Business news 3 October 2024
BoE warns of sharp correction in financial markets. UK financial fears hit new high. PM faces uphill struggle luring investment. Breweries & councils in crisis, student debt, markets, insolvencies & more business news that we thought would interest our members.
James Salmon, Operations Director.
BoE warns of sharp correction in financial markets
The Bank of England has warned of a sharp correction in the markets amid concerns that shares remain overvalued and global growth is fragile. The Financial Policy Committee (FPC), which is in charge of monitoring financial stability, warned that a fresh economic or financial shock could trigger a crisis if firms were unable to meet margin calls. The FPC added: “Investors [are] sensitive to short-term developments in a challenging global risk environment. Global vulnerabilities remain material, as does uncertainty around the geopolitical environment and global outlook.” Rising bets by hedge funds against US Treasuries, which have now hit $1trn, have also caused alarm within the Bank, which said a number of factors could trigger a sudden unwinding of these trades.
UK financial fears hit new high
Concerns regarding the UK financial system have surged to their highest level since 2019, according to the Bank of England’s (BoE) latest systemic risk survey. Conducted between July 23 and August 12, the survey revealed that one-third of the 55 financial firms polled identified a global economic downturn as a significant threat, marking a 19% increase from the previous survey. While overall risks to financial stability remained unchanged since June, the BoE cautioned against complacency despite a rebound in asset prices. Geopolitical risk was highlighted by 93% of respondents, while 80% cited the threat of cyber-attacks. The survey also noted a decline in concerns over climate risk, which fell to 29%, the lowest since late 2022.
PM faces uphill struggle luring investment
Sir Keir Starmer will meet with international investors to discuss the UK’s urgent need for infrastructure investment later this month, estimated in the tens of billions of pounds annually. Investors are apprehensive, however, particularly regarding the regulatory environment. Luke Hickmore, investment director at abrdn, said: “We’re talking to international investors, and they’re very nervous about the UK.” Elsewhere, Boston Consulting’s Raoul Ruparel said low rates of return on private investment and over-complicated contractual terms were compounded by elevated labour and energy costs and skills shortages. “The rest of Europe is similar,” he explained, “but the UK is a different story because of its long-running under-investment problem.”
Breweries in crisis as nearly 40 more close
Fears are mounting for UK breweries as 38 have closed in the first quarter of the year, prompting the Campaign for Real Ale to urge Labour to honour its manifesto pledge to reduce business rates in the upcoming Budget. The campaign also highlighted that “tax on ale sold in pubs should be 20% lower than on beer bought in supermarkets.” Notable closures include award-winning Elland Brewery from Halifax and Navigation Brewery from Nottingham, leaving Britain with 1,700 breweries.
Students face extra £18,000 student debt
Proposed increases in tuition fees could leave graduates paying an extra £18,000 in student loan repayments over the course of their careers, according to analysis by Blick Rothenberg. Labour is considering increasing tuition fees in line with inflation over the next five years. This would take their current fee of £9,250 up to as much as £10,500 a year. Roughly £20bn is loaned to 1.5m students in England each year, with the value of outstanding loans at £236bn in March this year
Councils face financial crisis
An analysis of councils serving nearly half of England’s population reveals a looming financial crisis, with many facing potential bankruptcy by 2028. The County Councils Network (CCN) warns that without additional funding, councils may be reduced to providing only essential care services. Barry Lewis, CCN finance spokesman, stated: “To meet all their projected service pressures, councils are staring down the barrel of a £54bn funding black hole.” The report highlights that rising costs in adult social care, children’s services, and transport for children with special educational needs are driving the funding shortfall. The CCN’s analysis indicates that 60% of its members could declare effective bankruptcy by 2026-27, significantly impacting frontline services for over 16m people.
Markets
Yesterday, the FTSE 100 closed up 0.17% at 8290.86 and the Euro Stoxx 50 closed up 0.18% at 4963.29. Overnight in the US the S&P 500 rose X% to X and the NASDAQ rose X% to X.
Stocks are declining now as the rally in Chinese shares pauses. Oil extended its gains amid rising tension in the Middle East.
The pound tumbled after Governor Andrew Bailey told the Guardian that the BOE may become a “bit more aggressive” in cutting rates if news on inflation remains good.
This morning on currencies, the pound is currently worth $1.312 and €1.188. On Commodities, Oil (Brent) is at $74.5 & Gold is at $2643. On the stock markets, the FTSE 100 us currently up 0.15% at 8303 (rising as the pound falls) and the Eurostoxx 50 is down 0.72% at 4927.
