Business news 3 January 2025

Some of the business news that we thought would interest our members.

James Salmon, Operations Director.

Tax fears loom over UK households

According to a survey by AJ Bell, UK households are increasingly anxious about potential tax increases in 2025, with 83% of the 1,530 respondents expressing concern. Chancellor Rachel Reeves previously announced £40bn in tax rises, primarily affecting businesses, but has not ruled out further hikes. Economists, including Paul Johnson from the Institute for Fiscal Studies, suggest that without significant economic growth, further tax increases may be necessary. AJ Bell cautioned that even the mere prospect of tax hikes could dampen consumer confidence, which has already been affected by Labour’s economic messaging. Laith Khalaf, head of investment analysis at AJ Bell, stressed the need for the Government to provide stability regarding taxation on long-term savings to encourage public spending and investment.

Manufacturing sector hits new low

The UK’s manufacturing sector has experienced a significant decline, reaching its lowest level in nearly a year, according to the S&P manufacturing purchasing managers’ index (PMI). The index fell to 47.0 in December, down from 48.0 in November, indicating widespread downturns across various sectors, particularly among small and medium-sized enterprises (SMEs). Rob Dobson, director at S&P Global Market Intelligence, said: “Manufacturers are facing an increasingly downbeat backdrop,” as business confidence plummeted to a two-year low, largely due to tax increases announced in the Government’s recent Budget. The survey highlighted a drop in factory output, new orders, and employment, with job cuts reaching a ten-month high. The overall economic momentum appears to be stalling, raising concerns about the future of the manufacturing industry in the UK.

Business leaders cautiously optimistic about growth

Business leaders in the UK are showing a slight increase in confidence, with the Institute of Directors (IoD) reporting a four-point rise in its economic optimism index to -61 in December. Despite this improvement, Anna Leach, the IoD’s chief economist, cautioned that businesses remain “fearful of higher costs over the next 12 months,” with 87% of respondents expressing concerns. The upcoming rise in employers’ national insurance contributions to 15% and a 6.7% increase in the minimum wage are significant factors. While there are signs of potential growth, such as a rise in the trading conditions sub-index to +8, the overall sentiment remains low compared to historical averages.

UK heading for tax rises despite return to growth, economists say

The Labour Government will likely be forced to raise taxes again, an FT poll finds, as economic growth is expected to be too weak to draw in sufficient funds.

Labour driving entrepreneurs abroad

Charlie Mullins, Britain’s richest plumber, relocated to Marbella as soon as he knew Labour had won the election, fearing that tax increases and new employment rights under the new Government would devastate businesses. He stated: “I think Labour will break the UK completely and we will have to build it up again when Farage gets in.” Mullins, who founded Pimlico Plumbers, is now launching a new venture, WeFix, and is considering moving it to Dubai due to the unfavourable business climate in the UK. He expressed concerns over the increase in employer National Insurance contributions, which could cost his new business up to £100,000 annually. Mullins is among business leaders who believe that the recent Employment Rights Bill could jeopardise £34bn of economic activity. He predicts that many wealthy individuals will continue to leave the UK for more favourable tax regimes.

Retail Footfall

Retail Footfall fell for the second year in a row in December, a report on Friday showed. According to BRC-Sensormatic data, total UK footfall was down 2.2% in the five weeks to December 28 compared to 2023. This was an improvement on November’s 4.5% decline, although this reflected the timing of Black Friday. This year’s December figure includes Black Friday, rather than November’s figure, while the reverse was true in 2023.

Meta

Nick Clegg, the former deputy prime minister and Liberal Democrat, is leaving his job as Meta’s president of global affairs. He will be replaced by Joel Kaplan, who has handled the social-media giant’s relations with Republicans in America. The switch comes weeks before Donald Trump returns to office, with Meta looking to repair relations with the incoming administration. Mr Trump’s Facebook and Instagram accounts were suspended after the Capitol riot in 2021, but reinstated in 2023.

Tax hikes loom for company car drivers

Motorists with company cars are facing significant tax increases due to new benefit-in-kind rules set to take effect in April 2025. Vehicles like the Ford Ranger and Nissan Navara will be reclassified as cars, losing their previous tax advantages. Andy Wood from Tax Natives cautioned that “big changes are coming for double-cab pickups,” warning that costs could rise dramatically for those using these vehicles as job perks. Currently, a basic rate taxpayer pays around £806 in income tax for a Ford Ranger, but this could soar to £4,440 after the changes. However, a transitional arrangement allows those who purchased vehicles before 6 April 2025 to continue under the old rules until April 2029, providing some relief for businesses.

Big firms order staff back to their desks

As British workers return to the office post-festive season, many face stricter attendance mandates from major employers. Amazon has implemented a five-day in-person requirement, while BT has introduced a “three together, two wherever” policy for its 50,000 office-based employees and PwC has curbed remote working. Despite a gradual increase in office attendance, with figures rising from 29% to 33% between July 2022 and September 2024, many workers are reluctant to abandon the hybrid model. The trend is echoed globally, with hybrid job postings increasing by 31% in 2024. As companies tighten attendance rules, tensions may rise, the Guardian suggests, as seen in a recent strike vote by Metropolitan police staff over increased office requirements.

