Business news 1 November 2024
Most think economy will worsen after Budget. Reeves admits NICs raid will hit employee pay. The pound falls, markets, insolvencies & more business news that we thought would interest our members.
James Salmon, Operations Director.
Poll finds most think economy will worsen after Budget
A YouGov poll has found that 51% of people think the economy will get worse following Labour’s Budget, while just 17% believe it will improve. Some 47% said they expected their own financial situation to worsen over the next 12 months
Reeves admits NICs raid will hit employee pay
The £25bn increase in employer National Insurance contributions (NICs) announced by Rachel Reeves will likely lead to lower wage increases for private sector workers, the Chancellor has admitted. “I recognise there will be consequences,” Reeves told the BBC. “It will mean that businesses will have to absorb some of this through profit and it is likely to mean that wage increases might be slightly less than they otherwise would have been.” Public sector employees, who have already received significant pay rises, will not be affected by the increase. Critics argue that this move contradicts Labour’s manifesto promise of no tax increases for working people. Paul Johnson from the Institute for Fiscal Studies warned that the NICs hike would ultimately lead to lower pay for workers while Tom Clougherty, the director of the Institute of Economic Affairs, said it was “fantasy” to suggest working people wouldn’t be hit by the change.
Labour’s Budget will put up the price of a pint by 40p
Pubs and restaurant bosses have warned that Labour’s Budget will be “catastrophic” for the industry. The combination of hiking the amount employers pay in National Insurance, while reducing the threshold at which it is paid, and increases to the minimum wage and business rates delivers a “crippling hammer blow” to employers, the boss of Fuller’s pub chain said. The Chancellor’s claim that a 1.7% cut in draft duty would lead to the price of a pint falling by a penny was dismissed, with one pub owner explaining that higher employment costs would drive the price up by 40p. Writing in the Scotsman, Mark Kent, the chief executive of the Scotch Whisky Association, says industry feels betrayed about the spirits duty announcement in the UK Budget.
Markets
London markets dipped into Thursday afternoon as post-budget trading saw bond yields rise and equities weaken. The outlook for potentially prolonged higher UK interest rates supported lenders but weighed on the retail and house-building sectors.
Yesterday, the FTSE 100 closed down 0.61% at 8110.10 and the Euro Stoxx 50 closed down 1.19% at 4827.63. Overnight in the US the S&P 500 dropped 1.86% to 5705.45 and the NASDAQ slumped 2.76% to 18095.15 as the latest Apple quarterly figures spooked markets as it issued cautious forecasts.
Apple announced a revenue rise of 6% to $94.4bn between July and September, beating expectations. Sales of iPhones also grew by 5.5%, after two consecutive quarters of decline. But the most valuable company in world said business in the important Chinese market continued to fall, by 0.3%. And overall profit fell by around 35% to $14.7bn due to the £14 billion tax bill in Ireland enforced by European courts.
Following on from the weak announcements from Microsoft and Meta, it caused a sell off on the US markets, particularly the NASDAQ.
Amazon bucked the trend though, reporting higher third-quarter earnings and revenue than analysts expected, sending its stock price up in after-hours trading.
Intel also rose in the after market after promising figures.
This morning on currencies, the pound is currently worth $1.291 and €1.189. On Commodities, Oil (Brent) is at $74.9 & Gold is at $2753. On the stock markets, the FTSE 100 is currently up 0.51% at 8151.5 and the Eurostoxx 50 is up 0.5% at 4851.
Oil jumped on reports Iran was planning a strike against Israel from it’s proxies.
UK bonds extend their losses, with the 10-year gilt set for its worst week of the year. Chancellor Rachel Reeves sought to reassure markets, saying in a Bloomberg TV interview that the “No. 1 commitment” of the government is “economic and fiscal stability.”
Next up is the all-important US jobs report. Investors are preparing for jobs data that will be tougher than normal to dissect after hurricanes disrupted business operations in the last month.
