that sectors such as travel, retail and hospitality could particularly struggle as these are the things people usually cut first.
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Closing summary
Stock markets are ending the week on a positive note, as investors regain their nerve despite the latest signs of economic slowdown.
In London, the FTSE 100 is now 112 points higher, or 1.6% up, at 7153, led by engineering firm Rolls-Royce (+5.5%), with airline group IAG (+4.4%) close behind.
The pound is clawing back from two-year lows, at $1.184, while the euro is back about parity with the dollar at $1.006.
Fiona Cincotta, Senior Financial Markets Analyst, at City Index, says:
Yesterday saw a disappointing start to the earnings season yesterday after JPMorgan and Morgan Stanley saw net income fall around 30%, missing forecasts. The fact that the banks are setting aside large sums for potential bad loans suggests that they are concerned about a possible recession.
Helping stocks higher today have been less hawkish comments from known Federal Reserve hawkish, which have helped the market pare back aggressive Fed hike bets.
With hawks Christopher Waller and James Bullard both supporting hiking rates by 75 basis points, not 100 bps that the market priced in after Wednesday’s red hot inflation.
Here are today’s main stories:
Have a lovely weekend. GW
US consumer sentiment has inched up this month, but remains near its lowest in decades.
The University of Michigan’s index of consumer morale rose to 51.1 this month, up from 50 in June, and better than hoped.
But as Surveys of Consumers Director Joanne Hsu explains, consumer sentiment was relatively unchanged, remaining near all-time lows.
Current assessments of personal finances continued to deteriorate, reaching its lowest point since 2011.
Buying conditions for durables adjusted upwards, owing both to consumers who cited easing supply constraints and those who believed that one should buy now to avoid future price increases, which would exacerbate inflation going forward.
Virgin Media O2 explores bid for TalkTalk
Mark Sweney
Virgin Media O2 has explored making a multi-billion pound offer for broadband and telecoms company TalkTalk in its latest move to build scale to create a new “national champion” to challenge BT and Sky.
The pay-TV, broadband and mobile giant, which is jointly owned by Spain’s Telefonica and John Malone’s Liberty Global, is understood to have held exploratory talks with the Salford-based TalkTalk.
TalkTalk, founded and chaired by Sir Charles Dunstone, has been in play since April when it emerged that the company had received a number of tentative approaches about a sale.
Companies including Vodafone and Sky have previously been linked with potential offers for the business, which was taken private in a £1.8bn deal with Martin Hughes’ Toscafund last year.
It is understood that TalkTalk and its bankers Lazard believe the business is now worth as much as £3bn. Virgin Media O2, which is working with LionTree, is understood to have explored the possibility of making an offer for TalkTalk but has not tabled a formal bid.
If a deal was to go ahead it would be the first major move by chief executive Lutz Schuler since the £31bn Virgin Media O2 joint venture was formed two years ago. Virgin Media O2’s potential interest in a deal with TalkTalk was first reported by the Telegraph.
The UK is poised for a potential wave of consolidation in the telecoms sector with companies such as Vodafone arguing that regulators need to relax their view on competition concerns to bring them more into line with other markets such as the US and parts of Europe.
In February, telecoms regulator Ofcom formally dropped its long held position that a merger between any of the UK’s big four mobile operators should be blocked at all costs.
Under former chief executive Sharon White, Ofcom was an outspoken opponent of Three UK’s attempted £10.25bn takeover of O2, which was blocked by competition regulators six years ago.
Liberty Global, Virgin Media O2 and TalkTalk declined to comment.
Shares in BT have dropped 7.5%, to the bottom of the FTSE 100 leaderboard, since news of Virgin Media O2’s interest broke.
Wall Street is bouncing back from its wobble yesterday.
The Dow Jones industrial average has jumped by 1.2%, or 368 points, in early trading to 30,999 points.
Almost every sector is up, led by energy and financials.
Fears that the US central bank could lift interest rates by a whole percentage point – for the first time in decades – may be easing of, after Wednesday’s surge in inflation to 9.1%.
Consumer and producer prices in June surprised to the upside, suggesting underlying price pressures remain firm.
