The Takeover Panel was required to look again at the use of conditions, including MAC, a subject on which it last provided substantive comment and guidance in 2001. Dean Harper, Consultant Solicitor at McCarthy Denning, explores the incident and what it means for M&A.
On 12 March 2020, Brigadier Acquisition Company Limited announced a recommended cash offer for Moss Bros at 22p per share, valuing the target at £22.6 million. The takeover was structured as a scheme of arrangement under Part 26 of the Companies Act 2006 requiring both court and 75% shareholder approval. Unlike in the more straight-forward offer structure, the target under a scheme has more control over the process and is required to prepare much of the scheme documentation. A scheme document, setting out the proposals and including the conditions to the Brigadier offer, was duly prepared and sent to Moss Bros’ shareholders on 7 April and a shareholder meeting called to approve the scheme.
The World Health Organisation had publicly declared the spread of coronavirus to be a pandemic the day before the Brigadier offer was announced. In the period between the announcement of the offer and the publication of the scheme document, the Government introduced the Coronavirus lockdown on 23 March. Moss Bros issued an announcement only a few days later on 25 March 2020 that, having seen a “significant reduction in footfall across our retail outlets”, the decision had been taken to temporarily close all its stores until further notice. The announcement also stated that “The Group expects that the effects of the COVID-19 will result in a significant reduction in revenue and profitability for the year ending 30 January 2021” but to which it added “…it is too early to determine the precise quantum at this stage.”
The World Health Organisation had publicly declared the spread of coronavirus to be a pandemic the day before the Brigadier offer was announced.
On 22 April, Moss Bros announced that it had been informed by Brigadier that it was seeking a ruling from the Panel in order to invoke a condition of its offer and lapse its offer for Moss Bros. Withdrawing or lapsing an offer after it has been announced requires the consent of the Panel. The Panel’s has previously stated position is that the “normal assumption should be that shareholders and the market expect that protective provisions will not be invoked” so Brigadier was facing an uphill task from the outset.
The Brigadier Offer was made subject to a long list of conditions, some quite specific and some more general. One of those conditions was a MAC condition: “there having been…no material adverse change and no circumstances having arisen which would reasonably be expected to result in any material adverse change in, the business, assets, financial or trading position of profits, operational performance or prospects of any member of the Wider Moss Bros Group which is material in the context of the Wider Moss Bros Group taken as a whole”. Although it was not been made public at the time, we now know that Brigadier sought to invoke a number of conditions, including this MAC condition.
They also tried to rely on a condition relating to the enactment of legislation which materially adversely affected the business, finances or prospects of Moss Bros, the condition concerning Moss Bros admitting inability to pay its debts, stopping payment of debts or seeking to restructure its indebtedness, and, finally one that required no liability having arisen or increased which would have a material adverse effect on the Moss Bros Group. All of these conditions required the relevant matter to have a material and adverse effect so they could all be generally characterised as MAC conditions.
The Panel’s has previously stated position is that the “normal assumption should be that shareholders and the market expect that protective provisions will not be invoked” so Brigadier was facing an uphill task from the outset.
Notwithstanding Brigadier’s request that the Panel allow it to withdraw its offer, Moss Bros announced on 23 April that there would be no change in the offer timetable and went ahead with the Court Meeting and the General Meeting of shareholders on 29 April (although, due to social distancing rules, shareholders were told to stay away and submit their votes by proxy). At the meeting, the scheme was approved and the directors were authorised to take all such action as they may consider necessary or appropriate for carrying the Scheme into effect. In the meantime, the Panel was still considering whether to allow Brigadier to lapse its offer on the basis of the MAC condition.
Conditions to an offer are governed by Rule 13 of the City Code on Takeovers & Mergers. Rule 13.5(a) of the Code states that “An offeror should not invoke any condition or pre-condition so as to cause the offer not to proceed, to lapse or to be withdrawn unless the circumstances which give rise to the right to invoke a condition or pre-condition are of material significance to the offeror in the context of the offer.”
Guidance on the scope and effect of Code Rule 13(a) has been given by the Panel in Practice Statement No. 5, issued in 2001 (and updated in 2004 and 2011) following the request by WPP Group plc to lapse its offer for Tempus Group plc as a result of the 9/11 terrorist attacks. In WPP’s view, 9/11 had resulted in a significant deterioration in Tempus’ long-term prospects and this constituted a material adverse change allowing them to use the MAC condition to withdraw their offer.
WPP were unsuccessful and, in fact, the Panel has never allowed an offer to be withdrawn or lapse based on the use of a MAC condition. Its view is that “…meeting [the] test [of what is material significance] requires an adverse change of very considerable significance striking at the heart of the purpose of the transaction, analogous….to something that would justify frustration of a contract”.
[ymal]
The Panel has since made it clear that this test does not require the offeror to demonstrate frustration in the legal sense, which is where a contract has become impossible to perform, but the bar to reliance on a MAC Condition is nonetheless set extremely high.
In determining what is of “material significance to the offeror” a matter must be specific and the position has to be considered objectively. Nonetheless, the views of the offeror and other informed parties, such as the offeree, should be given appropriate weight. The burden of proof is on the offeror.
The adverse change must also not be short-term in its effect. The Panel has previously indicated that something that has only a temporary effect on profitability is not sufficient to satisfy the “material significance” test. In relation to an acquisition for strategic reasons, the Panel has previously expressed the view that the purchaser is “clearly investing for the long term and therefore something of material significance to such an offer ‘in the context of the offer’ had to be long term”. A Brigadier director quoted in the original announcement of the Offer referred to being “excited to contribute our expertise and assist in delivering the current strategy. We see the Acquisition as an opportunity to contribute our expertise to improve Moss Bros’ financial performance and protect its heritage, brand and presence on the UK high street.” This suggests a long-term view of the acquisition and the development of the company in private ownership and will not have assisted Brigadier’s chances of obtaining a favourable ruling from the Panel.
Moss Bros resisted the attempt to lapse the offer and indicated that it planned to “take all necessary action” to convince the Panel that Brigadier did not have a valid reason to allow it to revoke its offer and that they believed “the requirements [to lapse an offer on the basis of a condition] have not been met and that the offer should not therefore be permitted to lapse”. This view received support from major Moss Bros shareholders and the matter was identified by some as a test of the City’s resolve and the view has been expressed that allowing the Brigadier Offer to be lapse in these circumstances could start a worrying trend for future deals.