Minimum wage costs leap to a record high

UK businesses employing minimum wage staff will see costs increase by over £2,000 per worker this year, with the tax burden reaching a record high, according to the Centre for Policy Studies. The average cost to employ someone over 21 earning the minimum wage will rise to £24,806, which is £2,367 more than in 2024. This increase is driven by the national minimum wage rising from £11.44 to £12.21 and the employer national insurance rate increasing from 13.8% to 15%. Daniel Herring, a tax and fiscal researcher for the CPS, said: “The more of an employee’s salary is owed in tax… the more costly it is for businesses to create and sustain jobs.” Major retailers like Tesco and Sainsbury’s have warned of potential job cuts and price hikes due to these tax increases.

UK house prices ended 2024 on a high

House prices in the UK increased by 4.7% annually in December, nearing an all-time high, according to the Nationwide Building Society. Robert Gardner, Nationwide’s chief economist, said: “UK house prices ended 2024 on a strong footing, up 4.7% compared with December 2023.” The average house price reached £269,426, with a month-on-month rise of 0.7%. However, upcoming stamp duty changes in April are expected to create volatility in the market, potentially leading to a surge in transactions in early 2025. Gardner noted that the changes could result in a “jump in transactions in the first three months of 2025,” followed by a weaker period. The report highlighted a north-south divide in house price performance, with Northern Ireland seeing the highest increase at 7.1%. Overall, the housing market showed resilience despite ongoing affordability challenges.

Farmers protest inheritance tax changes

Children of farmers in the South East delivered letters to Downing Street to protest against impending changes to inheritance tax, which will introduce a £1m cap on agricultural property relief from April 2026. Campaigners, including 650 tractors, gathered in Whitehall, voicing concerns that the changes will disproportionately affect “asset-rich, cash-poor” family farms. Ollie Vicary, a young farmer, expressed his frustration, stating: “We’ve worked hard to feed people and then some people are going to have to start selling up.” Tara Bell, inheritance tax specialist at accountancy firm Westcotts said professionals are awaiting a government consultation early in 2025 to find out how the tax will be rolled out.

Pension insurance deals expected to soar in 2025

British pension insurance deals reached £45bn in 2024, with projections of £40bn to £50bn in further transactions this year, according to a report by LCP. Life insurers like Aviva, Legal & General, and Phoenix have increasingly entered the lucrative bulk annuity market, which allows companies to offload pension scheme risks. The volume of bulk annuity deals hit a record £49bn in 2023. New entrants, including Royal London and Utmost, have emerged, with LCP anticipating at least one more insurer to join the market this year. However, regulators are concerned about counterparty risk from funded reinsurance providers in the event of a market crisis.

Treasury’s tax break claim challenged

The Treasury’s assertion that private schools have benefited from a tax break due to VAT changes has been challenged by Timothy Straker KC. In a letter to the Times, he clarifies that education was never subject to purchase tax and that VAT was introduced to tax goods and services broadly. Straker adds: “I have not heard it suggested that those paying university fees are, if one follows the approach of the Treasury, enjoying a tax break.” Richard Willmott from Hereford also highlights that parents already contribute to the state system through their taxes, questioning the fairness of the new VAT on school fees.

Tullow Oil wins big tax battle

Tullow Oil announced that the International Chamber of Commerce (ICC) has determined that the Branch Profit Remittance Tax (BPRT) does not apply to its operations in the Deepwater Tano and West Cape Three Points fields off the coast of Ghana. Consequently, Tullow will avoid a $320m BPRT assessment and will not incur future BPRT liabilities. The BPRT is a tax imposed on profits that foreign businesses remit back to their parent companies. Tullow is currently in discussions with the Government of Ghana regarding two additional tax claims.

IHT raid on pensions will leave millions in poverty

Labour’s proposed inheritance tax on pension pots has raised alarms among financial experts, with former pensions minister Ros Altmann warning it could lead to “later-life poverty” for millions. The Chancellor’s plan, effective from April 2027, will subject pension funds to inheritance tax, which Altmann describes as “more like confiscation than taxation.” This change could generate £1.5bn annually by the decade’s end, but it risks undermining savers’ confidence and complicating the already burdened system. Steven Levin, CEO of Quilter, echoed these concerns, stating that the combined impact of inheritance and income tax could result in marginal rates as high as 67%. The backlash from industry leaders suggests that the proposed changes could fundamentally undermine the UK pensions system.

Switching banks: A generational divide

According to a recent survey by KPMG, only 17% of adults switched their bank accounts in the past year, highlighting a significant generational gap. While 45% of 18 to 24-year-olds reported switching, just 4% of those aged 65 and older did the same. Peter Rothwell, a partner at KPMG UK, noted: “The growing proportion of older consumers now represents a big opportunity, but also a challenge, for the banks.” The survey also revealed that nearly half (49%) of older adults are unlikely to consider moving to a non-high street bank. The Current Account Switch Service (Cass) was designed to simplify the switching process, yet 24% of respondents do not foresee switching accounts in the future. OnePoll conducted the survey with 2,000 participants across the UK in October.

Chrysalis settles over Revolution crash

Revolution Beauty has reached a settlement with Chrysalis Investments, a former major shareholder, over claims it provided “misstatements and material omissions” ahead of its float in 2021. The agreement involves a “non-material sum” that is less than 1% of Chrysalis’s stock market value, although the exact amount remains undisclosed. Revolution stated that the settlement was achieved without any admission of liability and that Chrysalis will not pursue further legal action. Chrysalis had previously indicated potential claims exceeding £45m, following its initial investment of over £40m in July 2021. Shares in the cosmetics brand plummeted in 2022 after its auditor refused to sign off on its accounts for the previous year, leading to a suspension of its stock on the London Stock Exchange

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:

1. 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.
2. Our monitoring service will alert you to any significant changes in the status of those customers.
3. 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.