Business news 1 July 2024
Economic growth, business confidence, Greens & late payments, GDP, disposable incomes, HMRC, mortgages, financial literacy, markets, insolvencies & more business news that we thought would interest our members.
James Salmon, Operations Director.
Economic growth set to be faster than previously predicted
The UK economy is expected to grow more rapidly than initially predicted, according to analysis by KPMG. The firm has revised its GDP growth projections, predicting a rise to 0.5% this year, having previously forecast growth of 0.3%. It also expects to see the economy grow by 0.9% in 2025. With the Bank of England’s interest rate cuts and easing inflation expected to contribute to boost growth, KPMG said that the economy was “turning a corner” after struggling since the pandemic started in 2020.
Yael Selfin, chief economist at KPMG UK, said: “Political uncertainty will now resolve sooner with a summer election and a potential fiscal event in the autumn, setting out the new government’s economic agenda.” She added: “This could be aided by gradual cuts in interest rates, which look likely despite a small rise in inflation above its target expected later this year.”
Business confidence slips
Confidence among British businesses fell from an eight-year high in June, according to analysis by Lloyds Banking Group. Its measure of private sector sentiment fell nine points to 41%, having hit the highest level since 2016 in May. The report also shows that the number of companies which expect to issue pay rises above 5% has fallen to the lowest since March, while fewer businesses expect earnings to rise by about 4% to 5% in the coming year. While 53% of businesses are on course to increase their output this year, 9% are forecasting a decline. The study shows that 57% of firms expect to raise prices over the next year, with just 4% expecting to lower them. Hann-Ju Ho, senior economist at Lloyds Bank Commercial, said: “Fewer businesses indicated that their prices would increase in the next few months, which chimes with last week’s fall in inflation figures.”
Britain’s fastest-growing firms
The Sunday Times has published its annual ranking of Britain’s fastest-growing private companies, with firms having to have achieved an average increase in revenues of 62% over three years of trading to have made the top 100. Fintech firm Allica Bank topped the list, having seen 3-year annual growth hit 537%. The average annual sales growth rate across the firms which made the top 100 is 118%. Analysis shows that 25 of the companies were founded or co-founded by women. Across the 100 firms, there are plans to create more than 3,800 new jobs in the next 12 months.
Greens unveil small business charter
The Green Party has unveiled a charter to support small businesses. The party’s proposals include creating regional mutual banks for investment in decarbonisation, rejoining the EU customs union, and providing VAT and rates exemptions. They will also campaign for prompt payment legislation and proactive investigation of poor payment instances. The party’s Ellie Chowns said: “This is a comprehensive package offering direct support to small businesses that also introduces measures to encourage customers to get to and use small local businesses.”
Growth in disposable incomes has ‘slowed to a crawl’
Sluggish economic growth and economic shocks including the financial crisis and the pandemic mean increases in disposable incomes have been “slowing to a crawl” since 2010, according to the Resolution Foundation. The think-tank says typical household incomes have risen by just £140 a year, with an increase of just 7% over the last 14 years. By contrast, disposable incomes rose by 38% in the 14 years up to 2010. Lalitha Try, an economist at the Resolution Foundation, said: “What little income growth Britain has experienced over the past 14 years has been driven primarily by rising employment, which has benefited poorer households the most.” The report also reveals that absolute poverty has fallen 3.6 percentage points since 2010, but in the 13 years prior to 2010 it fell by 14 percentage points.
4 in 10 unable to cover 3 months of living expenses
New research has found that four in ten Brits say they do not have funds to cover three months of living expenses. Fintech firm FIS found that 35% of Brits have less than £500 in savings. Generation X are the least likely generation to have savings, with 27% revealing they have none whatsoever. Some consumers are relying on credit, with 33% admitting to over £1,000 of credit card debt, according to the survey of 2,000 consumers.
GDP grew faster than expected in Q1
Revised figures from the Office for National Statistics (ONS) show that the UK economy grew by more than initially estimated in the first three months of the year. Figures released in May suggested that GDP was up 0.6% in Q1 as the UK emerged from recession. However, the updated analysis shows that the economy grew by 0.7%. Reflecting on the revised ONS data, Danni Hewson, head of financial analysis at AJ Bell, said: “It’s the tiniest sliver of improvement but when it comes to UK GDP growth, every little really does help.” Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said while “hotter-than-expected growth doesn’t help those looking for a faster route to cutting interest rates, it does help to boost overall optimism.” Looking ahead, Thomas Pugh, an economist at RSM UK, commented: “All the data suggests that the economy is set to continue to rise in Q2.”
