Small business confidence in the UK improved slightly in Q3 2023, although challenges persist, according to the latest Small Business Index from the Federation of Small Businesses (FSB).

The headline confidence reading in Q3 stood at -8.0 points, an improvement from the -14.2 points recorded in the previous quarter but still below the -2.8 points measured in Q1.

The decline in confidence over the past six quarters can be attributed to factors such as rising inflation and the energy crisis.

The hospitality sector exhibited the lowest confidence level, recording -31.1 points for accommodation and food services. Retail and wholesale followed closely with -22.8 points, while the construction, manufacturing, and information and communication sectors also reported negative confidence.

The only sector with a positive confidence reading was professional, scientific and technical services, at 6.9 points.

According to the FSB, the low business confidence in the hospitality and retail sectors underscores the need for additional support.

Martin McTague, FSB’s national chair, said:

“After the economic turmoil wrought by the cost of doing business crisis over the past year and a half, our latest Small Business Index shows signs of stabilisation in small firms’ performance.

“The improvement in the overall confidence measure since Q2 is a good start, but we really want to see it firmly back in positive territory, rather than eight points below zero, as it is currently.”

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The Bank of England (BoE) announced it would maintain its interest rate at 5.25% for the second consecutive time, following a series of 14 rate hikes.

The Monetary Policy Committee (MPC) voted by a majority of 6–3 to maintain the bank rate on 2 November, with three members preferring to increase the Bank Rate by 0.25 percentage points to 5.5%.

The BoE’s decision to keep interest rates unchanged is driven by inflationary pressures affecting UK businesses. It also aligns with recent moves by other central banks worldwide, including the US Federal Reserve and the European Central Bank, which have also opted to maintain their interest rates.

While the BoE has relied on interest rates as its primary tool to combat inflation, the central bank still faces challenges in reaching its 2% target by the end of 2025.

The MPC anticipates that inflation will eventually fall below the target as reduced domestic inflationary pressures follow a period of economic slack.

The decision highlights the ongoing struggle to manage inflationary pressures and their impact on the UK economy. This is evident in Q3 insolvency figures, which contributed to the highest corporate insolvency levels in over two decades.

BoE governor, Andrew Bailey, said:

“Inflation is falling, and we expect it to keep falling this year and next. Our increases in interest rates are working to bring inflation back to the 2% target.”

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Corporate insolvencies in England and Wales are at their highest level since 2009, according to new data from the Insolvency Service.

In Q3 2023, 6,208 companies registered as insolvent in England and Wales, down 2% from the previous quarter but up by 10% compared to Q3 2022.

This rise in insolvencies can be partially attributed to firms struggling with rising borrowing costs, high inflation and post-pandemic debt.

The number of creditors’ voluntary liquidations (CVLs) hit 4,965 between July and September 2023. According to the Insolvency Service, the last two quarters saw CVLs rise to their highest levels since the series began in 1960.

During the same period, there were 735 compulsory liquidations, 466 administrations and 41 company voluntary arrangements (CVAs).

Notably, over the 12 months to Q3 2023, the construction sector had the highest number of new underlying company insolvencies (4,272), with the wholesale and retail trade (3,777) and accommodation and food services (3,477) sectors following closely.

Meanwhile, individual insolvencies hit 24,418 in Q3 2023 – down by 6% from the previous quarter and 15% lower compared to the same period last year.

Commenting on the insolvency statistics, past president of R3, Christina Fitzgerald, said:

“A perfect storm of economic issues has led to the highest Q3 corporate insolvency figures in more than two decades. A combination of rising costs, director fatigue and increased creditor pressure mean more firms are turning to a corporate insolvency process to resolve their financial issues.

“Our message to anyone who is worried about their personal or business finances is to seek advice as soon possible – as soon as you become concerned.”

Contact us for expert financial advice.

How will technology impact your business’s financial future?

Constant developments in technologies like AI and cloud accounting are changing the way we do business and manage our finances. It’s a rapidly advancing field that has already changed the way most businesses think about their processes. So what are the benefits of using technology in

business accounting?

Embracing technology can empower you to move your business forward, whether you’re looking for innovative solutions to common accounting problems or you want to dive deeper into your financial reports. But if you want to make the most of tech, you need to know how to use it effectively.