The Panel has previously indicated that something that has only a temporary effect on profitability is not sufficient to satisfy the “material significance” test.
Given the long-term strategic reasons for the acquisition, the difficulty in assessing the likely long-term effect of the current crisis on profitability, the likelihood that lockdown restrictions on non-food retail may be lifted in some way in the relatively near future and the chance of Moss Bros recovering from the damage the lockdown has caused, coupled with the not unreasonable expectation that Brigadier had or should have priced-in the potential impact of the coronavirus pandemic, it was always likely that the Panel would deny Brigadier the ability to lapse their Offer. The history of attempts to rely on a MAC condition to withdraw or lapse an offer was not on Brigadier’s side and the criteria to allow reliance on a condition of this type is very strict and Brigadier was always likely to fall short.
It came as no surprise to many when The Panel announced on 19 May that, having considered Brigadier’s submissions as to why it should be permitted to lapse its bid and Moss Bros’ submissions as to why it believed there were no grounds for allowing it, Brigadier had not established “that the circumstances which give rise to its right to invoke the relevant conditions are of material significance to it in the context of its offer” and that Brigadier should not, therefore, be permitted to invoke any of the conditions or withdraw its offer.
This serves to re-enforce the requirements for bidders to recognise that once a Rule 2.7 announcement of a firm intention to make an offer is made, reliance on a condition, other than the acceptance condition and regulatory approvals, is extremely unlikely to enable the offer to be withdrawn unless the impact is considerable and ,it seems, even the impact and consequences of something as momentous as the coronavirus pandemic may not be sufficient. The Panel Statement noted, however, that Brigadier had been given a short period of time in which to decide whether to request a review of the Panel’s ruling by the Panel’s Hearings Committee and indicated that a further announcement would be made in due course. Brigadier initially requested a review of the Panel Executive’s ruling but then withdrew its request and the Hearings Committee issued a statement on 26 May 2020 that, accordingly, the Panel Executive’s ruling stands. It always seemed unlikely that Brigadier would obtain a more favourable result from such a review should their request not have been withdrawn and that no doubt figured in their decision to withdraw it.
In a press release, the organisation has shared its plans to “attend annual meetings, correspond with other shareholders under Securities and Exchange Commission rules, and directly urge CEOs to convert all slaughterhouses to produce and pack only vegan meats". Tyson Foods, the world’s largest meatpacker, has entered the alternative meat sector already – it launched its Raised & Rooted product range at the end of last year.
PETA has connected the recent move to the current COVID-19 pandemic, saying that another pandemic is inevitable if our society fails to learn from this one. “This crisis has shown that raising and killing animals in filthy factory farm conditions and butchering them in ill-regulated slaughterhouses creates breeding grounds for infectious diseases”, says Ingrid Newkirk, PETA’s President. “PETA is pushing major meat companies to shut down the slaughter lines and switch to plant-based meats that never cause a pandemic.”
PETA says that many meatpacking companies have already increased their production of plant-based meat during this time. The organisation hopes that their recent move will help complete this transition.
The Pandemic’s Impact on the Meat Industry
A study conducted by The Vegan Society has found that one in five (20%) of Britons are reducing their meat intake, while another study points out that nearly one-quarter of all Americans (23%) are eating more plant-based foods now, during the current COVID-19 crisis. As a result, more and more people have been buying plant-based meats like Beyond Meat and Impossible Foods in the past few months. Meanwhile, meat plants in the US are shutting down as hundreds of their employees get infected with coronavirus, causing meat shortages which are driving the price on animal protein up. Tyson Foods, one of the companies that PETA has bought shares in and one of the world’s largest meat processors, was forced to suspend operations at its Columbus Junction, Iowa, pork plant in April after more than two dozen workers contracted COVID-19 there.
Although the novel coronavirus originated in a Chinese ‘wet market’, which is obviously very different from slaughterhouses in the Western world, diseases like Swine flu began on a US factory floor, while other deadly influenza viruses have been traced to chickens. The Centers for Disease Control and Prevention has warned that approximately 75% of recently emerged infectious diseases affecting humans originated in other animals such as pigs and chickens.
What PETA hopes is that by becoming an activist stockholder, the organisation can influence meat processors to transition to plant-based alternatives, which could have a great impact not only on people’s health but also on our planet, and could prevent a potential new pandemic in the future.
Beyond Meat, Inc. (BYND)
Should I Invest in Companies that Make Plant-Based Meat?
Vegan meats produced by companies like Beyond Meat and Impossible Foods were surging even before the pandemic. The super successful stock market debut of Beyond Meat on the US NASDAQ market exactly a year ago has attracted growing awareness of plant-based meat companies amongst investors. Known for its famous Beyond Burger, which very successfully mimics a ground beef burger but is made of pea protein, the company was (at one point) one of 2019’s most impressive stock market success stories. Its $25 IPO offer price initially jumped by a remarkable 163% to $65.75 and then topped $250 in July 2019.
The global plant-based meat market is expected to grow to $27.9 billion by 2025, a compound annual growth rate of 15%. Barclays has estimated that global sales of meat substitutes could grow from 1% of the total market for meat to 10% over the next decade. And whilst in the past, a lot of companies have focused on vegetarian and vegan markets, the increased dialogue about the health benefits of consuming less meat and the negative impact animal farming has on the climate has influenced more people to turn to a ‘flexitarian’ diet – or regularly opting for meatless alternatives without giving up meat completely. 32% of Americans identify as flexitarians today and companies across the world are responding to the trend. Even fast-food companies like KFC and Burger King have now launched plant-based alternatives of their signature chicken and beef burgers.
The current coronavirus pandemic seems to have added to the surge in going fully or partially meat-free, however, like with all hot trends, it is worth considering the risks if you want to get involved as an investor. The appetite for meat alternatives is extremely strong right now, but could slow down in the future. However, the fact that massive meat processors like Tyson Foods are responding to the trend by launching their own meatless products can give confidence to investors that the plant-based revolution is likely here to stay.
*Invest responsibly.
EasyJet has announced plans to cut as much as 4,500 members of its 15,000-strong staff in order to save costs as air travel demand continues to slump.
In a statement released on Thursday, the airline stated that it will soon launch an employee consultation process and outlined its measures for reducing its capacity. It also confirmed that it will restart domestic flights in the UK and France on 15 June, though it does not expect to resume operations at full strength until 2023.
EasyJet chief executive John Lundgren said: “We realise these are very difficult times and we are having to consider very difficult decisions which will impact our people – but we want to protect as many jobs as we can for the long term”. He added that the airline was focusing on “what is right for the company and its long-term health and success”.