Revised GDP data ‘will do little to enthuse investors’
While Office for National Statistics data shows that economic growth for Q1 has been revised up from 0.6% to 0.7%, GDP stagnated between March and April. Lindsay James, investment strategist at wealth manager Quilter Investors, said: “With UK GDP having shown no growth in the latest data covering the month of April, news that the better growth rate of 0.6% in the first quarter has been upgraded marginally compared with earlier readings will do little to enthuse investors.” Meanwhile, separate data shows that real household disposable income grew by 0.7% for a second consecutive quarter in Q1. Meanwhile, real household expenditure grew by 0.4%, quarter-on-quarter. Peter Arnold, UK chief economist at EY, said: “The income breakdown indicated that Q1’s 0.4% rise in consumer spending was supported by continued strong growth in real household disposable income.” He added that EY believes quarter-on-quarter GDP growth in the three months to June “will probably come in a bit softer than Q1’s strong rise.”
Rising government debt could disturb financial markets, says BIS director
Agustín Carstens, director of the Bank for International Settlements (BIS), has cautioned that rising government debt levels could disturb global financial markets. He has stressed the need for governments to cut short the rise in public debt and accept that interest rates may not return to ultra-low levels seen before the pandemic. The BIS, the body that advises central banks, has warned that economic stimulus plans, cost pressures from ageing populations, climate change, and rebuilding defence capabilities could unsettle sensitive markets,
UK’s ‘tax on talent’ deters international researchers
Top international researchers are being deterred from taking jobs in the UK due to the high costs associated with visas and surcharges. The UK’s visa fees and surcharges are higher than other leading scientific nations, such as the US, Japan, Australia, and Germany. Dr John-Arne Røttingen, head of the Wellcome Trust, says the next government needs to lower these costs in order to attract talented researchers and drive science, technology, and the economy.
SMEs accuse HMRC of stifling enterprise
HMRC has been accused denying genuine claims for tax breaks on research and development (R&D) from small firms. A number of business say the tax office is rejecting valid submissions, delaying payments and grabbing back tax credits as it ramps up efforts to tackle fraud. HMRC estimates that £7.6bn in R&D tax relief was claimed by more than 90,000 firms in 2021/22. However, it believes more than £1bn of this was paid out due to fraud or in error. As it looks to clamp down on this, the tax office is taking a tougher approach to claims, with officials now checking one in five applications compared to one in a 100 previously. Amid concern that this approach could see more genuine claims being rejected, Natasha Frangos of Haysmacintyre said: “There is a real risk that the handling of some R&D tax relief claims is undermining the Government’s own policy to support investment here in the UK.”
Mortgage rates to stay above 4% for the next year
Richard Donnell, head of Zoopla’s research and insight team, says mortgage are unlikely to fall below 4% over the next 12 to 18 months, even if interest rates are cut. He said: “Most people are expecting the base rate to level out at 3.25% on average for the next five years, which will mean we see mortgage rates of between 4% and 5% once banks’ margins are added on top.” Charlie Nunn, the chief executive of Lloyds Banking Group, this week said a return to ultra-low interest rates is unlikely, saying a “new normal” for mortgages will be in the 3.5% to 4.5% range.
Property sales climb again in May
Data from HMRC shows that property sales increased for a fifth consecutive month in May. The figures show that 91,290 sales took place in May, with this 2% up on April’s total and 17% higher than in May 2023. Over April and May, 180,450 transactions took place, compared with 160,530 a year earlier.
23m Brits struggle with financial literacy
Up to 23m people in Britain are said to have low levels of financial literacy, according to a survey conducted by Opinium for Abrdn. The survey saw many respondents struggle to answer basic questions about savings and investment, indicating a level of ignorance or confusion that could hinder their ability to make informed financial decisions. The study used three key questions developed by the Global Financial Literacy Excellence Centre, with only 20% of participants answering all three correctly. The Financial Conduct Authority has cited a study ranking Britain ninth out of 17 countries for financial literacy, emphasising the importance of financial education. Bridget Phillipson, the shadow Education Secretary, has pledged to address the issue by incorporating practical financial lessons into the curriculum if Labour wins the election
Markets
On Friday, the FTSE 100 closed down 0.19% at 8164.12 and the Euro Stoxx 50 closed down 0.17% at 4894.02. Over in the US the S&P 500 fell 0.41% to 5460.48 and the NASDAQ fell 0.71% to 17732.60 with data showing the worlds largest economy is slowing but without significant damage to consumers. although political uncertainty weighed on markets.
The first round of voting in France showed Marie Le Pen failing to get an asolute majority as previously expected and prospect of French political gridlock sent the Euro and European markets higher. This morning on currencies, the pound is currently worth $1.267 and €1.177. On Commodities, Oil (Brent) is at $85.5 & Gold is at $2328. With stock markets, the FTSE 100 is up 0.34% at 8192 and the Eurostoxx 50 is up 0.8% at 4933.