With a wealth of information out there, cutting through the noise and finding exactly what you need can be hard. Having expertise from an accountant, like us, will make all the difference.

In this guide, we’ll discuss how you can use technology to boost productivity, streamline time-consuming processes and future-proof your business finances.

How can I use technology to strengthen my business finances?

Let’s take a look at some of the most common accounting challenges businesses face and how tech can help you overcome them.

The challenge: your clients are paying late

Cashflow is the lifeblood of any business. So if your clients don’t pay their invoices on time, this can have a knock-on effect on your business operations and overall financial health.

Last year, analysis from cloud accounting provider Xero showed that around half of the invoices issued by small businesses were paid late. Over one in ten (12%) of these invoices were still outstanding a month after they were first issued.

If you’re facing this problem in your business, you may struggle to pay your own bills. This can lead to strained relationships with suppliers – and you could even incur costly late-filing penalties from HMRC. So how can

tech help?

The solution: automated invoicing

While there’s no quick fix for late payment culture, using tools like automated invoicing can help minimise the impact on your business.

Automated invoicing allows businesses to schedule client invoices in advance at a specific date and time. This not only saves you time manually issuing invoices yourself, but also encourages prompt payment by getting invoices to your clients as early as possible, and chasing them for payment so you don’t have to.

Depending on your chosen cloud accounting platform, you can also set up automations to chase late-paying clients.

With more invoices paid on time, you’ll find it easier to manage your cashflow and stay on top of your business costs.

An alternative solution could be to set up a direct debit through an online payment processing provider and cut out the chasing time altogether.

The challenge: You spend too much time on accounting tasks

Good financial management calls for accurate, up-to-date business records — but staying on top of your books can be time-consuming. If you and your team spend hours on routine recordkeeping tasks, you may not have time to focus on bigger-picture strategies.

Entering your financial data doesn’t just take up a lot of time — it can also increase the risk of human error in

your accounts.

The solution: Track business transactions automatically

Instead of entering your transactions manually, you could link your business bank account with your accounting software. This allows your software to automatically download your bank transactions so you can easily track your income and expenses.

While this feature has been available on most platforms for some time, it’s still evolving. Thanks to recent developments in AI and machine learning, software can often categorise your business transactions automatically, winning back more time for you to spend on

your business.

Other software solutions can help to automate the record-keeping process by importing bills and receipts, automatically recording the description, tax rate and amount on digital or physical documents.

The challenge: You want to make better business decisions

Effective decision-making requires an in-depth understanding of your firm’s fiscal health. If you want to implement a solid business strategy, you’ll need to do much more than balance your books and meet your obligations.

The solution: Combine technology with accounting expertise

AI-powered accounting tools can take what they learn from your accounts to give you valuable insights about your business’s past, present and future. With technology analysing your real-time data, you can draw up forecasts, budgets and other financial statements to help you make well-informed business decisions.

However, computer-generated reports do have their constraints. Even the more sophisticated accounting tools don’t include external factors like current industry trends and economic conditions in their predictions.

To get a truly accurate picture of your business finances, you’ll need to harness the power of technology and expert accounting insight.

Most cloud accounting providers have an app store with solutions that plug into their software, so it’s easy to find a platform that integrates with the tools you’re already using.

How to make the most of technology

With technology advancing at such a rapid pace, it can be difficult to keep up. The business landscape has shifted significantly in the last few years alone, and it’s likely to change even more as we learn more about AI capabilities.

If you want to future-proof your business, you should embrace technology — but you also need to understand its limitations. As your accountants, we can help you use different financial management tools as effectively as possible.

Easy collaboration

Giving us access to your cloud accounting can make collaboration easier than ever. With us working on your real-time data at the same time, it’ll feel like we’re an extension of your team.

In-depth insights

Automating many of your financial processes can free up more time for us to focus on longer-term strategies. We’ll combine technology with our accounting expertise to give you a deeper understanding of your business finances and help you meet your ambitions.

Tailor-made solutions

No two businesses are the same, so you need to find tech solutions that work for you. Whatever challenges you have, we can give you the support you need to face them with confidence.