While a 100bp hike at the July FOMC meeting is a possibility, we think the Fed will opt for a 75bp increase. BofA pic.twitter.com/whJBzyq3Gl
— Mike Zaccardi, CFA, CMT (@MikeZaccardi) July 15, 2022
Uggh…Industrial production moved down 0.2% in June, led by a 0.5% drop in manufacturing output and a 1.4% drop in utilities output. Mining advanced. Manufacturing weakness was in primary metals, machinery, motor vehicles, and among most non-durable goods industries. pic.twitter.com/foKupI4vVc
— Dr Thomas Kevin Swift (@DrTKSwift) July 15, 2022
The decline in US industrial production and manufacturing output in June is partly due to zero-covid shutdowns in China, suspects Michael Pearce, senior US economist at Capital Economics.
Those lockdowns temporarily paralysed global supply chains again, adding to weaker demand for US goods as economic demand slows.
Pearce told clients:
What had been surprising is how well activity in the factory sector had held up in recent months, but the downward revisions to the May data and further decline in June now match the downbeat message from the survey data that manufacturing activity has slowed, and mirrors the broader slowdown in global manufacturing output.
With activity in China rebounding, however, and inventory across most of the economy still looking lean, US manufacturing output growth should slow rather than collapse.
US manufacturing output has weakened, indicating that the factory sector eased off last month.
Total industrial production dipped 0.2% percent in June, new figures show, while manufacturing output declined 0.5% for a second consecutive month.
Both readings are weaker than expected, taking the shine off the stronger-than-forecast retail sales figures earlier.
June industrial production fell -0.2% vs. +0.1% est. & +0.2% in prior month; factory production -0.5% vs. -0.1% est. & -0.5% in prior month (rev down from -0.1%); Utilities -1.4% vs. +1.9% prior; mining +1.7% vs. +1.2% prior pic.twitter.com/j9Aml0l4nG
— Liz Ann Sonders (@LizAnnSonders) July 15, 2022
The European Commission is proposing a ban on the import of Russian gold, as part of an adjustment to its sanctions regime following the Ukraine invasion.
A package agreed by the EC today would introduce a new import ban on Russian gold, aligning EU sanctions with those of its G7 partners..
The package also reiterates that EU sanctions do not target in any way the trade in agricultural products between third countries and Russia, in an attempt to protect food security around the world (already threatened by the blockage on Ukrainian grain).
The EC is also proposing extending the current EU sanctions for six months, until the next review at the end of January 2023.
The proposal will now be discussed by EU member states.
Russia’s brutal war against Ukraine continues unabated.
Therefore we propose today to tighten our hard-hitting EU sanctions against the Kremlin, enforce them more effectively and extend them until January 2023.
Moscow must continue to pay a high price for its aggression.
— Ursula von der Leyen (@vonderleyen) July 15, 2022
Gwyn Topham
Rail passengers across England and Wales have been urged to only travel if necessary next week, with extreme temperatures forcing blanket speed restrictions across much of the network.
Network Rail said the impact on train services would vary by region, but that journeys would take significantly longer. It said there was a high likelihood of cancellations, delays and last-minute alterations to services on Monday and Tuesday.
Long-distance train journeys, such as London to York, could take four hours instead of two, with trains forced to travel below 60mph for safety.
Vulnerable passengers and those with health conditions should avoid travelling, Network Rail said, while passengers who choose to travel should check if their train is running and ensure they are prepared for the heat with plenty of water to drink.
Rail passengers in Scotland should also check their journeys before travelling and take sensible precautions.
Refuse collection workers in the West Midlands are to strike on the opening week of the Commonwealth Games, PA Media reports.
Members of the GMB union will take five days of action – on July 28, when the Games open in Birmingham, July 29 and August 4, 5 and 8.
The union said private contractor Serco, which runs refuse collection services across Sandwell, had offered a real terms pay cut to workers.
Justine Jones, GMB Midlands organiser, said:
“Strike action is a last resort, but Serco top brass have forced the hand of hundreds of hard-working local refuse workers.
“Our members have asked for nothing more than a fair pay rise, after keeping communities here in Sandwell clean and safe throughout the pandemic.