Pound drops to 18-month low after Budget
Ten-year UK bond yields surpassed 4.5% for the first time in a year following Labour’s Budget, raising concerns about higher borrowing costs going forward. The pound experienced its largest drop in over 18 months following Rachel Reeves’s announcement of significant tax and borrowing increases. Megum Muhic, of RBC Capital Markets, said the markets were “unconvinced” that Ms Reeves’s spending plans would boost growth. Elsewhere, Ruth Gregory of Capital Economics said the move in UK borrowing costs had wiped out half the Chancellor’s borrowing headroom. Meanwhile, former Tory PM Liz Truss said Labour’s Budget would push the country into bankruptcy, arguing that the Chancellor was being backed by the Bank of England and the Treasury “because she is going along with their high-tax, high-regulation orthodoxy.” Reeves attempted to calm investor nerves, telling Bloomberg the Labour Government was committed to “economic and fiscal stability.” There was some relief for Labour, however, after the International Monetary Fund stepped in to support the Government, arguing the measures announced in the Budget would boost growth “sustainably”. Finally, the IFS said Reeves could be forced to top-up her spending plans by an additional £9bn after the next financial year to avoid ushering in real-terms cuts to unprotected Whitehall departments, including councils, the justice system and prisons.
Labour accused of ‘disgusting land grab’ by farmers
Labour’s plans to impose inheritance tax on combined business and agricultural assets exceeding £1m has stirred significant controversy. Ruth Davidson, former Tory Scottish leader, predicts that Rachel Reeves will likely reverse this decision, likening it to George Osborne’s “pasty tax” U-turn. Emma Gray, a shepherdess from Argyll and Bute on the west coast of Scotland, declared the policy “a disgusting land grab” that would push family farms under while another small farm owner said he now “cannot afford to die”. TV presenter Kirstie Allsopp accused the Chancellor of leaving all farmers ‘f***ed’ following her inheritance tax raid while Jeremy Clarkson said farmers had been “shafted” by Labour. Industry leaders accused the Government of breaking “clear promises” not to tamper with exemptions for agricultural property calling the raid a “betrayal” of the rural community. Finally, British growers have said the price of fresh vegetables could rise by as much as 20% after Labour’s “shameless” tax raid on farmers.
House Price Growth
UK House Price Growth slowed last month, numbers from mortgage lender Nationwide showed. Annual house price growth ebbed to 2.4% last month, from 3.2% in September. On a monthly basis, prices edged up 0.1%. They had risen 0.6% in September from August. The average UK house price now stands at GBP265,738, according to Nationwide.
Eurozone inflation
Eurozone Inflation rose to 2% in October, preliminary figures released by statistics agency Eurostat showed Thursday. Economists had forecast a headline figure of 1.9%. The September headline reading was revised down to 1.7% from 1.8% on Oct. 17, below market expectations. The biggest upward pull in the headline rate came from food, alcohol and tobacco, where price rises accelerated to 2.9% from 2.4%.
US inflation
US Inflation increased slightly in September and moved closer to the Federal Reserve’s target, according to the Commerce Department. The personal consumption expenditures price index showed a seasonally adjusted 0.2% increase for the month, with the 12-month inflation rate at 2.1%, both in line with estimates. The Fed uses the PCE reading as its primary inflation gauge, though policymakers also follow a variety of other indicators.
Boeing
Unions finally struck a deal with the embattled plane maker with a 38% pay rise over 4 years, taking average wages up to $120k.
Russia and Google
Russia ordered Google to pay a fine of two undecillion roubles ($20,000,000,000,000,000,000,000,000,000,000,000). Many magnitudes bigger than the world’s GDP. Russia is a bit miffed that Google has restrictions on Russian state-media on YouTube
Scotland to host global investment summit
Scottish Financial Enterprise is partnering with The City of London Corporation to host the Scottish Investment Summit in Edinburgh next autumn, aiming to attract global investment. The event will coincide with the Scottish Financial Services Awards, where over 700 leaders will celebrate the industry’s contribution to Scotland’s economy, valued at £14.8bn and supporting 148,000 jobs. Alasdair King, the newly elected Lord Mayor of the City of London, emphasised Scotland’s appeal, stating: “The Investment Summit will be the perfect opportunity to showcase Scotland to investors from around the world.”