Seamless integration

Are you looking for an inventory management system to help you monitor stock levels? Do you want to start using time-tracking software so you can keep an eye on the costs of different projects? We can help you integrate new tools into your existing business processes.

Accounting support

It’s our job to provide support and answer any questions you have – whether you want to know more about your tax liabilities or how to make the most of new accounting tools.

We can help you navigate accounting software with ease. And if we find something that could improve your financial processes or boost your productivity, we’ll let you know.

Get in touch with our team to find out how we can use cloud technology to move your business forward.

Talk to us about cloud technology and your business.

How to plan your finances ahead of retirement.

For many savers, retirement can seem like a far-off or even unattainable goal. But to maximise your chances of retiring comfortably, early planning is essential.

Recent research from Canada Life shows that a worrying number of UK adults are not planning for this key milestone, with 45% of over-55s saying their retirement plans are not detailed, and 19% saying they have no plans in place at all.

One in ten respondents said they’d never thought about planning for retirement – and didn’t intend to do so. But more than a third (35%) of retirees wished they’d planned for their retirement more thoroughly in advance.

As the cost-of-living crisis puts pressure on day-to-day finances, it’s a difficult time to think about saving for the future. But these challenges make it all the more important to carefully consider your finances and plan for the long term.

Here are some tips on how to plan for retirement.

Assess your saving goals

At its most basic, retirement planning from a financial perspective comes down to two key questions: how much do you need to save, and how will you save it? The answers to these can be down to various factors.

What kind of lifestyle do you want?

To start working out how much money you’ll need in retirement, you’ll need to consider your various expenses and the lifestyle you’d like to achieve.

Give careful consideration to factors like holidays and leisure, transport, home maintenance, food and drink, shopping and gifts.

The Pensions and Lifetime Savings Association estimates that a single person would need at least £12,800 a year to afford at least a minimum level across these expenses in retirement.

For a ‘moderate’ lifestyle that offers more financial security and flexibility, you’d need at least £23,300, while a more comfortable lifestyle with some luxuries would require £37,300 a year.

These estimates could vary for couples and different locations in the UK, and you’ll also need to factor in additional costs like medical and social care.

They also assume that you own a home and are no longer renting or paying a mortgage. But with these points in mind, they can provide a useful starting point for your calculations.

When did you start saving?

Another major factor in your retirement plans is how early you start. The sooner you start, the more you can save over time – plus, compounding interest means the money you put in earlier can go further.

For instance, let’s say your investments see returns at 3% above inflation each year. If you put £10,000 into your pension at the age of 21, your investment would be worth £35,000 by the time you turn 65. If you made the same investment at 40, it would be worth around £20,000 instead.

One rule of thumb suggested by some experts is to halve your age, and use that number as a percentage of your annual salary you should save.

So if you start saving into a pension at 20, you might aim to save 10% of your income. If you start at age 30, you’d need to save 15%.

How long will your retirement be?

Generally speaking, the length of your retirement depends on how soon you retire and how long you expect to live.

Remember, life expectancy has increased drastically in the last 50 years, and according to the Office for National Statistics, it’s expected to increase again in the next 50, by approximately 6.6 years for males and 5.5 years for females in England and Wales.

People potentially living longer than before is great news, but it does make it more important to check that your finances will cover that period of time.

Understand your pension

Most people in the UK are entitled to income from the state pension, as well as any workplace or personal pension savings they’ve built up over time.

State pension

The new state pension, which applies to people reaching retirement age (currently 66) on or after 6 April 2016, offers a full amount of £203.85 per week (£10,600.20 per year). But the amount you receive will depend on your National Insurance record.

You can check how much state pension you’re entitled to, when you should get it, and how you might be able to increase it using the Government’s ‘Check your state pension forecast’ tool.

Workplace pension

In the last few years, more people have been saving into a workplace pension scheme following the introduction of auto-enrolment laws.

These require employers to automatically enrol qualifying employees into a workplace pension scheme and make contributions as a percentage of the employee’s salary.

Currently, the minimum total contribution for auto-enrolment pensions is 8% of pensionable earnings.

Employers must pay a minimum of 3%, with employees covering the remaining 5% – although employers can choose to contribute a higher amount.