The British Airline Pilots Association (BALPA) criticised easyJet for not discussing the measures with the union ahead of the time, and described the move as “ill-considered”.
BALPA general secretary Brian Strutton said in a statement: “EasyJet staff will be shocked at the scale of this announcement and only two days ago staff got a ‘good news’ message from their boss with no mention of job losses, so this is a real kick in the teeth. Those staff have taken pay cuts to keep the airline afloat and this is the treatment they get in return.”
Below, Jonas Puck, Professor of International Business at Vienna University of Economics and Business, outlines a number of factors that he believes will help businesses achieve success in the post-COVID-19 economy.
On the upstream side, interruptions of supply can cause severe operational and consequently, financial challenges. Firms that are dependent on very few suppliers, rare raw materials, and/or geographically concentrated supply channels are most vulnerable in this situation. The strong dependence on production from China in the textile/garment/clothing industry or in the field of central processing unit production has led to major delays and supply-chain interruptions – and severe financial consequences for players in the industry. Firms that have diversified their supply-chain risk by sourcing through multiple channels from multiple regions will have good chances to be less affected on the supply side. Note that the ‘solution’ to the supply-chain risk is, in my eyes, not the ‘nationalisation’ of supply chains as proclaimed by many politicians around the world. From my perspective, ‘nationalising’ supply chains would conceptually put firms at the same risk as current practices as they would again be dependent on a very specific set of suppliers within a single context.
In operations, the central indicator for survival will be flexibility on different levels. Flexibility is connected to the cost-structure in firms. Firms that have fewer fix-costs (as compared to their industry peers) in their operations will be less affected as they can address changes in supply and demand more flexibly and without severe financial consequences. If companies have high fixed-costs in comparison to their industry peers, they will still have a good chance of successfully venturing through the crisis, as long as they can efficiently leverage support from COVID-19 relief packages as offered by many states, countries, or supranational organisations. Airlines are a good example of this- we can see how they struggle because of the high proportion of fixed costs in their business models. At the same time, however, the airlines that have good connections with political decision-makers may, in the end, benefit from the financial distress of others.
The ‘solution’ to the supply-chain risk is, in my eyes, not the ‘nationalisation’ of supply chains as proclaimed by many politicians around the world.
On the output or customer side, I see a similar logic to the diversification logic described for the supply side. A larger and more diverse set of clients across different countries, industries, and firm characteristics reduces the risk of major demand interruptions. It also improves a firm’s competitive position if competitors do not have the same options. Some firms have also increased the diversification of their customer base during the crisis and have sold their products in new industries and/or to new customer segments. Some hotels, for example, have adjusted their offering to health workers. The Vienna Trade Fair has turned part of their space into a hospital for coronavirus patients with mild symptoms. While this could be considered as too costly or out of strategic scope in ‘normal’ circumstances, such active diversification moves can help to reduce the risk of severe losses during the crisis.
Next to challenges in the operating supply chain, we can find indications for vulnerability and/or survival in the way value chain’s support functions (e.g., finance, IT, etc.) are designed and how they are currently characterised. Very straightforward but extremely important indicators on the side of finances are cash holdings and the ability to postpone major investments. If firms can postpone investment projects or payments for such projects, this will strongly increase their financial flexibility. Major cash holdings are usually not only associated with positive connotations, but they are of major importance today as liquidity helps to remain strategically agile in the current uncertain times. This agility allows firms to react to developments in the crisis and keeps them alive and potentially ahead of the competition. Similarly, a well-designed and implemented IT support system helps to survive the crisis. Digital connectivity, especially in times of reduced physical connectivity, can support decision making, indicate challenges in supply and demand at an early stage, and forecast financial challenges.
I believe that successful firms in the current environment are characterised by their ability to diversify their risk in supply and demand, as well as by their operational efficiency and flexibility. While diversification and flexibility are associated with costs and therefore are not always something that firms focus on in ‘normal’ times, they are of utmost importance today. It will be interesting to see how firms work towards the optimal balance between flexibility and efficiency as soon as the crisis ends.
What are the most common issues that your clients face in terms of tax preparation?
Common issues that our tax return clients face are varied. Tax codes are complicated and we are there to be able to make the complexity of preparing a return easier for our clients so that they do not incur needless penalties and interest. Issues that they face that can result in additional refunds of thousands of dollars are as follows: Do they qualify for child tax credits? If so, how much? What about earned income credits? In the case of divorce, separation or dependent of two non-married individuals, who gets to legally claim the dependents? Tax professionals such as us are spending numerous hours preparing a return that is complete and accurate and will meet the IRS due diligence requirements. Other common issues that clients face are connected to deciding if the off-the-shelf tax software is right for them or if they’re better off using a tax professional, staying up-to-date with the timing and amounts of deposits allowed for IRA contributions, HSA contributions, estimated tax payments, business income, and deductions.
What are the advantages of using professional help?
There are many significant advantages to using a tax professional overusing online software. One of the most common myths is that using online software will save people a significant amount of money when compared to hiring a tax professional. While at times this can occur, often this is not the case. Completing a tax return with online software does not mean the return was “correct”. For the software to file someone’s return correctly, the person using the online software would have to have an understanding of taxation; then know that the questions the software asks during preparation are correct for their situation; and also know that the answers the person uses are correct for their situation. I would be retired by now if I was given a dollar for every time I took a phone call from a person asking me to tell them how to answer a question from the online software they are using to prepare their return because they have no idea of what the answer should be. Tax professionals are educated in knowing about deductions and credits that most people are not aware of, and because of this, the cost of preparing a tax return can often be paid for by claiming one or more of these deductions or credits. Another advantage of using a tax professional is the ever-changing tax laws. Tax professionals are required to stay up-to-date with new and changing tax laws and do so by completing continuing education requirements which the general public does not have access to. Thus by using professional help, people will save themselves the time and money they’d need to research these changes.
Mistakes on tax returns are costly. Penalties and interest that the IRS or the state charge because of mistakes on tax returns are usually higher than the sum you’d pay a tax professional to prepare your return. Having a ‘trusted’ tax professional will usually pay for the costs of having the tax return prepared.