Last-minute rush for property deals
The decision by Rachel Reeves to add an additional 2% stamp duty surcharge on second home purchases, raising the total to 5% on top of standard rates, prompted a frantic rush among Central London estate agents to finalise multi-million pound property deals before the midnight deadline. Meanwhile, agents are also expecting a flood of demand from first-time buyers hoping to buy will want to push through purchases in advance of a reduction in the stamp duty threshold from £450,000 to £300,000 next April. This will land the average first-time buyer in London with a potential tax increase of £6,190. The Telegraph reports on buyers forced to drop out of chains because they are using let-to-buy and cannot afford the sudden increase in stamp duty. Riz Malik, of brokerage R3 Mortgages, said: “Getting these sorts of chains tied up has already been a nightmare. And now one of my clients is having to find £15,000 – that’s before I speak to other people in the same position. It’s a major issue.”
Care homes face closure after tax hikes
Wednesday’s Budget has raised concerns among care home providers, with some reporting that tax increases and higher staffing costs could lead to closures. The rise in National Insurance contributions and minimum wage would immediately wipe out any benefit from the additional £600m funding for social care announced by the Chancellor, care groups argued. The Liberal Democrats have urged the Government to exempt social care from the National Insurance rise, warning that the current measures could exacerbate the crisis in the sector.
Charities to cut services following tax raid
Charity bosses have warned they’ll have to scrap services after the Chancellor’s increase in NICs for employers. The voluntary sector employs around one million people – the National Council for Voluntary Organisations (NCVO) warns of a £1.4bn-a-year blow to their staffing bill. Age UK and Marie Curie are among the charities warning of a cut to the support they can offer. The Association of Chief Executives of Voluntary Organisations has written to Rachel Reeves asking that charities be exempted from the rise.
Pension pots face £3.4bn tax raid
Pension savers are set to face a significant £3.4bn inheritance tax burden due to new regulations announced by Chancellor Rachel Reeves. Starting from April 2027, pension pots will be included in the value of a deceased person’s estate, making them subject to inheritance tax for the first time. This change is expected to impact around 50,660 families annually, with 8% of all estates affected. Baroness Ros Altmann, a former pensions minister, said: “Taking away the ability for savers to pass on their funds as a pension for their offspring is a really bad decision.” The reform will primarily affect private pensions, while public sector defined benefit pensions remain exempt. Meanwhile, The Telegraph reports that the number of grieving families being hit by inheritance tax will double by the end of the decade, with forecasts by the Office for Budget Responsibility indicating an 85% increase in inheritance tax receipts to the Treasury – from £7.5bn to £13.9bn over the same period. The FT reports on how financial advisers are racing to rethink retirement savings plans in the wake of the Budget, with Tom McPhail at consultancy The Lang Cat suggesting the “long-term benefits of substantial pensions pots will become very questionable” in the face of double tax charges.
Grieving families face ‘draconian’ tax raid
Grieving families are facing increased financial burdens due to a rise in the interest rate charged by HM Revenue and Customs (HMRC) on unpaid inheritance tax. The Government has announced a 1.5 percentage point increase, bringing the rate to 9%, which could add £750 a month to tax bills for families already under stress from civil service delays. Kieran Bowe from Russell-Cooke stated: “The Government’s proposal to increase the interest charge adds further financial pressure to already hard pressed bereaved families.” The new rate is expected to generate an additional £215m annually for HMRC by 2029-30. Dawn Register, of BDO, said: “The increased rate is a surprisingly draconian measure considering the already high level of late payment interest that taxpayers are charged, currently 7.5%.”