As an employee, it’s possible to opt out of an auto-enrolment pension scheme, but because you receive a contribution from your employer and benefit from tax relief on those contributions, it’s often a good idea to remain enrolled.

Personal pension

You also have the option to arrange a pension yourself. This can be particularly useful if you’re self-employed and therefore unable to benefit from an employer’s pension scheme.

There are a few different types of pension you could choose from, including stakeholder pensions, which must meet specific Government requirements, or self-invested personal pensions (SIPPs), which allow you to choose your investments.

Whichever you choose, check that your provider is registered with the Financial Conduct Authority, or the Pensions Regulator for stakeholder pensions.

Assess your savings options

Many people choose other methods to save for retirement,  such as individual savings accounts (ISAs). You can make contributions to an ISA up to an annual limit without incurring tax on the growth of your savings – for 2023/24, the limit stands at £20,000.

You can also invest, either in stocks and shares or assets like property. The seed enterprise investment scheme (SEIS) and enterprise investment scheme (EIS) are two very tax-efficient ways to invest, for example – talk to us for more information on these.

Holding investments over a longer period generally gives you a better chance of returns, but as ever, the value of investments can go down as well as up. Before making investment decisions, it’s best to seek out expert advice.

Withdrawing from your pension

When the time comes to access your savings, it’s important to be aware of the tax implications.

From the age of 55, you can usually take up to 25% of your total pension pot as a tax-free lump sum. Withdrawals after this are subject to income tax. You’ll still receive your tax-free personal allowance in retirement, which currently stands at £12,570.

Tax on pension income can be very complicated, and while you have various flexible options for withdrawing your funds, it’s essential to get professional advice to avoid unexpected tax charges.

We can help you to understand the tax implications of retirement and create an effective plan to achieve your savings goals.

Get in touch to talk about retirement planning.

Britain’s economy partially recovered in August, with a marginal growth of 0.2% following a sharp fall in July.

This slow growth has fuelled expectations that the Bank of England’s (BoE) Monetary Policy Committee will vote to maintain its base interest rate at 5.25% next month.

The BoE halted its run of interest rate increases in September following signs of a slowdown.

Earlier this week, the International Monetary Fund predicted that Britain would be the slowest-growing G7 nation in 2024.

While the UK is not currently in recession, weak growth has been a concern, and the economy is likely to be a key issue in next year’s election.

The Office for National Statistics said the economy needed to grow 0.2% in September to avoid reducing in the third quarter of 2023.

Commenting on August’s GDP figures, David Bharier, head of research at the British Chambers of Commerce, said:

“The UK economy is holding up but remains in a precarious state.

“Our research is clear about the issues UK firms are facing — three years of economic shocks, high inflation and interest rates, skills shortages, and trade barriers with the European Union.”

Get in touch about your finances

The number of company insolvencies in September 2023 was 16.5% higher than the same month last year, according to official data published in October by the Insolvency Service.

Corporate insolvencies decreased to a total of 1,967 compared to August’s total of 2,319, but compared to September 2022’s figure of 1,688, they increased by 16.5%.

Nicky Fisher, president of R3, the UK’s insolvency and restructuring trade body, commented on the corporate insolvency statistics:

“September 2023’s corporate insolvency figures are the highest we’ve seen for this month in four years as a combination of economic issues, director fatigue, and the post-COVID insolvency lag which has seen more firms turn to corporate insolvency processes to resolve their financial issues.

“It’s clear that the challenging trading climate is taking its toll on businesses. Firms are operating in a climate where people are cutting back their spending on non-essential items, while at the same time the costs of operating a business remain high – and will only increase as the weather gets colder and the cost of borrowing and servicing existing debts get more expensive.

“Our message to company directors is simple: if you’re worried about your business, seek advice.”

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Leading business organisations have criticised the Government’s decision to scrap the northern leg of HS2, despite its promises to divert £36 billion into new transport in the Midlands and north of England.

High-Speed Rail Group, which represents rail and engineering firms, described the move as the “biggest and most damaging U-turn in the history of UK infrastructure”.

The replacement scheme, “Network North”, includes schemes already in progress or where funding was expected, alongside previously paused or cancelled projects.