An example that illustrates this happened to me recently. I interviewed a new client that had been using a different firm to prepare their business and personal taxes. After our interview and reviewing the tax returns that had been prepared prior, I realized that this client would qualify for a special tax credit known as the Research and Development Credit; a little known, but a very powerful credit. I was able to amend their tax returns for the past three years, which resulted in them receiving a refund of over $1,000,000 (yes, you read that right) from the state and Internal Revenue Service – money that they have the freedom to spend however they please. One could certainly assume that these clients see the significance of using a tax professional!
How do you help your clients mitigate their tax liability whilst remaining fully compliant with tax laws?
Mitigating tax liability for clients and remaining compliant with IRS rules and regulations can be challenging. The main thing to know regarding this is the difference between tax avoidance and tax evasion. Tax avoidance is legal; tax evasion is criminal. Tax avoidance is the process of knowing the rules and regulations and using them to properly reduce or possibly eliminate any tax burden and is completely legal and wise. The definition of tax evasion is ‘an attempt to reduce your tax liability by deceit, subterfuge, or concealment’, and it is a crime. It is a tax professional’s job to educate the client why they should not deliberately underreport income, claim false or overstated deductions on a return, claim personal expenses as business expenses or hide assets or income. Although I like my clients and I’m friends with many of them, I will not risk losing my license to practice by committing tax fraud for them. It is better to lose a client who wants to falsify the information on a tax return than keep them as a client. The tax professional needs to be able to educate the client on the consequences of doing things in a non-compliant manner and explain why being honest is the best policy.
A couple of years ago, a client shared a story with me about our firm and my father which had occurred 40 years ago. The client was starting a new manufacturing business and had a meeting with my father to interview him about becoming his accountant. During the interview, something the client said caused my father enough concern to stop the interview and say: “Listen, if you are asking me to bend the tax laws for you, then you better go on down the street.” The client said he was taken aback, but found the utmost respect for my father. He understood that my father and our firm will do things right, yet use our education and knowledge to make sure the client is afforded every deduction and credit that is allowed by law and as a result, the client will not pay a penny more in tax than they are supposed to. That same person has been a phenomenal client of our firm ever since. He explained to me that the reason he has stayed with our firm is that I am exactly like my father and therefore, he has the same respect for me. This is the type of client that every tax preparer should want in their firm.
Mitigating tax liability for clients and remaining compliant with IRS rules and regulations can be challenging.
What have been any recent changes in tax legislation in Indiana?
As of 1st January 2019, Indiana has adopted Wayfair nexus for income tax, meaning income derived from Indiana would be taxable to the fullest extent permitted by the Constitution of the United States and Federal Law, regardless of whether the taxpayer has a physical presence in Indiana. Please consult your tax adviser regarding how this could impact you.
If you could, what would be the one thing you would change about Indiana’s tax legislation?
If I could change one thing regarding Indiana’s tax legislation, it would be the tax add-back for certain deductions on a Federal Return. The tax add-back is an item that needs to be added back on your Indiana return to properly calculate your Indiana Adjusted Gross Income. This creates the need to keep separate records for federal and state depreciation, net operating losses, excess federal interest and out of state municipal obligations. This creates questions and uncertainty about the validity of their tax return, as most taxpayers do not understand the reasons behind the add-backs.
In what ways has the COVID-19 pandemic impacted tax preparation in Indiana?
The COVID-19 pandemic has impacted the preparation of tax returns for the 2019 tax year in a myriad of ways. It has created delays in refunds from the IRS for taxpayers and has caused confusion as to new tax deadlines. In Indiana, the deadlines for a timely filed return is now 15th July, rather than the 15th April deadline. However, as of 13th April, more than a third of states kept their original 15th April deadline. Taxpayers should check with their tax professional what the date of filing in their state is. Our offices adopted a policy of staying open and preparing returns, but we have cancelled all face-to-face client meetings. Clients were asked to either drop off their documents through our mail slot, mail documents to us or send them to us via our secure portal. We then called or emailed them to consult about their returns and request any information that was still outstanding.
The biggest challenge we faced was the number of phone calls we received with people asking questions about the ever-changing Payroll Protection Program and the stimulus checks that were to be distributed. Due to the proliferation of misinformation on the internet, we were receiving hundreds of calls every day.
What do you think will be the broader impact of COVID-19 on the economy, both in Indiana and US-wide?
This is an excellent question, but I don’t believe that anyone will have the answer to this for years to come. Speaking for myself and basing it on my clientele, (which covers clients in over 30 states), I feel that the economy will be negatively affected for at least a decade. It will take years to bring businesses back to where they were because supply chains will need to be reorganised and many businesses will not survive the economic downturn. I also believe that we will see a real decrease in businesses hiring human workers as they turn to more automated systems to help stem costs and ensure that they will be in a better position in the case of the pandemic causing mass closures again.
The COVID-19 pandemic has impacted the preparation of tax returns for the 2019 tax year in a myriad of ways.
While I would hope that the current pandemic would show the United States that it needs to bring back manufacturing inside our borders so we are not so reliant on China and other countries, I feel that this will not be the case. Indiana and the rest of the United States will certainly emerge from the COVID crisis, but the question is, will we be better off or not? I for one am sceptical that we will ever fully recover.
Tell us about your work for the not-for-profit tax sector.
The not-for-profit tax sector makes up a small part of our overall business, but with 3,500 clients we still have numerous clients in the not-for-profit sector. I make every attempt to provide the sector with many benefits, such as reduced pricing and attending board meetings to educate members about the finances of the business. Many board members are volunteers who have no real background in business and I believe that our job is to explain the workings of their finances so they can be better prepared to make wise financial decisions. Not-for-profits have different tax rules, and board members need to be aware of these rules to stop needless penalties or worse yet, have the state or IRS take away their not-for-profit privileges.
Does your practice get involved in other services such as retirement and wealth planning?
I’m actually surprised by how much we’ve always have been involved in this area. So many of our clients seek our advice before they call their investment adviser. Other times they will call us after they have received a recommendation from them and get our opinion as to whether they should proceed or not with the recommendation. We even had an instance in which the investment adviser called us to propose their recommendation for the client before the meeting because they said: “I know they will call you after I meet with them to get your opinion anyway.” Due to the volume of questions we were receiving, we brought on Cory Reckard a few years ago to help assist with these questions and help clients. He also brings an additional layer of knowledge from his experience and connections that can be of benefit to our clients. We feel that we don’t have to know everything, but more importantly, we need to be able to recognise opportunities and have the connections and resources available to provide value to our clients.
Can you give us some examples of a scenario where you feel you provided significant value to a client in relation to retirement and wealth planning?
