Published: 25 August 2023
By Suzanne Evans, Director, Political Insight
UK construction companies are going bankrupt at the highest rate in a decade as inflation, according to a Financial Times analysis of data released from the Government’s Insolvency Service. 4,280 operators went bust in the year to June, a 16.5% jump on the 12 months prior, with rampant inflation, higher interest rates, excess regulation, and labour shortages cited as reasons for the dramatic increase. The data showed the worst hit companies were smaller, specialist subcontractors, which accounted for 60% of the insolvencies in question, although Rebecca Larkin, head of construction research at the Construction Products Association (CPA) told City A.M. the “increase in insolvencies has been strongest among larger firms”, which she said reflected “the inevitable knock-on effects of firms going bust further down the supply chain”. Higher interest rates are also “affecting clients willingness to proceed with projects”, she added, with labour shortages piling on problems when they do finally get underway. According to the Office for National Statistics, the price of construction materials is currently 42.7% higher than pre-pandemic levels. A spokesperson from the National Builders Federation (NBF), meanwhile, highlighted the damage caused by government regulation in housebuilding, which has contributed to the damage caused by inflation, leaving much of the industry “treading water at best”. The NBF said 13 new taxes and regulatory costs had been announced or implemented in the last three years in housebuilding, with some “adding thirty per cent to build costs”.
Meanwhile, The Competition and Markets Authority (CMA) is promising a deeper probe into the large amount of land controlled by Britain’s largest homebuilders and weaknesses in the adoption process for roads and public open spaces. The CMA has already undertaken a six-month study on homebuilders in response to concerns that builders were not delivering homes at an adequate pace or scale, and has identified five areas of concern, including estate management charges and land banks, that it will investigate further in the next phase of its study. "These warrant further investigation and we stand ready to take enforcement action if needed," CEO Sarah Cardell said.
Energy regulator Ofgem has announced the new energy price cap this morning, setting average bills for a typical household at £1,923 from October. The decrease of £151, around 7% down on the current price cap of £2,077, will determine the new maximum price of each unit of gas and electricity for 29m households in England, Wales and Scotland who are on standard rate tariffs, to which the price cap applies. The cap is £577 down on last winter’s peak. However, reduced government support for energy bills and higher fixed costs mean few will see much difference in what they pay, and Ofgem CEO Jonathan Brearley told the BBC's Radio 4 Today programme this morning that prices paid by suppliers would be "volatile for some time to come". Although wholesale gas and power prices have fallen by about 85% and 80% respectively since record highs in the first quarter of last year, the price cap remains well above the level it was before the current energy crisis began when Russia invaded Ukraine.
Rail workers in England are on strike tomorrow. Some 20,000 RMT union members at 14 rail companies are striking as part of a long-running dispute over pay. It will be 24th time they have been on strike since last summer. RMT General Secretary, Mick Lynch,told the BBC that union members were targeting Saturdays deliberately. “The strike has to be effective," he said. "We haven't got a plan to disrupt anybody's particular activities but that is the busiest day for the railway and members have decided that's the way they want to go." Further action is planned for the weekend of 1st -2nd September, with Aslef workers walking out on the Friday and RMT members again on the Saturday.
The Government has announced Britain will host a global summit on artificial intelligence (AI) at Bletchely Park, the site in Milton Keynes where mathematician Alan Turing cracked Nazi Germany's Enigma code, on 1st and 2nd November. The plan is for tech company execs, government officials and academics to meet to consider the risks of AI and how they might be mitigated. "The UK has long been home to the transformative technologies of the future, so there is no better place to host the first ever global AI safety summit than at Bletchley Park," Prime Minister Rishi Sunak said in a statement issued earlier.
Left-wing think-tank The Institute for Fiscal Studies says this morning that the Government should increase taxes on the self-employed and homeowners, as well as on capital gains, as part of an overhaul to fund more spending on public services and welfare. "Better designed taxes would make us more productive, and therefore ultimately richer," IFS deputy director Helen Miller said. "Taxes could also be fairer if we stopped taxing very similar people in very different ways."
One million new British consumers have flocked to buy-now-pay-later (BNPL) provider Klarna in the last year, amid the cost of living crisis, the Daily Mail reports. The Swedish company said customer numbers in the UK jumped from 17m in the summer of 2022 to 18m at the end of June this year. The average age of users also rose from 33 in 2021 to 36 today. Klarna said its average order value is £80 and the average outstanding debt is £150, which it said was far less than typical debts accrued on credit cards. The top categories for shoppers using Klarna, which offers payment services beyond BNPL too, were clothing, home and garden, and leisure and sport.
Meanwhile, calls to regulate BNPL firms are increasing, as a new analysis by economists at the Bank of England has found that more than 3.1m UK households, 11% of the total number, now owe £2.7bn on such cards. It also suggests users, being younger, are more likely to be financially vulnerable. The report claimed 68% of users are concerned about their borrowing, compared with 45% of other borrowers. BNPL users are also more likely to fall behind on repayments by two months or more; and 21% report having been in arrears compared to 6% of other borrowers. Labour MP Stella Creasy said: “For years we have been warning of the dangers of BNPL credit, and the need to act before these legal loan sharks become the next Wonga-style scandal. This data again shows why the Government's refusal to regulate them is inexcusable”.
Retailers Aldi, The Works, Dunelm and Hobbycraft have all said they will give Wilko workers a job interview if they apply. Aldi says it has over 6,000 store vacancies available. Wilko went into administration around two weeks’ ago, putting 12,500 jobs and its 400 stores at risk.
The John Lewis Partnership is recruiting for more than 10,000 jobs over the coming months. It is looking to fill 1,700 permanent positions and over 8,400 seasonal roles. 2,900 seasonal workers are required for its 34 department stores, over 2,800 for its 329-strong Waitrose chain, and a further 2,700 workers for its warehouses and to deliver goods.
The Serious Fraud Office (SFO) has closed two long-running corruption investigations into mining companies Rio Tinto and Eurasian Natural Resources Corporation (ENRC). In the case of the FTSE 100’s Rio Tinto, the SFO was probing allegations arising from its business in Guinea, but has now concluded that “it is not in the public interest to proceed with a prosecution”. As for Kazakh miner ENCR, “the suspected payment of bribes by the company and individuals connected to it to secure access to lucrative mining contracts in the Democratic Republic of the Congo (DRC) between 2009 and 2012” was being investigated, but now the SFO says there was “insufficient admissible evidence to prosecute”. The SFO added it will “continue to support” the Australian Federal Police, which is continuing its probe. US agencies are also understood to be continuing their investigations.
Wrightbus has launched a major recruitment drive to fill hundreds of job roles and apprenticeships at its Ballymena manufacturing plant. Three years’ ago, the firm, which makes the world’s first hydrogen and battery electric double-decker buses, was rescued from administration by JCB heir Jo Bamford. Having fallen to a staff of only 56 when it was bought out of administration, Wrightbus now employs more than 1,200 people.
Recruitment group Hays has appointed Dirk Hahn as its new CEO, the successor to Alistair Cox. Hahn is currently MD of Hays Germany and Continental Europe, Middle East and Africa. He joined Hays in 1997 and has led the firm’s expansion in Germany, which is now its largest market. He will take up the role on 1st September.
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