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Laura Dench

Elliott MacCallum

Financial Report 07/11/20

25/10/2020 – Fraudulent COVID-19 loans go unreported

Earlier this month, the National Audit Office reported the Bounce Back Loan Scheme had delivered £36.9 billion to small businesses. This loan was introduced to help smaller businesses to access finance more quickly during the virus outbreak and has been granted to more than 1.2 million applicants, for many of which this loan could well save their business from being forced to close. However, the Cabinet Office has warned that the fraud losses from these loans would be higher than other public sector fraud levels (typically 0.5% – 5%) and in turn suggests that at least £1.85 billion could have been claimed wrongly. With only 176 reports of fraud being reported in the year to date, this could prove to be a very large loss to dishonest claimers at a time when the country is already under financial stress.

04/11/2020 – Government incentives fail to convince employers to hire apprentices

A 46% drop of new apprentice starters in England between 23rd March and 31st July 2020 compared to those in 2019 prompted the government to increase the support available to businesses when they hire a new apprentice. This help came in the form of a £2000 package for each apprentice hired under 25 and £1500 for those 25 and over, effective until 31st January 2021.

This is a step in the right direction to support those young people who have felt the effects of COVID-19 hardest, many graduate and school leavers job schemes have been cancelled and the 16-24 age group has seen the biggest reduction in their working hours.

Although it is refreshing to see the government focus on getting young people into jobs, UK industry bodies are now saying this may not be enough to encourage the employers to begin training contracts. A study by the HomeServe Foundation has suggested that, although financial support will encourage tradespeople to take on apprentices, the amount needed to influence that decision would be three and a half times the amount offered.

With more young people considering the apprenticeship route as well as further education such as university, do the government need to do more to support the businesses, in order to ensure apprenticeships are available for all who want them?

04/11/2020 – Data shows that smaller, independent businesses are coping with Coronavirus better than large chains

Whilst all businesses have had to adapt to life with COVID, new research into the closing of high street businesses by the Local Data Company has shown that independent businesses seem to be dealing with the effects of the virus and the implications of lockdowns and restrictions better than larger chains. Being smaller means that the businesses are able to be more flexible and agile, allowing them to be able to implement new strategies more easily and quickly. The revamping of strategies, willingness to adapt and increased use of online platforms has allowed them to stay afloat where older, larger chain companies tend to be more tied to the ways in which they have worked for numerous years.

The use of online marketplaces is likely to have played a massive role in whether a business survives these restrictions and it is possible that smaller businesses which have opened more recently could have adopted more of a ‘hybrid’ business model, which includes both online and high-street sales. This is due to the fact that in recent years, a trend has been identified that high-street sales have been contracting and so to open a new business and sustain growth, a company would be wise to also sell online. This ‘hybrid’ model would also reduce the amount of space required by a business on the high-street, meaning that during this time of closure, they have had lower expenditure on fixed costs such as rent. Independent businesses are rising as they begin to grow their market share, with eBay saying that during the first UK lockdown, the number of small businesses on the site more than tripled compared with the same period in 2019.

05/11/2020 – £150 billion stimulus launched in the UK to boost consumer spending

The Bank of England has voted to purchase £150 billion of government bonds in the hope of boosting spending, as the UK enters a second lockdown. This is a bid from Andrew Bailey, the central bank’s governor, to act ‘quickly and strongly’ to the effects of the virus and is part of an effort to increase consumer spending. With a double-dip recession forecasted, increased consumer spending could prove to be pivotal to avoid the predicted 2% drop in GDP that would be observed in the fourth quarter of the year before recovery in 2021.

05/11/2020 – Covid vaccine market could be worth $10 billion a year

Calculations by analysts at Morgan Stanley and Credit Suisse have indicated that the COVID-19 vaccine market could be worth more than $10 billion a year which would generate massive revenues for pharmaceutical companies that have funded large amounts of their research with government money.

The calculation assumes a cost around $20 per vaccination and is based on the assumption that the vaccine would need to be taken every year, much like the flu jab, despite the virus being less likely to mutate year on year. This is due to the current uncertainty surrounding how long a vaccine-induced immunity could last. This market estimation is across developed countries and assumes that only those people who take the flu jab would take the COVID-19 jab and so if the vaccination were to be administered to further demographics, the market could even increase in size.

Round up based on news articles from the Financial Times with data from the National Audit Office and National Office for Statistics.

This round-up is not linked to and does not reflect the views of any companies with which Laura Dench or Elliott MacCallum are associated.

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Financial Report 07/11/20

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