One fascinating story was when we were able to provide great value to a 100-year-old’s family. The family called us with some crazy ideas because they were trying to reduce their future estate tax liability. Because we recognised an opportunity for the clients, we used our connections to get the correct people involved and were able to save over $2,000,000 in estate tax for the heirs. As a result of this, we then took an inventory of our entire client base to find out who else may benefit from the same opportunity. We feel we have a responsibility to our clients to present them with opportunities that we feel fit their circumstances, and it is then their decision whether they want to move forward or not.
From what we see, it seems that quite often the tax preparer, who is the trusted adviser of the client, is not proactive. I remember a question that was asked at a seminar of mainly investment advisers: "How many people in the room have been called by their tax professional with ideas and opportunities?” Unfortunately, only a few were able to raise their hands. Because we understand that we are our clients’ trusted advisers, we need to take that role seriously and be more proactive for them.
Another example I can think of was from last fall when we recommended a strategy to a long-term client to save him and his family significant taxes on the assets in his C-Corporation. He liked the idea; however, he didn’t want to go forward with it at that time. This spring he called and apologised saying we were correct in what we presented to him and that he should have listened to us instead of taking the advice of someone else. Now we are working on getting the plan implemented, and we are pleased that we can offer him something of value that he appreciates and wants to do.
About John & Cory
John Emshwiller is an Enrolled Agent and has been granted unlimited practice rights to represent taxpayers before the IRS. With this designation, he is authorised to advise, represent and prepare tax returns for individuals, partnerships, corporations, estates, trusts and any entities with tax-reporting requirements in all 50 states of America. His role within the firm is all-encompassing; he prepares business, personal, estate and trust tax returns as well as payroll and bookkeeping for clients, while also doing business consulting for clients with an emphasis on Research & Development Credits.
Cory Reckard has been a Certified Public Accountant for over 25 years, which enables him to create specialised tax-driven plans for clients. He has extensive training and licenses in many investment-related areas, including his Chartered Adviser in Philanthropy designation and is also a Registered Investment Adviser. The training and licensing in all of these various areas help Cory create customised plans for each client and also help him bridge the gap between clients and their other professional advisers by translating the technical language and complex strategies so the client can see the value of the strategy; thus allowing them to be more confident in their decisions, whether it be increasing retirement income, saving significant taxes, leaving more money to charity or heirs, or elevating profits of their business.
The number of employees working from home has drastically increased over the past two months, and employers are starting to realise the benefits. In fact, 74% of CFOs intend to shift some employees to remote working permanently, according to Gartner. Allowing employees to work from home was previously used as a method to reduce overheads and as an employee incentive to reduce staff turnover.
Now, however, working from home has become the new normal, and as the workforce becomes increasingly disparate geographically, cybersecurity needs to be higher up on the executive agenda. Organisations need to have the appropriate cybersecurity measures to empower employees to work remotely, whether it be from home, in an office, or on the move. CFOs have the ability to facilitate a conversation with CIOs and CSOs to avoid incurring any additional costs from unnecessary IT help desks and data breach fines. Simon Biddiscombe, CEO of MobileIron, outlines the risks of remote working and potential safeguards.
Productivity
Not only does increased working from home present organisations with a significant cybersecurity risk, it also has the potential to limit productivity. The Office of Budgetary Responsibility has estimated that the financial services may see a 5% drop in productivity whilst enforced working from home policies are in place. CFOs need to carefully balance budgets to ensure productivity whilst maintaining the benefits of remote working.
Traditional cybersecurity principles are archaic and dangerous and threaten corporate resources. The on-premise perimeter has been decimated by a general shift to cloud applications and mobility, and the recent surge in remote working has only emphasised this shift. As more employees use personal devices and networks to access business applications, the line between business and personal data is becoming blurred.
CFOs need to carefully balance budgets to ensure productivity whilst maintaining the benefits of remote working.
Additionally, cybercriminals are already exploiting the relaxed security measures brought about by the sudden need for organisations to shift a large part of their workforce to teleworking, as shown by a Europol report. If a bad actor penetrates a device through a personal channel, what is to stop them from breaching a business application?
The Security Foundation
Organisations need to increase their governance over the devices being used to access corporate data. A unified endpoint management (UEM) platform allows IT teams to secure, manage and grant authorised users, devices and apps access to corporate resources and networks. UEM also provides visibility and insights into usage and patterns that IT can use to determine and enforce compliance. As financial services employees work from home, having this level of visibility over employees’ personal devices is just as important as having control over corporate devices if they are using business applications.
UEM separates the corporate digital workplace from personal activities on a device. This is done by containerising and protecting data and applications through application sandboxing. Device encryption can also be deployed so only authorised users can access crucial data. For instance, when banking staff return to work, a corporate scanning app can allow managers to scan a customer’s ID and passport with a smartphone camera.
Integrating threat detection management with a UEM platform allows for continuous enforcement and protection of data, both on the device and on the network. AI-based software constantly assesses the risk a device poses to a company’s ecosystem as a whole through its entire life cycle. Having this 24/7 capability allows IT teams to mitigate any threats should they arise, resulting in a more secure remote work experience and increased productivity.
[ymal]
Scalable Solutions
Security systems should be reviewed to ensure that all networks, devices, and applications are verified before access to crucial business data is granted. As we look for COVID-19 exit strategies, there is a clear need for any cybersecurity solutions to be scalable to accommodate the fluctuating numbers of remote workers in the future.
The accessibility of UEM means it is a highly scalable solution. The enrolment process is as simple as downloading an application and updating a device. Additionally, employees can use a self-service portal to track, add, or remove devices they have under management. If the user needs to retire a device, unenrolment can be initiated immediately. In the event that a device becomes compromised, IT teams can wipe business related applications to remediate the threats. This ability to deprovision devices remotely and selectively delete data is critical for an end-to-end device life cycle management program.
SaaS Flexibility
In order to be as agile as possible and still meet businesses essential security requirements, UEM platforms are widely available on a software-as-a-service (SaaS) basis. A subscription-based SaaS model provides CFOs more flexibility in their payment structure as they are only required to pay for what they use instead of paying a large upfront cost for a fixed number of software licences.
A subscription offering of UEM generally gives CFOs a better return on investment. Maintenance and support are usually included in the service provided, making the need to purchase a separate maintenance and support contract redundant. Software updates are included in a subscription, helping organisations stay current with the latest capabilities and ahead of potential threats.
As we look to the future, one thing is clear: business solutions need to remain agile. COVID-19 has shone a light on the need for agility when it comes to the enterprise cybersecurity, and CFOs should embrace these solutions.”