Boots
Walgreens Boots Alliance said it would close 700 of its US stores and shelved plans to float its Boots unit in a UK IPO citing ‘unexpected and dramatic’ changes in market conditions as key reasons for a new US$1bn cost cutting plan.
Graduates hit by decline in internships
The number of internships relative to job openings has fallen sharply, reaching the lowest level since at least 2018. The dip in internships is on track to be deeper than in previous years, with the overall jobs market also having slowed down due to high borrowing costs and wage pressures. “We have heard a lot about a white-collar recession. Our sectoral job-posting data corroborate that,” said Jack Kennedy, an economist at Indeed. Analysis shows that the cost-of-living crisis has led students and graduates to consider jobs in lower-paid sectors where wages have risen significantly. Despite the challenges, a record number of students are employed, with this attributed to lower maintenance loans and rising rents
Uncertainty over global tax rights deal
Plans to reallocate more of the taxing rights on the biggest, most profitable multinationals to the countries where their consumers are is at risk of collapse as a global deal has yet to be agreed. Officials from 127 countries and jurisdictions had aimed to agree on the terms of the new multilateral treaty by the end of June in order to sign it as soon as possible. In the absence of an agreement, a standstill deal on national digital services taxes could expire as June comes to an end. It has been suggested that the deal could yet be agreed if the US includes the treaty’s ratification as part of an overhaul of the US tax code due next year. If efforts to deliver the global treaty fail, the EU could proceed with a bloc-wide digital service tax and other countries could follow suit. This, it is argued, could further complicate multinationals’ cross-border tax obligations.
Fancy dress brand saved from insolvency
Fancy dress brand Smiffys has been saved from insolvency after being bought by Ad Populum. Joint administrator Jane Steer from PwC said the 130-year-old retailer, “like many other retailers,” had been impacted by the after-effects of the pandemic.
Latest Insolvencies
Petitions to wind up (Companies) – HUBB INVESTMENT 101 LTD
Appointment of Liquidators – PDC ( BH ) LIMITED
Appointment of Liquidators – FOWLERS FOREST DAIRIES LIMITED
Appointment of Liquidators – SKYROOM GROUP LIMITED
Winding up Order (Companies) – CORRY UTILITIES LIMITED
Winding up Order (Companies) – CHC CONSTRUCTION AND FORMWORK LTD
Winding up Order (Companies) – EURO GROUPE LTD
Winding up Order (Companies) – SMILES DC LTD
Appointment of Liquidators – WARDPARK PROPERTIES LIMITED
Appointment of Liquidators – NEW MUTUAL HOLDING COMPANY LIMITED – THE
Appointment of Liquidators – CARE CIRCLE HOME MANAGEMENT LIMITED
Petitions to wind up (Companies) – KABLOOM LTD
Appointment of Liquidators – DOMESTIC CARE LTD
Appointment of Liquidators – GRANDSTAND LIMITED
Appointment of Administrator – PARADOXX LTD
Petitions to wind up (Companies) – WILLOWLOCH LIMITED
Petitions to wind up (Companies) – TESUP ELECTRONICS LIMITED
Appointment of Administrator – BUSINESS DOCTORS FRANCHISING LIMITED
Appointment of Liquidators – HILLCREST CONSULTING GROUP LTD
Appointment of Liquidators – IRIDESCENCE TECH LTD
Appointment of Liquidators – NATURE’S BEST HEALTH PRODUCTS LIMITED
Appointment of Liquidators – BOB SGT SERVICES LTD
Appointment of Administrator – ISLAND POKÉ LIMITED
Appointment of Liquidators – LARVUTUM LIMITED
Appointment of Liquidators – JMP PROJECTS LTD
Appointment of Liquidators – KEWELD LIMITED
Appointment of Liquidators – H.G. HOMES (WEST COMMON) LIMITED
Appointment of Liquidators – GNM (SWANSEA) LIMITED
Appointment of Liquidators – LBD ASSOCIATES LIMITED
Appointment of Liquidators – STORED LOCAL LTD
Appointment of Liquidators – TIER ONE RESOURCING LIMITED
Appointment of Liquidators – FLAGSHIP ASSET FINANCE LIMITED
Why should you become a CPA member!
The Credit Protection Association (CPA) has been assisting thousands of UK businesses to get paid, since 1914. We have seen many financial crises, this last one was particularly deadly for suppliers fand we are still seeing elevated insolvencies as businesses struggle.
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Just call Peter Uwins, CPA’s National Sales Manager, on 020 8846 0000 (business hours) or email nsm@cpa.co.uk today.
When you see your money come in, you will be so glad you used CPA.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.
Get compensated for previous late payments
Have you been paid late by business customers in the last six years?
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.