Business news 4 August 2023
James Salmon, Operations Director.
Interest rates rise to their highest in 15 years. BoE predicts high food prices and wages. High interest rates trigger services sector slowdown. Wilko, Apple. Amazon and more business news that we thought would interest our members.
Interest rates rise to their highest in 15 years
The Bank of England has raised its key interest rate by a quarter of a percentage point to a 15-year peak of 5.25% (up from 5%).
The last time rates were at 5.25% was April 2008. Six of the nine-member committee voted for the rise – two wanted a rise to 5.5%, while one wanted a cut to 5%
The Bank also says it expects inflation to fall below 5% in the final quarter of 2023. The government has pledged that inflation will be 5% or below by the end of the year.
Unlike the US Federal Reserve or the European Central Bank, the BoE’s Monetary Policy Committee gave little suggestion that rate hikes were about to end as it battles high inflation. Governor Andrew Bailey stressed that borrowing costs were likely to stay high for some time.
Financial markets priced in a two-thirds chance of another rate rise to 5.5% in September. The BoE forecast inflation would fall to 4.9% by the end of this year. Yael Selfin, chief economist at KPMG, said that it may take two years until rates start to fall again.
Sterling fell significantly following BoE’s decision to raise interest rates by only 0.25%. This cautious hike, along with Governor Andrew Bailey’s clear indication that a 0.50% hike was not on the table, resulted in substantial pressure on the Pound. This morning the pound is at 1.27 USD and 1.16 Euros. The release of today’s non-farm payroll report is however going to be a critical to whether the US dollar can sustain its near-term rally.
The FTSE100 extended losses yesterday, however prices improved in late trading and were off the day lows heading into the closing bell. The index ended down 0.43%, at 7529.16. Overnight, the S&P 500 dropped -0.25% and the NASDAQ dropped -0.10%.
As rates rise, cash flow is all the more important for small businesses. CPA can help speed up your cashflow.
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.
BoE predicts high food prices and wages
Food prices are likely to remain high for the rest of the year, according to the Bank of England. The bank stated that food price inflation had peaked and was expected to be around 10% or slightly lower by the end of the year. However, food prices will still remain high and not decrease. Many food producers are facing significant cost pressures from wages and energy.
Wage growth is expected to remain higher than normal until 2024, and businesses may not benefit from the reduction in wholesale gas prices until their energy contracts come up for renewal. The Bank’s decision to raise its policy rate “reflects the good and bad of tightening monetary policy,” says Barret Kupelian, senior economist at PwC. “While inflation is expected to fall, food prices are likely to stay high, signalling the end of the era of cheap food in the UK.”
High interest rates trigger services sector slowdown
Services output in July rose at the slowest rate since January, according to the S&P Global / CIPS UK Services purchasing managers index, which cooled to 51.5, down from 53.7 in June. Analysts warned high inflation, soaring borrowing costs and a fall in confidence have “knocked the wind out of the sails of the service sector”. They added that the period of growth that began at the start of the year is quickly coming to an end as the economic outlook darkens. Martin Beck, of EY ITEM Club, said: “Less robust growth in the services sector was not accompanied by an easing in cost pressures. Respondents once again reported that strong wage growth emanating from a tight labour market was driving up input cost inflation.”
Campaigners protest outside BoE over interest rate rise
Campaigners from Positive Money protested outside the Bank of England on Thursday demanding a windfall tax on bank profits to combat the cost-of-living crisis. Hannah Dewhirst, head of campaigns at Positive Money, stated, “We’re outside the Bank of England here today to protest the Bank of England’s relentless hiking of interest rates, which are causing big bank profits to balloon while millions of us suffer from the cost-of-living crisis.” Protesters expressed their frustration with the increasing mortgage payments and called for banks to pay their fair share of taxes. The demonstration highlighted concerns about the housing market and rental market, with many feeling unable to afford a home.
Tice issues warning over Sunak’s “socialist solution”
The UK economy is “heading to an iceberg” due to high interest rates and taxes, according to Richard Tice, leader of Reform UK. Tice warned that another interest rate rise by the Bank of England will accelerate the country towards an economic crisis. He attributed the sinking economy to record public spending, which has led to increased taxes and interest rates. Tice criticised the Government’s economic plan as a “socialist solution” and called for a focus on growth. He proposed measures such as cutting government spending, reducing income tax, lowering VAT, and bringing down corporation tax to attract businesses and investment.
UK Construction up.
The UK Construction PMI unexpectedly rose from 48.9 to 51.7 for July (above 50 is positive) when it had been expected to fall to 48.0
HMRC under fire from small businesses over cuts to phone services
Small businesses owners have hit out at HMRC’s plan to scale back phone services with trade bodies claiming the move would hamper firms struggling to navigate complex tax affairs.
UK Finance serious about linguistic issues
Language guidance issued by UK Finance has been criticised as “woke nonsense” by Tory MP Nigel Mills, who pointed to instructions from the trade body to substitute the term “black market” with “illegal market”, for example, or “penetration testing” with “ethical hacking”. The report on language in technology and cybersecurity was put together in 2021 with the help of EY and Microsoft, a spokesman for UK Finance said. Mills said: “You’d think bank bosses would have their focus on the country’s economy rather than this.” But David Postings, the chief executive of UK Finance, said the body takes linguistic issues in society “extremely seriously”.
Wilko on the brink of collapse
Thousands of jobs at Wilko, one of Britain’s largest discount retailers, are in danger as the company faces the possibility of collapse. The privately-owned chain, which operates 400 stores and employs around 12,000 people, has filed a notice of intention to appoint administrators at the High Court. Wilko has been searching for a rescue deal and has a 10-day window to secure one while being protected from other creditors. The company received a £40m lifeline earlier this year from Hilco UK. Wilko’s CEO, Mark Jackson, stated that although there has been significant interest and offers to recapitalise the business, none have provided the necessary liquidity in the available time. The retailer is working with PwC to finalise a company voluntary arrangement, which would help slash rents across its stores while CBRE is negotiating with landlords. The GMB Union has postponed a meeting with Wilko members in anticipation of a more detailed update from the company.
Apple
Apple reported a drop in revenues in the second quarter as sales of its iPhones, which account for nearly half of all revenues, fell by 2.4% year on year. However, net profit actually ncreased by 2.3%, driven by greater subscriptions. The number of subscribers to Apple’s digital services has risen by 150 million in the year.
Amazon
Amazon beat Wall Street expectations on the top and bottom line, with revenue boosted by strong growth in Amazon Web Services. The retailer reported 11% growth in second quarter revenue to $134.4 billion from $121.2 billion a year ago, swinging to net income of $6.7 billion from a net loss of $2.0 billion.
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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.
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.
Unlike other credit management companies, we offer our members a fixed annual subscription regardless of how high the debt value maybe!
No face-to-face meeting required – 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 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.