This week’s topics:
PwC comments on Working from Home announcement
Kevin Ellis, PwC chairman and senior partner, said:
"As always we will follow government guidelines, but there's no denying this will be a challenge for some sectors. The majority of our people had returned to the office two to three days a week. It's the busy season for audit and there’s also lots of deal activity that benefits from some in person meetings. We’ve successfully run our businesses through previous restrictions and our offices will remain open for our people who have a business or personal need to use them."
FCA pushes forward with new Consumer Duty for all retail customers
The FCA published more detail on a new ‘Consumer Duty’ towards retail customers for all financial services firms. The rules are due to take effect in April 2023.
Andrew Strange, Director of PwC Financial Services Regulatory Insights, comments:
“The FCA’s detailed consumer duty proposals mark a substantive change in approach by the regulator. Even firms without a retail footprint but which design products will need to adhere to the new rules; and even with the FCA’s intention to apply the proposals in a proportionate way, this will capture a very large number of firms.
“While some of the more challenging aspects of the regime, such as the right of private action, have been deferred, the bar has clearly been raised. The FCA’s decision to define its new Principle based on “good outcomes” may benefit from being a clean break from existing regulator concepts, but lacks legal certainty and creates ambiguity for firms.
“The regulator is focused on four key outcomes - products and services, price and value, consumer understanding, and consumer support. These are far reaching and will require significant work by firms to ensure they have done enough to meet the FCA’s expectations. Indeed, the FCA’s own cost-benefit analysis puts the potential one-off costs for firms at up to £2.4 billion, which underlines the scale of work needed.
Ethnicity pay gaps laid bare
Analysis by Strategy&, PwC’s global consulting house, shows that ethnicity pay gaps exist in every region in the UK. The Ethnicity Pay Gap Report 2021 finds that, on a like-for-like basis, white British people earn more on average than almost every other ethnic group. Separate PwC research finds that nearly four out of 10 people from ethnic minority backgrounds feel the pandemic has exacerbated racial and ethnic inequality. The study, based on a survey of 4,000 people, finds that younger generations are most likely to take personal responsibility for tackling the issue.
Karen Finlayson, PwC partner and regional lead for government, said:
“Events of the past two years have shone a light on the numerous inequalities that exist in our society and kick-started the conversations that need to happen for them to be properly addressed. These two studies highlight the divides not only in the perception but the reality of ethnic and racial inequality in the UK.
“Despite considerable progress on social attitudes, as well as the endeavours of policymakers, businesses and individuals, there is still a long way to go to knock down the structural barriers and behaviours and attitudes towards racial equality that exist in the British workplace and in society.
“Young people, in particular, appear to be not only the most determined to tackle inequality but are the most positive about our prospects of seeing it eradicated in the future.”
Businesses reopen 320 million square feet of operations after lockdown - but challenges remain
PwC’s Business Restructuring Services (BRS) team has analysed data from the Local Data Company on the businesses that reopened after social distancing restrictions were lifted. Key findings include:
59,126 outlets of independent and chain businesses reopened across England, Scotland and Wales. Reopening rates reached 88.6% between April and the beginning of July, compared to 82.7% after the first lockdown
In total the amount of real estate reopened exceeded more than 320 million square feet, equivalent to 123 times the size of Westfield London, Europe’s Largest shopping centre
Whilst a number of businesses reopened, the financial burden many were shouldering led to 4,721 remaining temporarily closed with 4,535 permanently closing and clearing their premises. The real estate impact levelled out at more than 48m square feet
20,559 County Court Judgments were filed against businesses for more than £93.5m of claims between July and the end of November 2021.
Zena Gridley, restructuring partner at PwC, said:
“Logistics, stock, and staffing arrangements are still being significantly tested, and are likely to be further stretched either side of the festive season. We’re seeing high levels of activity among clients needing to review their cost bases and strip out any activity in support functions or services not directly linked to customers or not adding value.
“Fuel, driver and supply chain issues continue to swirl. If trailers carry significantly reduced stock, companies still incur costs such as fuel, driver wages and wear and tear on vehicles, denting vital margins. Anecdotally between 10-40% of routes are either empty or partially empty.”
“Hospitality & leisure and retail businesses were among the most exposed to CCJs across the five-month period alongside engineering & construction and business services.
“Breakdowns revealed a 23% increase in winding up petitions between September and October 2021 (56 vs 69) as the furlough scheme ended and restrictions on winding up petitions were relaxed, with a further 60 being recorded in November 2021.“
Mark Addley, real estate restructuring partner at PwC, added:
“Businesses will be taking critical decisions on refinancing, reviewing or repurposing assets.
Winding-up orders remain off the table until the end of March 2022 for commercial rental liabilities built up during the pandemic, as does landlords’ ability to evict tenants.
Landlords are willing to reach a compromise, but they are also under severe financial pressure themselves. It’s never been more vital that landlords and occupiers negotiate early.”
Something to read:
Why relationships with corporates are so important to social enterprises
PwC is celebrating ten years of its London social enterprise hub, the Fire Station, and a partnership with the School for Social Entrepreneurs (SSE). Alastair Wilson, SSE’s CEO, shares his views on how these kinds of relationships can bring significant and lasting benefits to both parties.
Something to watch:
ESG legal developments webcast
On Tuesday 14th December at 11am our legal services team is holding a live virtual event focusing on the rapid developments in environmental and sustainability regulation. A panel of experts will share views and perspectives, and there will be an opportunity to submit questions.
To register, visit: https://event.webcasts.com/starthere.jsp?ei=1515042&tp_key=5c556bd4df
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