We want brand experiences to be fast, personalised and seamless. Digitally native brands like Uber and Netflix have raised the bar for simplicity and convenience in every transaction, and the rise of challenger banks like Monzo and N26 is a clear example of how innovation in financial services is following these trends. Chris Ford, senior director at Blackhawk Network, explains to Finance Monthly how the COVID-19 pandemic has accelerated these trends.
Research from social media management platform, Hootsuite, found that in the first quarter of this year, 42% of online shopping was paid for with digital or mobile wallets. But, whilst payment behaviours were already changing, this has likely been exacerbated with consumers forced to dramatically change their daily lives by staying at home and adhering to lockdown regulations. Historically, chaos has fueled innovation and from what we’ve seen it may very well be true in this case. We are about to go through a new revolution in how we pay. Those that adapt quickly will win, whilst those that don’t will struggle to survive.
COVID-19: the Renaissance of emerging payments
Right from the early weeks of the COVID-19 outbreak, businesses have started to become cashless to avoid unnecessary physical contact. Contactless payments have been encouraged by many retailers and we’ve seen the limit increase to £45 as a result. As the lockdown measures were put in place, the need for alternative ways to support people throughout the crisis has also increased the adoption of alternative payment methods such as e-code vouchers and gift cards. Even the UK government reacted by setting up the supply of supermarket vouchers for families that rely on free school meals.
Contactless payments have been encouraged by many retailers and we’ve seen the limit increase to £45 as a result.
The grocery industry, which has experienced the COVID-19 impact like few other sectors, has had to adapt quickly to changing shopping habits. From forming physical barriers for staff, to working with every aspect of their supply chain to maintain stock levels, innovation has been essential. This innovation has also extended to payments with a new category being born: the volunteer gift card. With vulnerable people not able to leave their homes to shop, these gift cards have let them send money to friends, families or neighbours who are taking on the grocery run.
The financial services industry has also developed new services to support customers who are self-isolating. For example, NatWest has created companion cards that allow others to pay for your shopping without having to give over your main account card. Additionally, those that can’t physically get to the shops to buy presents have turned to gift cards as a thoughtful way to keep in touch.
Innovation beyond the chaos
COVID-19 has pressured business leaders to accelerate the innovation that was already on the way. 50% of the UK population is already cashless according to Access to Cash Review published in March, and COVID-19 is seen as a way to make more of us move towards being cash-free. With lockdown restrictions not going away anytime soon, we will have a longer period of time to adopt these new behaviours and they are likely to hang around long enough to make them stick.
[ymal]
Before COVID-19, the demand for gift cards was already at a record high, with the total value of the global gift card market expected to reach $506 billion by 2025. With more organisations adapting to the new normal, the development and uptake of alternative payment methods will continue to increase and e-codes help to lead the revolution.
Apparently, it takes 66 days to form a new habit. Lockdown measures have already exceeded this timeframe in the UK, meaning that new payment habits are likely to be here to stay. Brands need to make sure they respond quickly to these new behaviours to keep meeting and exceeding customer’s expectations.
Our new norm as individuals was always going to change when it came to payments. COVID-19 has accelerated that shift in behaviour and it’s a delight to see so many companies rising to the challenge.
Tuesday morning trading saw shares in airlines and retailers increasing across the UK and EU, apparently symptomatic of growing hopes that international travel restrictions will ease as summer comes about.
London’s FTSE 100 surged by 1.9%, and the more UK-centric FTSE 250 by 3%. Pubs, cinema groups and retailers also saw share price growth.
The gains followed a Monday evening announcement from Prime Minister Boris Johnson that car showrooms and outdoor markets will be allowed to reopen from next week, with high street shops, department stores, shopping centres and other non-essential retail premises being able to resume business from 15 June.
The greatest earners in Tuesday trading were air travel and hotel companies, with airline conglomerate and British Airways owner International Airlines Group (IAG) seeing a 15% surge while Intercontinental Hotels Group (IHG) jumped by 14%.
Meanwhile, European shares leaped to an 11-week high, with investor sentiment likely boosted by the German government’s recent €9 billion bailout of Lufthansa.
Markets.com chief market analyst, Neil Wilson, commented on the stock price surges: “Strength in this sector underscores confidence among investors that economies are reopening, and consumers are keen to travel.”
“There is a lot more hope that travel restrictions across Europe will be eased in time for the summer holidays. If the summer holiday season can be saved it would be a big plus after most of us wrote it off.”
Around a third of Americans are currently working from home in order to help prevent and limit the spread of the novel coronavirus. However, while not physically in the office, keeping track of things such as employee time can prove to be quite a challenge. From payroll to efficiency, modern business technology might be able to help. With that said, here’s how the utilisation of time tracking software can be useful, especially when it comes to a business's financial aspects.
What is time tracking software?
Time tracking software is a computer software that allows businesses to accurately keep track of an employee’s time that’s spent on projects. Many industries utilise this type of software, as it proves to be especially useful for those who work in the freelancing industry and for those who bill their clients by the hour. Not only can this eliminate paperwork and physical means of timekeeping, such as spreadsheets or paper, but some time tracking software allows you to enter both time on and time off of work, along with expenses on one interface. This not only reduces stress for business owners and employees alike, but it is extremely convenient to use as well.
In the new age of the COVID-19 pandemic where working from home has become the norm, time tracking software can become even more valuable. For example, it can become difficult to track employee time when the employees are working from remote locations, though time tracking software can become a solution to that issue as it allows for full transparency. Not only that, but it can help greatly when it comes to keeping track of worker productivity, motivation, and increasing efficiency within the business as a whole - though there’s more to it than that, and especially so though a financial standpoint.
In the new age of the COVID-19 pandemic where working from home has become the norm, time tracking software can become even more valuable.
Saving money and cutting costs
One of the greatest benefits of utilising time tracking software is the fact that it can save businesses money in a number of different ways. By seeing where employees specifically spend their time, companies can save when it comes to payroll, by accurately paying employees for the work they do — thus working to effectively cut out any guesswork on the employee or employer by creating far less work in the payroll department.
This also allows for clients to be billed for the exact amount of time spent on a project, which can benefit the client and create clarity when it comes to billing, and can also act as proof that they didn’t get overcharged. Unsurprisingly, this can help result in a more satisfied customer, improving relationships between the business and consumer. Time tracking software can cut costs in other ways as well. For instance, many kinds of software can be integrated with a businesses existing payroll or accounting system. By doing so, implementing the software can not only be convenient, but time and costs can both be reduced in the process.
