Business news 4 January 2024
James Salmon, Operations Director.
Falling inflation could mean tax cuts before election. Commercial property sector faces tough year ahead. Financial services chiefs optimistic. And more business news that we thought would interest our members.
Falling inflation could mean tax cuts before election
Lower government borrowing will help to fund prospective pre-election tax cuts, according to Deutsche Bank. The German investment bank predicts that Jeremy Hunt will have extra spending power at his forthcoming budget due to lower borrowing in the 2023-24 fiscal year. Deutsche Bank suggests that the borrowing bill could be £5bn lower than previously estimated by the Office for Budget Responsibility. Sanjay Raja, chief UK economist at the bank, said there were several reasons for optimism going into 2024, including a likely fall in annual consumer prices inflation, the prediction by money markets of aggressive interest rate cuts, a recovery in house prices and a decrease in the Bank of England’s bond holdings.
Commercial property sector faces tough year ahead
Seizures of commercial property have surged, with a 75% increase in fixed-charge receiverships from 2022 to 2023. Experts warn that the heavily indebted sector could face refinancing demands of around £180bn, leading to continued strain on commercial property owners. Annika Kisby, managing director for real estate at Kroll, stated that the rise in distress in the sector is expected to continue into 2024 due to higher interest rates and potential requirements for fresh equity. The need for refinancing is exacerbated by declining capital values, making it difficult for landlords to fully repay their debts through asset sales. Land Securities and Abrdn European Logistics Income have already experienced difficulties, with the latter considering winding itself up. Julie Palmer, a partner at Begbies Traynor, said: “Sadly, after the year they have just been through, many business owners will be looking ahead to 2024 with a degree of hope, but there’s nothing to suggest that it’s going to be any easier next year.”
PM faces calls to cut business taxes
Rishi Sunak is facing pressure to lower the tax burden on businesses as he begins his election pitch. The British Chambers of Commerce (BCC) warns that the economy is in danger of flatlining if firms do not receive more government help to boost their investment. Shevaun Haviland, the director general of the BCC, said: “The Chancellor’s decision in his Autumn Statement to make full expensing permanent was very welcome; 2024 needs to be the year when companies are given further assistance to invest. “In the noisy election year ahead, it is crucial politicians remain focused on growing the economy and helping businesses thrive.”
Food price inflation falls to 6.7% in December
Food price inflation fell to 6.7% in December, the smallest increase in 18 months. However, the British Retail Consortium (BRC) warns that cost pressures and new border checks on EU food imports may prevent further falls. The BRC also highlights potential price increases due to upcoming business rate hikes. While food price inflation decreased, the average price for non-food purchases rose from 2.5% to 3.1%. The BRC urged the Government to reconsider imposing new costs on retail businesses, which could lead to higher prices for struggling households.
Financial services chiefs optimistic, but wary on competitiveness
A poll commissioned by KPMG has found a high level of optimism among financial services chiefs with 87% “confident” about business growth in the first quarter of 2024 while 83% have a positive outlook on profitability. Executives in banking, asset and wealth management were the most optimistic about growth, followed by insurance. “It’s great to see financial services leaders go into the new year feeling confident despite ongoing economic turbulence, which is set to continue to challenge the sector in the first quarter,” said Karim Haji, global and UK head of financial services at KPMG. However, bosses highlighted a need to reduce regulatory pressures, tackle inflation and overhaul the tax system to help the UK maintain its status as a global financial centre. KPMG also noted concern about mandatory disclosures for diversity and inclusion despite strong support for the need for more progress on representation.
Labour mulls crackdown on fraud against government
People who defraud the government will face going to jail for more than a decade under plans being considered by Keir Starmer as part of a wider cleanup of British politics. The Labour leader will pledge to restore standards in public life with “a total crackdown on cronyism” in a speech on Thursday marking the beginning of the election year. Sources say a range of policy options are being considered as part of the cleanup plan, including tougher sentences for “fraud against the public purse”, such as the billions wasted through Covid loan schemes. Labour is considering either bringing in a separate offence of fraud against the public purse or making it an exacerbating factor in sentencing guidelines, sources said.
Income growth in UK varies widely over past 10 years
Analysis by UHY Hacker Young reveals that income growth has risen on average by 40% over the last 10 years but growth across the UK caries wildly. Hackney and Newham had the largest growth in gross domestic household income (GDHI), with incomes increasing 80.1%, thanks to the expansion of the technology and financial services in east London. But Aberdeen saw pay increasing just 15.8% in the past 10 years. UHY Hacker Young partner Martin Jones said: “There’s been a huge increase in the levels of income in some up-and-coming areas in London. Areas that were seen as lower-income and unfashionable 10 to 20 years ago have become hotspots for growing wealth.”
Markets
Stocks and bonds steadied in Europe this morning after a bruising two-day selloff to start 2024.The FTSE 100 is at up at 7719 and the Euro stoxx 50 is at 4462.. In the US, the S&P 500 fell 0.8% overnight to 4704.8 and the NASDAQ fell 1.2% to 14592 after the latest FED minutes revealed hesitancy over rate cuts, most notably regarding a cut markets had anticipated in March. Even the so-called Magnificent Seven (Apple, Amazon, Alphabet, Microsoft, Meta Platforms, Tesla and Nvidia) who drove the US gains last year are struggling, having slipped for the last four trading days.
Oil
The Oil price rose this morning (Brent is at $79) adding 1% to solid gains (3%) yesterday on persisting concerns over Middle Eastern supply following disruptions at a field in Libya and heightened tension around the Israel-Gaza war.
China
China’s Services Sector expanded more than expected in December, according to a survey released on Thursday. The Caixin services purchasing managers’ index rose to 52.9 from 51.5 in November, coming in above consensus expectations of 51.6 and marking the highest level since July. A reading above 50.0 indicates expansion, while a reading below signals contraction
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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 one will be particularly deadly for suppliers for some time to come.
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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?
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!
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.