Bank of England
The Bank of England is monitoring the Middle East crisis amid fears that a worsening conflict between Iran and Israel will make it impossible to stabilise oil prices, the Guardian reports. Governor Andrew Bailey told the outlet that he was watching developments “extremely closely” and that there were limits to what could be done to prevent the cost of crude rising if things “got really bad”.
Consumers need clarity on tax rises, says Sainsbury’s boss
Simon Roberts, the CEO of Sainsbury’s, has expressed concern that uncertainty surrounding Rachel Reeves’s proposed tax increases is negatively impacting consumer spending. He the Chancellor must also aim to bring down mortgage costs to ease financial pressure on households. With expectations of tax hikes to address a £22bn shortfall, shoppers are reportedly holding back on non-essential purchases. Recent data from GfK indicates a significant drop in consumer confidence, attributed to fears of further tax and spending cuts.
Should politicians be taxed on gifts?
Accountants have called for politicians to be taxed on gifts in the same way people in other professions are following news that Sir Keir Starmer accepted £107,000 of freebies whilst Labour leader. Robert Salter, a director at Blick Rothenberg, said: “HMRC argues that the gifts given to media personalities or social influencers, which appear to be very similar in many cases to the gifts received by politicians, are liable to income tax and in some cases also National Insurance Contributions.” However, there is no rule that allows politicians to avoid paying tax on gifts, Mr Salter said. Instead, the “current situation is more a result of practice rather than explicit exemption.” Blick Rothenberg calculated that Sir Keir’s tax bill on the gifts would be as high as £48,150.
House sales up 25% last month
House sales in the UK experienced a significant increase in September, with a 25% rise compared to the previous year, driven by lower mortgage rates, according to Zoopla. The data, which compares the four weeks leading to 22 September with the same period last year, indicates that nearly a third (32%) of homes listed are “chain free.” Richard Donnell, executive director at Zoopla said: “Lower mortgage rates are delivering a much needed confidence boost to homeowners, many of whom have sat on the sidelines over the last two years. Market activity is up across the board and expectations of lower borrowing costs will continue to bring buyers and sellers into the market.” Coastal and rural areas, such as Truro and Torquay, are seeing a higher number of properties for sale, suggesting that second home owners are offloading their assets. The most common “chain free” listings are two-bedroom houses, making up 41% of such homes. However, affordability remains a challenge for house price growth, particularly in southern England.
Pensions warning as the number of centenarians surges
The number of centenarians in the UK has doubled over the past 20 years, reaching nearly 15,000, and is projected to soar to around 400,000 in the next century, according to the Office for National Statistics (ONS). Clare Stinton, head of workplace saving analysis at Hargreaves Lansdown, warned: “Increased life expectancy brings serious retirement planning challenges.” With many individuals retiring in their mid-60s, they could face over 30 years in retirement, necessitating larger pension pots. Currently, only 38% of households are on track for a moderate retirement. Alistair McQueen from Aviva highlighted that “about one-in-five girls born today could live to 100,” stressing the need for better pension planning. To prepare, Aviva recommends starting retirement savings 40 years in advance, saving at least 12% of salary, and aiming for a pension fund of ten times one’s salary by retirement.
Brace for rising milk prices
Shoppers are being warned of impending increases in milk prices as dairy farmers begin to recover from significant losses incurred last year. According to the accountancy firm Old Mill, the average dairy farmer lost over £240 per cow in the year leading up to March. Andrew Vickery, head of rural services at Old Mill, stated: “I would expect there to be upward pressure on the price of dairy products and an underlying rise in the milk price.” A report from Old Mill and the Farm Consultancy Group highlights that many farmers are forced to sell stock to maintain profitability.
Tesco
Tesco raised its full-year guidance a little as a focus on competitive pricing and discounts in a fight against Aldi and Lidl, helped volumes. The supermarket now expects £2.9 billion in retail adjusted operating profit, rather than at least £2.8 billion.
National Grid
National Grid expects to earn £70 million more than expected from its Electricity System Operator (ESO) mechanism in the first half of its financial year ending on 7 November. In a quick trading update, National Grid this is due to “ownership and held-for-sale accounting treatment”. The ESO is the mechanism that is responsible for managing and balancing the electricity system in Great Britain.
OpenAI
OpenAI, the owner of ChatGPT, completed its $6.6bn fundraising that raised its valuation to $157bn. The fundraising round was led by Thrive Capital, a venture-capital firm, and included investments from Microsoft, Nvidia and SoftBank
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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.