Gaining valuable insight
Time tracking software also brings the benefit of bringing valuable insight to businesses, by allowing them to view the software analytics. Since time tracking software allows businesses to see exactly how workers spend their time, adjusting their pricing models accordingly can become much easier and even save time. Time tracking software can also be beneficial in planning and budgeting, too - for instance, consulting with the analytics from the time tracking software can give business owners a general overview that can help decide how they should go about certain affairs, as they can see how much time it takes to complete certain tasks.
[ymal]
Maximum efficiency
For many businesses, the coronavirus pandemic has brought uncertainty, especially when it comes to finances. While working from home is becoming the new norm for now, 74% of CFOs and business finance leaders expect that at least 5% of their workforce will actually continue to work from home permanently — even after the pandemic is over. With that in mind, time tracking software can help to seamlessly maximise efficiency and help to create a sort of certainty in the process, whether it be short or long term.
For example, by reporting exactly how an employee’s time is spent, you can see which employees are truly contributing to the team, of which can save money in the long run should you determine an employee to be extremely unproductive by letting them go. While the efficiency gained from time tracking software can seem quite beneficial for managers and business owners alike, employees can also take advantage of this feature by viewing their progress and learning from it on how they can be more productive in the future.
For many businesses that have chosen to operate online by having their employees work from home during the coronavirus pandemic, time tracking software can prove to be a real asset, especially with the benefits that it can bring financially. From saving money to providing valuable insights that can help with pricing and budgeting, time tracking software can bring a myriad of benefits to those who choose to implement it, and can introduce businesses to a helpful tool that may be able to help them even after the pandemic ends.
Andrew Raymond, CEO of Bolero International, shares his advice with Finance Monthly.
Reliance on paper documentation and manual processes means banks are struggling to meet the needs of exporters and importers as we emerge from the COVID-19 crisis.
The demand for fast digital services with minimal human involvement is gathering pace as global trade prepares itself for the big task of recovery. The WTO (World Trade Organisation) estimates trade could plummet by anything between 13% and 32% this year alone.
The critical role of paperless trade systems in fostering recovery is recognised in the ten-point plan issued by UNCTAD (The United Nations Conference on Trade and Development), which makes their introduction a key priority.
Apart from sheer speed of transfer, electronic versions of essential trade documents have the distinct advantage of not being held up at borders or lost during movement restrictions. This has become a vital attribute. Bills of lading, for example, are crucial trade documents that serve many purposes. Created by carriers, they can be used by exporters to draw under letters of credit from the buyer’s bank payable at sight, or to obtain finance in case of deferred payment. As “documents of title”, they confer ownership of a shipment and are forwarded to the buyer’s bank in exchange for payment against the letter of credit. The buyer will also use the bill to claim the consignment, once delivered.
The demand for fast digital services with minimal human involvement is gathering pace as global trade prepares itself for the big task of recovery.
Clearly, severe consequences ensue if documents such as bills of lading go missing or are held up. Fees and penalties mount as cargoes sit in port longer than necessary. This is where the advantages of digitisation are most obvious. Exchanged on a secure, purpose-built trade digitisation platform, trade finance instruments, electronic bills of lading (eBLs) and other digitised trade documentation, take hours to process instead of days or weeks for paper equivalents.
This is why banks are more likely to invest in paperless systems in the aftermath of the coronavirus pandemic. Yet digital trade finance solutions vary hugely and corporates must take care they do not sign up to services that are poorly designed, lack connectivity or have little acceptance in the wider trade sphere.
Here, then, are five points for corporates to ask a bank when it comes to trade digitisation.
1. Can you manage everything end-to-end from a single interface?
Any digital solution in trade finance must be comprehensive in every sense. From a single interface it should be possible to manage all the documentation required to support a transaction.
A single interface should provide simple access to multiple banks for fast comparison of credit lines, rates, fees and offers. This is the primary means by which corporate treasuries will improve their cash flow and use of working capital. Fast access to a wide choice of credit lines also reduces the need for expensive bank instruments.
[ymal]
2. Does the solution bring everyone together?
Buyers, sellers and carriers – they all need to be on one platform. There needs to be a good, secure flow of information between all parties. Your bank’s digitisation solution should connect seamlessly with your back-office and your own eco-system, giving access to alternative funders and third-party providers such as logistics companies, carriers, insurers and counterparties. This is connectivity that should be easy and open to increase efficiency and provide customisation.
3. Does the bank and its proposed solution have the necessary expertise in-built?
It’s vital to ask if a bank and its solution-providers have the necessary understanding of trade flows and how your business fits in. Does the proposed solution have a proven network of users among banks and significant corporates, and is it sanctioned by national authorities and recognised within the trade community? Many platforms focus on their integration with emerging blockchain solutions. This is important but still requires a current network of users and documents based on real working practices in global trade.
4. Is the platform secure, compliant and fit for trade after COVID-19?
A critical electronic document such as an eBL must be underpinned by a respected body of law, such as English common law, to give both yourself and customers greater confidence. A platform must also conduct compliance checking in line with international trade rules such as those prescribed by the International Chamber of Commerce eUCP which govern letters of credit. For many corporates, the immediate post-COVID era will be one in which they cannot be certain of the solvency of their trading counterparties. Know Your Customer protocols need to part of the solution but not so laborious they become a barrier.
A critical electronic document such as an eBL must be underpinned by a respected body of law, such as English common law, to give both yourself and customers greater confidence.
5. Does the solution offer visibility of bills of lading as well as letters of credit from multiple banks?
A digital platform must give corporates access to electronic bills of lading (eBLs) as well as letters of credit and other trade finance options. As we have seen, bills of lading are critical documents, but often subject to change, which requires visibility and vigilance.
Ideally, a bank’s trade finance digitisation platform should offer you the ability to use critical trade documents such as eBL under any transaction. With so much competition in some of the toughest conditions ever experienced, open account trading is set to continue its dominance in cross-border transactions, so having access to eBLs is an important requirement.
These are just five points but they cover the main areas that corporates need to explore. It is important to weigh up the options quickly, but also to take the right decisions on trade document digitisation in order to maximise revenues as the world recovers from the pandemic and new rules apply.
From 13 May 2020, estate agent’s offices were permitted open and to begin viewings, in line with social distancing guidelines. People were allowed to move home. The construction industry was also permitted to begin building again, in line with government guidance.