HMRC faces loan charge review
The Labour Government announced on Wednesday that it would conduct a review into the loan charge scandal, which has led to ten suicides. HMRC has been strongly criticised for how it made demands of those caught up in tax-avoidance schemes. Around 60,000 contractors were hit with crippling tax bills after entering schemes they believed to be HMRC-compliant. The Chancellor, Rachel Reeves, said the Government would commission an independent report to “help bring the matter to a close for those affected, whilst ensuring fairness for all taxpayers”.
Reaction Engines falls into administration
Reaction Engines, a British aviation firm known for its innovative hybrid rocket engine, has entered administration after failed rescue talks. The company, which aimed to revolutionise hypersonic travel, filed a notice of intention to appoint administrators on Thursday. Restructuring experts from PwC have been engaged to manage the process. Sarah O’Toole, joint administrator at PwC, said: “It’s with great sadness that a pioneering company with a 35-year history of spearheading aerospace innovation has unfortunately been unable to raise the funding required to continue operations.” Despite securing over £150m in funding, the company struggled to commercialise its technology and faced significant annual losses, with revenues plummeting from £7.2m to £4.7m in 2022.
Latest Insolvencies
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Why you should become a member of CPA!
The Credit Protection Association (CPA) has been assisting thousands of UK businesses to get paid, since 1914. We have supported our members through all sorts of difficult trading environments. With high interest rates and a struggling economy and elevated insolvencies, our services can help your business navigate these difficult waters.
Unlike other credit management and debt collection companies, we offer a range of services to our members that are all included as part of a fixed annual subscription, tailored to your needs.
Under your annual subscription you will have access to our main services:
- Our Creditcare credit reports provide credit ratings and limits along with a host of detailed information on your potential customers to enable you to trade with confidence and set appropriate credit policies for new customers.
- Our monitoring service will alert you to any significant changes in the status of those customers.
- Our Overdue account recovery service can be used to chase up payment on any invoices to those customers that have not been paid on time. Unlike other debt collection companies, this service directs your customer to pay direct to you and allows you to maintain your goodwill with them, rather than inserting ourselves into your relationship with you customer and insisting they pay CPA instead. Our Overdue account recovery service resolves over 80% of accounts referred to us.
All of the above services and other complimentary services such address verification, are included in your subscription!
And for the small minority of debts not resolved through our Overdue account recovery service, you can refer the debt to our collections department to escalate the late payment collections process.
CPA eases cash from tardy debtors – Efficiently, Effectively, Economically and Ethically. And we provide credit information so you can monitor and assess your key customers and be warned of any potential risks. CPA has been improving business cash flow for over 100 years, by tackling late payers and campaigning against the late payment culture in the UK.
Unlike other credit management companies, we offer our members a fixed annual subscription regardless of how high the value of their debts maybe!
Rather than to borrowing more money to improve your cashflow, CPA suggests that business owners tackle the problem at its source. If late payments are a strain on your cashflow, then talk to CPA about how we can help you reduce those late payments.
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
Do you have a commercial late payer that is causing you grief? Use CPA’s no-win, no-fee, commercial debt recovery service!
If you have a particular business customer who is late paying and causing you sleepless nights, why not offer it to CPA’s collection department for purchase on recourse?
CPA’s collection department will then pursue the debt. We will be liable for any costs incurred and then when we have recovered the debt, we will pay you the net principle debt recovered less our percentage.
Once you have enjoyed that success then you can consider the more cost effective membership which includes our Overdue Account Recovery service and Status/Credit reports as well as a range of other complimentary services.
Just call 020 8846 0000 and ask for Godfrey Nelson or Cris Shirley (business hours) or email debtpurchase@cpa.co.uk today.
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?
Maybe you no longer work with them. Under legislation, you are entitled to compensation you for those late payments you have suffered.
You put up with the PAIN – now claim the GAIN!
Claim late payment compensation (LPC) from former business customers who paid you late in the last six years!
CPA (LPC) Recoveries is using our bespoke software and decades of experience to do just that for our clients
Check our compensation calculator to see how much your business could be owed!
Discover NOW the potential value of late payment compensation hidden in your sales ledger!
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.