“The eyes of the world will be on our area during the Commonwealth Games, it’s a shame that Serco have put the bottom line before their own workforce and community in this way.
“This is a big distraction from the Games and we hope Serco see sense and urgently bring a pay offer to the table that reflects the hard work and dedication of our members.”
Here’s some snap analysis of the US retail sales report:
🇺🇸Modest #retail sales gain in Jun
🟢Sales +1.0%
⚠️Adj. for inflation -0.3%🟢Core 0.8%
⚠️Adj. for inflation +0.1%Core sales revisions⬇️
Gas +3.6%
Online +2.2%
Furn 1.4%
Rest/bars +1.0%
Autos +0.8%
Sports +0.8%
Food +0.4%
Elec +0.4%
Merch -0.2%
Cloth -0.4%
Build mat -0.9% pic.twitter.com/7xkekUJy4Q— Gregory Daco (@GregDaco) July 15, 2022
US retail sales for June up by 8.9% year over year. Not bad, but growth running below inflation. And without gasoline sales (which rose 49.9% year-over-year) growth comes down to 5.4%.#RetailSales
— Neil Saunders (@NeilRetail) July 15, 2022
US June Retail Sales: The data tends to support the Fed proceeding with a 75 basis point hike. This data does not scream 100 basis point hike as the central bank moves forward in its price stability campaign. pic.twitter.com/LPNsgrPr29
— Joseph Brusuelas (@joebrusuelas) July 15, 2022
US retail spending holds up amid soaring inflation
Just in: US retail sales jumped by more than expected last month, as rising inflation drove up prices in the shops and online.
Retail sales rose 1.0% in June, ahead of forecasts of a 0.9% rise, and were 8.4% higher than a year before.
That follows a 0.1% monthly drop in May (which has been revised up from -0.3%)
The figures aren’t adjusted for inflation, and show gasoline stations spending was 49% higher than in June 2021, while food services and drinking places grew sales by 13.4%.
US retail sales in June stronger than expected.
Headline +1.0% m/m (expected +0.8%)
Ex-autos +1.0% m/m (expected +0.6%)
May figures revised up too.
— Jamie McGeever (@ReutersJamie) July 15, 2022
It suggests that consumers didn’t cut spending heavily in June, despite a slump in confidence last month as inflation hit a 40-year high of 9.1%.
That may give the Federal Reserve the green light for another hefty interest rate rises later this month.
the value behind retail sales is its timing
one of the earliest looks we get at US consumer behavior for most recently completed month
data also often a little dirty, hence the revisions
but, nothing here seems to be a glaring stop light for the #FOMC https://t.co/b6XGXTSjm1
— James Stanley (@JStanleyFX) July 15, 2022
BlackRock’s Fink: investment environment ‘not seen in decades’
The head of investment group BlackRock has blamed the toughest investment environment in decades after profits tumbled by almost a third.
Net income at BlackRock fell 30% in the second quarter of 2022 to $1.12bn, a bigger fall than expected. Assets under management at the firm dropped by 11% to below $8.5trn.
Laurence D. Fink, Chairman and CEO, points out that it’s been a tough year:
“The first half of 2022 brought an investment environment that we have not seen in decades.
Investors are simultaneously navigating high inflation, rising rates and the worst start to the year for both stocks and bonds in half a century, with global equity and fixed income indexes down 20% and 10%, respectively.
“BlackRock generated net inflows of $90 billion in the second quarter demonstrating our ability, once again, to deliver industry-leading organic growth even in the most challenging of environments. Our connectivity with clients has never been stronger. Over the last twelve months, we’ve delivered over $460 billion of net inflows reflecting 5% organic base fee growth.
Market volatility has pushed some investors out of the market, and also pushed down the value of assets which managers charge their fees on.
Here’s some good analysis:
2/2. Critical question for BlackRock, financials & market in general is how much of the bumper earnings quarters in 2020/21 was just result of pandemic-related fiscal & monetary stimulus & will have to be stripped out going forward.
— One Bubble to Rule Them All (@shortl2021) July 15, 2022
3/3. And to what degree did the market incorrectly project these pandemic-related “Peloton-style” portion of earnings into the future?
— One Bubble to Rule Them All (@shortl2021) July 15, 2022
