Accounting
March 15th 2023 is the date of the next budget, and on 16th March we will be partnering with the Chamber to hold a budget update breakfast. In other areas, the challenges of recruiting remain. We have streamlined our processes with regards to how we manage the accounts and tax work of our clients. This has led to a surplus resource and increased staff morale. Lead times that were previously months have been significantly reduced. A 2022 Benchmarking report was recently published.
Banking
- A) On 9th February a markets Matter call is taking place. 2023 so far has seen some calm in many financial markets. Some risks still need to be closely monitored, for example the labour market. Central Bank action on interest rates has affected confidence in the markets, although borrowing does seem to be increasing. There has not been a noticeable increase in property availability.
- B) Resilience of SME businesses in the two counties is usually fairly robust in a national downturn and, whilst there will be casualties, these are not being seen in great number at the present time. Borrowing requests in the SME community is still weak but there are signs of demand to replace aging capex and for medium term strategic projects. Banks continue to support SME clients who are investing in sustainability projects with discounted terms.
Credit policies have remained broadly unchanged with a focus on understanding the impacts of: strained supply lines. Logistics, freight and distribution challenges and cost, staffing and skills shortages and energy costs.
Community Housing, Social Care
The Housing Association sector is not positive. It is very heavily regulated and there currently seems to be a policy of naming and shaming associations that have had some problems with general property condition and have experienced media exposure. The cost-of-living crisis is having an impact with rent increases capped at 7% instead of being linked to CPI, which has a current rate of 11:1%. There is a big push around tenant welfare and helping people to understand the current climate and to advise them on what they are eligible to claim for. The out of hours service has been incredibly busy and we are finding that people have been very reluctant to turn their heating on. Recruitment has been a struggle, particularly for electricians and plumbers. House prices appear to be coming down, but inflationary costs continue to rise.
Education
Currently it is a mixed picture within the sector. Industrial action is growing with 17 days of strikes planned. It is hoped that this will have a minimal impact on University of Worcester activity. There is mixed news also around national figures on 18-year-olds going to university. Although the number of 18-year-olds in the country is rising, the current number of applicants looking to go on to university has fallen by 4.1% nationally and by 7% in the region. The University of Worcester itself is likely to see a small reduction of applicants, especially in the area of health education. However, in relation to the Business School, the University has seen a 22% increase in student applicant numbers.
Of the 11,000 students at the University, approximately 1,500 are international students, many of whom may want to stay locally following the completion of their studies and will therefore be looking for internships and employment at local businesses and SMEs. The University medical school building will soon be completed ready for the arrival of its first students in September following recent approval from the General Medical Council. There have been over 1,100 international applications for the 28 available places, although a further 20 places have had funding provided for UK students.
Insurance
Electric vehicles come with very high insurance premiums due to the parts and issues involved with the vehicles. In the last month car insurance rates increased by 19% on average due to labour and equipment costs. The increase in buildings and contents insurance is index linked plus 3% so is currently increasing by 14%. Regulatory work is meaning significant increases in both time and costs for insurance companies.
IT & Cyber
This month cryptocurrency expert Chainalysis reported that ransomware groups extorted $457m from victims in 2022 – bad – but this is down 40% from $768m the previous year. Specialist hacking negotiator, Coveware, states that 41% of their clients paid up a ransom last year. The figure two years ago was 70%. Much of this is due to more robust back-ups meaning data ceased is not lost and can be recovered without paying ransom demands. The number of attacks are rising but fewer victims are paying. Bitcoin is the usual currency requested, hence to crypto analysis being pretty accurate, on a comparative basis, although money will exchange using other anonymised platforms. Malicious software is still wide and varied, some 10,000 unique software types were active in Q1 and Q2 of 2022, showing a need for all to remain vigilant, up to date, and easily recoverable.
In better news, some criminal gangs have been discovered and disbanded by global police efforts. Groups such as Revil and Darkside have been foiled and $10m retrieved in Bitcoin from just these two examples. However, the caution is that by disbanding large groups, smaller groups may emerge and deliver a greater number of lesser attacks, potentially to smaller-sized organisations – so the advice is to remain vigilant. Even with declining pay-outs, cyber-attacks are still big money, with public sector companies, governments, schools, and hospitals, all being prime targets.
Manufacturing
The market continues to be challenging. The company is working hard to reduce delays and to attempt to deliver on time. Supplier delivery and price forecasts makes planning hard. Lead times and costs remain high, although energy costs are starting to show signs of reducing, particularly in Germany.
Powers & Utility
Growth in the financial year for the provision of EV charging is positive. Hoping to double the amount installed each year. A large recruitment of electricians has taken place and we have found that we have had no real issues with recruitment, and have new starters every week, although this does not come without some significant HR issues. There have been some issues with site readiness when we are ready to install and complete work. There are also some issues with availability of supply power on site as well. A lot of clients are focussing on decarbonising their property stock and we are increasing our own fleet of electric vehicles.
Real Estate
In certain areas the market is as it was last year. There is a big lack of supply industrial warehousing property. Supply is also hampered by developers being very cautious at this time. Investment activity has also slowed for new developments and rents are high because of a lack of availability. There is a rates re-evaluation being undertaken which may result in an uplift in rates. With regards to office space there has been an increase in the amount of office space available, although an ongoing issue is that the available space is predominantly on the edge of towns and cities rather than being in the centre. Have been talking to the LEP about increasing engagement with local government. owners of properties are taking more time to look at energy saving ideas and bio-diversity offsetting is increasing. Residential sales are slowing, and the rate of new house builds will also be lower in the near future.
Recruitment
The last quarter was quiet, but this was reflected in the sector as a whole. January has been very strong, particularly in the temporary worker market. Candidate availability has been tough but is starting to improve. Workforce planning which is key to businesses is, in many cases, lacking. The Recruitment and Employment Confederation are reporting an increase of jobs available from 1.1m to 1.5m.
Retail
The business had a very positive Black Friday. Importing and exporting is a fluctuating situation currently and benefits realised by currency increases are offset by energy prices. E-commerce has been badly hit with delivery issues and the business has had to switch to a new provider. There is currently high growth but there is a squeezing of margins regard to cost. Brand loyalty is extremely welcome and we are currently supplying our brand to certain large retailers and are looking to provide to other independent retailers.