Despite such steps, many commercial premises are likely to remain shuttered for some time to come. Those that do reopen may expect significant falls in turnover. The lockdown precipitated by the coronavirus pandemic has already pushed some businesses over the edge. Even as the lockdown measures are slowly eased, many commercial tenants may struggle to meet their payments. Landlords and tenants alike are now grappling with a radically altered economic situation and struggling to understand how it impacts their commercial lease arrangements. Richard Osborn, a specialist commercial property and property development lawyer at Excello Law, parses the new measures and their implications below.
The emergency Coronavirus Act, 2020 protects commercial tenants from eviction should they miss a payment in the three months after the measures were implemented. This means that no right of re-entry or forfeiture for non-payment of rent may be enforced in a commercial tenancy until 30 June 2020, at least. This protection can be extended up to six months. Landlords and tenants will be expected to work together to establish an affordable repayment plan when this period ends.
The government has put in place a raft of measures to help businesses weather the coronavirus crisis. Commercial tenants can avail of UK government loans on attractive terms in order to pay rent. The government’s £330 billion business loan package announced by Chancellor Rishi Sunak was specifically stated to be available for businesses to “pay their rent, their salaries, suppliers or purchase stock”. The Bank of England’s reduction of interest rates to a record low of 0.1% may help make existing loans more manageable. The government’s VAT payment deferral is estimated to have provided businesses with £30 billion in cash flow relief. Crucially, the government’s coronavirus jobs retention scheme helps businesses retain furloughed staff, which will help them to get up and running quickly once they reopen.
The government’s £330 billion business loan package announced by Chancellor Rishi Sunak was specifically stated to be available for businesses to “pay their rent, their salaries, suppliers or purchase stock”.
Despite these measures, many now fear a permanently changed commercial reality across the commercial property sector. Landlords of office premises are concerned that the massive moves towards homeworking necessitated by the coronavirus pandemic have proven a remarkably successful experiment for many businesses. Some major employers now intend to ramp up homeworking on a permanent basis, which may imply a long term reduction in the demand for office space. Likewise, the recent vast shift to online shopping is a serious concern for the retail sector. Many expect customers to continue shopping online in greater numbers, even after the pandemic passes. Concerns that the coronavirus pandemic may be causing permanent tectonic shifts in the commercial property market have increased anxieties across the sector. On top of this, most economists believe that we are already in the early stages of a major global recession.
Given this radically changed commercial reality, it’s no surprise that some commercial tenants are now actively seeking to escape their leases. Unlike construction and commercial agreements, however, commercial leases rarely contain force majeure clauses. Some commercial tenants are seeking to rely upon the legal concept of frustration to escape their leases.
In law, a contract becomes frustrated when something happens which is not the fault of either party, but which strikes fundamentally at the root of the contract. This event must be beyond what was contemplated by the parties when they entered into the contract. Further performance of the contract must be rendered impossible, illegal or it must make the obligations radically different from those contemplated by the parties when the contract was entered into.
[ymal]
Frustration brings the contract immediately to an end. Both parties are relieved of any of any unperformed obligations. The Law Reform (Frustrated Contracts) Act, 1943 stipulates that money already paid is normally recoverable. However, if a party to the contract has incurred expenses, they may charge them to the other party. If a party who has gained a valuable benefit under the contract must pay a fair sum for that. Otherwise, the contract is brought to an end.
Frustration may appear attractive as a clean way to end a lease. However, meeting the legal test for frustration is onerous. Each case will turn on its own facts, and will depend upon the impact of the crisis upon the performance of the contract. Frustration may be arguable in cases where leases have only a short period to run, and where the business requires physical proximity – such as a hairdressing salon, for example. But even then, much will depend on government advice as it evolves. The government has issued advice on how to operate businesses safely for England. However, this is open to interpretation in terms of how might apply in practice to a given business. Some tenants may argue that compliance is impossible and that their leases are therefore frustrated.
Most standard commercial lease agreements oblige tenants to comply with statutory notices issued by competent authorities. In such cases, where the lease also contains a “keep open” clause, which obliges tenants to keep trading, the tenant will nonetheless be required to comply with overriding statutory notice to close.
Frustration may be arguable in cases where leases have only a short period to run, and where the business requires physical proximity – such as a hairdressing salon, for example. But even then, much will depend on government advice as it evolves.
The position is more complex where a commercial tenant is not ordered to close, but where they decide to do so in order to protect staff or customers - perhaps due to their judgment that the premises does not enable government social distancing guidance to be met. In such cases, where there is a valid “keep open” clause, it is open to a landlord to argue that the balance of convenience lies in favour of the premises being kept open. However, cases seeking damages for breaches of “keep open” clauses are rarely successful at the best of times. The courts are likely to be sympathetic to businesses closing to protect their staff and customers in the context of the coronavirus pandemic.
In this time of uncertainty, it is best for landlords and tenants to communicate openly and to work together collaboratively to resolve any issues that may arise. However, when complex issues do arise, professional advice should be sought.
While it is a matter for their own commercial judgment, it may be advisable for landlords to agree rent reductions where appropriate, to help their tenants to survive the crisis. Keeping existing leases going in a modified form may be far preferable to seeking new tenants in what may be a very difficult market. After all, none of us knows what sort of economy awaits us on the other side of the coronavirus crisis, or when the crisis will pass.
The UK’s inflation rate fell to its lowest level in almost four years as of last month, according to information released today by the Office for National Statistics (ONS).
As lockdown measures came into effect across the country, demand for fuel and energy decreased dramatically, reacting with a global oil surplus to drive crude oil prices down to historic lows. Clothing retailers also slashed prices in a bid to lure customers online.
These factors weighed on the Consumer Price Index, driving inflation lower. While there was also an increase in expenditure on leisure-related products, it failed to make up the difference in consumer spending.
As a result, the roll-out of the UK's nationwide lockdown measures between March and April coincided with the inflation rate's fall from 1.5% to 0.8%
In its release, ONS stated: “Since November 2018, the largest upward contribution to the CPI inflation rate has come from housing and household services. However, reductions to household utility prices in April 2020 saw the group’s contribution to the headline rate fall to 0.16 percentage points, from 0.51 percentage points in March 2020.”
“This is the lowest contribution the group has made to the headline CPI rate since November 2010,” it continued.
Should inflation rates continue to fall in the UK and elsewhere, price deflation may begin to occur, which would impede efforts to revive the world economy as the COVID-19 pandemic abates.