Prime Minister Rishi Sunak said the “facts have changed”, and it was time to ditch the high-speed rail project between Birmingham and Manchester in the face of increasing costs.

He confirmed that, contrary to some ongoing fears, the HS2 line would still continue into central London, ending at a scaled-down Euston station.

As part of the plan, £9.6bn would be reinvested into the Midlands, including a rail hub for the region, and an additional £1bn for the West Midlands city region, whose Conservative mayor Andy Street had earlier indicated he was considering leaving the party if HS2 was scrapped.

The £19.8bn from scrapping HS2’s second phase would be spent on electrifying rail lines, with £2bn going to Bradford and £2.5bn for West Yorkshire, including the tram in Leeds.

Commenting on the decision, Chris Fletcher, greater Manchester chamber director of policy at the British Chambers of Commerce, said:

“Whilst this may sound like a better use of the money with new lines promised, we are still no nearer getting the transport network that we actually needed years ago to unlock the north’s potential.

“HS2 was a major investment opportunity for the UK that would unburden a worn-out network already at over capacity; boost the country’s net zero ambitions and open up labour markets and job opportunities on a scale like never before.

Plus, it was also a cornerstone of Northern Powerhouse Rail. Network North has to deliver all this, and more and in a shorter timescale.”

Talk to us about these changes

A Treasury task force explained on the 9 October how listed companies and financial firms will have to outline plans to cut carbon emissions in the transition to a 2050 net-zero economy.

The plans dovetail with pre-existing mandatory climate standards, which are set to be replaced by new measures from the International Sustainability Standards Board (ISSB).

The blueprint by the Transition Plan Taskforce (TPT) builds on the ISSB’s plans and draws on work by the Glasgow Financial Alliance for Net Zero.

Listed companies and financial institutions will be expected to use the framework to disclose their transition plans for 2025 and onwards, which means the first reporting deadline will be in 2026.

Joanna Penn, a junior Treasury minister in Parliament’s upper house, said making transition plans mandatory is an essential part of Britain’s plans to become the world’s first net zero financial centre:

“The transparency and accountability offered by transition plans are vital to the fundamental shift in business and finance required for the economy-wide transition to net zero and a climate-resilient future.”

Michael Izza, chief executive of the Institute of Chartered Accountants in England and Wales (ICAEW), also praised the framework, saying:

“For the first time there is a definitive guide and insight into the risks and opportunities that surround the development and implementation of a climate transition plan.”

Amanda Blanc, group CEO of insurer Aviva and co-chair of the taskforce, said in a statement: “Backing up net zero ambitions with high quality and clear transition plans is crucial if we are to collectively deliver net zero.”

The net zero strategy builds on the Government’s ’ten-point plan for a green industrial revolution’ published 18 November 2020. It set out policies and proposals for decarbonising all sectors of the UK economy to meet the Government’s net zero target by 2050.

The Government stated net zero means “any emissions would be balanced by schemes to offset an equivalent amount of greenhouse gases from the atmosphere, such as planting trees or using technology like carbon capture and storage.”

Contact us to learn more.

HMRC has reopened the self-assessment tax helpline from 4 September after it was closed for three months over the summer.

Between 12 June and 3 September, callers were redirected to digital services to give HMRC staff time to deal with other phone enquiries and handle the postal backlog.

This was not the first time HMRC has limited access to helplines to reallocate staff elsewhere, but it was the first time the tax authority completely shut down a service for a significant period.

Adam Harper, director of professional standards and policy at the Association of Accounting Technicians, said:

“The need for such a pilot, in order to redirect staff elsewhere, highlights the much bigger challenge that HMRC faces in balancing competing priorities with a constrained budget. Ultimately, the Government must address the root problem that more investment is needed.”

In June, Victoria Atkins, financial secretary to the Treasury, suggested that the closure of the self-assessment helpline would not be the last, saying:

“We will be watching this very, very carefully. If it is helping with some of the customer service problems we have, then we will look to see if we can surge people at other times of the year when there are peaks and troughs into the higher activity areas.

“It is about using our people as effectively as possible when customers are trying to contact HMRC.”

Talk to us about your self-assessment tax return.