2023 was a tough year for companies and consumers alike. Rising costs and interest rates continued to put extreme pressure on finances, creating economic problems and increased risk of debt default. So, what will 2024 bring?
Will the economy recover?
Inflation fell from 10% in January 2023 to 3.9% in November, and the good news is that it’s forecast to fall further in 2024. However, it’s not expected to reach the Bank of England’s target rate of 2% until at least 2025.
As for GDP growth, that looks set to remain weak until 2025 at the earliest. Even the most optimistic forecasters predict growth of much less than one per cent this year and the Bank of England expects growth to flatline.
Fortunately, there’s an upside to these less-than-encouraging economic forecasts. To stimulate growth, it’s widely expected that interest rates will start to decrease this year, reducing the debt burden on both businesses and households.
Who are likely to be the winners and losers in 2024?
According to Business Matters magazine, business sectors which are expected to thrive over the next 12 months include artificial intelligence, online gaming, online retail and environmental services.
As for sectors which may struggle, continuing economic pressures are likely to create a similar picture to 2023. In December, PwC’s Head of Insolvency David Kelly told The Standard that the construction sector and business services accounted for almost a fifth of total insolvencies last year. He expects these areas to ‘remain the hardest hit in 2024’.
What new legislation is on the cards?
Following its Prompt Payment and Cash Flow Review (see our previous blog), the government is planning to introduce new legislation to encourage better reporting of payment performance data. This will include new metrics, such as a value metric and a disputed invoices metric to encourage accountability.
What’s happening about construction sector retentions?
In October, Business Secretary Kemi Badenoch announced that large construction companies will need to report key details about the retentions they hold. Required information will include contractors’ retention policies and the percentage of retention payments paid in 30 days or less, between 31 and 60 days, and in 61 days or longer.
Giving credit to businesses who pay on time
Launched in 2021, the Good Business Pays campaign encourages the UK’s largest companies to fast-track payments to small suppliers, helping them reduce the risk of experiencing cash flow issues or financial stress because of overdue debt.
The organisation’s Fast Payer Awards commend companies who have demonstrated the best payment performance to their suppliers over the past year. In 2023, the number of official Fast Payers increased by almost 25% compared with the previous year, with winners coming from almost all industry sectors and regions of the UK.
What’s the outlook for the independent schools sector?
In 2022, research by Oxford Economics, commissioned by the Independent Schools Council, showed that the independent schools sector contributed £16.5 billion to the UK economy, supporting 328,000 jobs and £5.1 billion in tax revenue.
However, the sector is by no means immune to economic pressures. With tuition fees rising and parents continuing to face a squeeze on household budgets, enrolment figures for 2024 are expected to be down on previous years.
With this in mind, keeping a tight rein on finances is a key priority for school finance teams. That means diligence in administration and credit control to ensure fees are collected in full and on time.
Increase business resilience with support from Redwood Collections
Businesses must continue to be aware of the increased risk of customers being unable to settle their debts promptly. By acting sooner rather than later, you can avoid serious cash flow issues that could impact on the financial stability of your business.
Many businesses lack the time and resources to deal effectively with overdue debt. At Redwood, we can relieve you of the worry and stress of chasing debtors, using our proven experience and expertise to achieve positive results as quickly as possible.
With our support you can reduce the risk of overdue debt becoming a burden, ensuring your business can Grow Stronger.
