Business news 4 October 2024
Half a million small businesses disappear since 2020. UK services sector growth slows. Labour’s rights reforms boost business optimism. Wage growth and inflation expectations, long term sickness, banks given new powers, Property, CGT, markets, insolvencies & more business news that we thought would interest our members.
James Salmon, Operations Director.
Half a million small businesses disappear since 2020
Half a million small businesses have folded since the start of 2020 with official figures showing the total number of private sector businesses stood at 5.5m in the year to January. The British Chambers of Commerce said that the decline in private businesses “underlines the challenging economic conditions many firms are still facing.” Tina McKenzie, policy chair at the Federation of Small Businesses, said that the “disappointing” figures highlighted in “stark terms the need for a renewed focus on economic growth and entrepreneurial culture”. She added: “There are now well over half a million missing small business owners. That’s half a million wealth creation units missing, which means local jobs and local enterprise are also missing.”
UK services sector growth slows
The S&P Global UK services PMI survey has revealed a decline in the services sector, scoring 52.4 in September, down from 53.7 in August. Tim Moore, economics director at S&P Global Market Intelligence, stated, “The September PMI surveys suggest that the UK economy is still on a positive trajectory, with improving order books accompanied by cooling inflationary pressures. UK service providers indicated a moderate expansion of activity in September, fuelled by resilient business and consumer spending.” However, Moore added that “the post-election rebound lost some momentum as output, new work and employment all increased at the slowest pace for three months.”
Labour’s rights reforms boost business optimism
Deputy Prime Minister Angela Rayner is set to introduce the Employment Rights Bill next week, with key proposals including protections against unfair dismissal, immediate sick pay access, and a ban on zero hours contracts. A survey by Opinium reveals that 66% of business leaders believe the reforms will positively impact their operations. Commenting on the survey, TUC General Secretary Paul Nowak said: “Most managers understand that if you treat your staff well they will perform better.” Additionally, Dr George Dibb from IPPR highlighted that secure employment benefits both workers and businesses. Elsewhere, Tesco’s chief executive, Ken Murphy, has urged the Government to collaborate with businesses on the new rules to ensure they don’t inhibit growth.
Wage growth and inflation expectations steady
Recent data indicates that businesses’ expectations for wage settlements and inflation rates remain largely unchanged, with finance directors predicting a 4.1% wage increase over the next year. Rob Wood, chief UK economist at Pantheon Macroeconomics, noted that the data does not provide a “green light” for quicker interest rate cuts, as wage growth and price rises remain “stubborn”.
Ill-health crisis leaves millions jobless
According to a report by the Commission for Healthier Working Lives, Britain’s ill-health crisis is significantly impacting the workforce, with over 8m adults either jobless or limited in their work capacity. The study reveals that one in five working-age individuals suffers from health conditions that hinder their employment, with those affected being three times more likely to be unemployed. The report highlights a 37% increase in such cases since 2013, with 4.3m people currently out of work due to health issues. It goes on to call for reforms in sick pay and urges the Government to incentivise employers to support workforce health. Some 60,000 women are currently off work due to symptoms relating to the menopause, costing the UK economy £11bn annually. Sacha Romanovitch, chairman of the commission, said: “If we intervene early and provide the right support, people can stay at work for longer. That is a goal that is great for individuals, great for businesses and great for society.”
UK firms still overlook working-class talent
In the UK, many firms are failing to tap into the working-class talent pool, with only half actively seeking candidates from less advantaged backgrounds. The Social Mobility Commission highlights that adults from lower working-class families are three times more likely to remain in working-class jobs compared to those from higher professional backgrounds. The Sutton Trust suggests that improving social mobility could add £170bn to the UK economy annually. Alun Francis, chairman of the Social Mobility Commission, said: “It’s not true that social mobility is getting worse on all counts, nor does our country compare badly with others. In reality, the picture is complex. But we don’t need a crisis to recognise that opportunity can be improved.” The Times notes that Linklaters, Nationwide, KPMG and PwC are among those taking part in this week’s Somo Awards, which highlight the work done by organisations actively supporting working-class talent.
Banks given new powers to protect consumers against scams
Banks will be given new powers to delay and investigate payments that are suspected of being fraudulent, helping to protect consumers against scammers. New laws proposed by the Government today will extend the time that payments can be delayed by 72 hours where there are reasonable grounds to suspect a payment is fraudulent and more time is needed for the bank to investigate.
Sterling falls after Bailey hints at ‘more activist’ stance on rate cuts
Andrew Bailey, the Governor of the Bank of England, has indicated that the central bank might adopt a more proactive stance on interest rate cuts if inflation continues to improve. Currently, rates stand at 5% following a reduction in August. Bailey said he was encouraged that inflation pressures had proved less persistent than the Bank had feared, but he also highlighted the potential impact of geopolitical tensions in the Middle East on oil prices. He cautioned: “There’s a point beyond which that control could break down if things got really bad,” stressing the need for vigilance in monitoring these developments. Sterling fell 1.5¢ against the US dollar following Bailey’s comments to trade at about $1.31 – its lowest level in three weeks. Kathleen Brooks, a research director at XTB, said: “The market has used Bailey’s comments as a green light to price in more [interest rate cuts]. The pound has already sold off sharply this week, so further downside could be limited in the short term, however, Bailey has made it harder for the pound to recover.”
Markets
Yesterday, the FTSE 100 lacked clear direction, fluctuating between gains and losses and closed down 0.17% at 8276.42 and the Euro Stoxx 50 closed down 0.96% at 4915.54. Overnight in the US the S&P 500 fell 0.17% to 5699.94 and the NASDAQ slipped 0.04% to 17918.47.
Oil prices continued to rise on concerns of a broader conflict in the Middle East. Brent Crude was up nearly 4% to $76.7 per barrel yesterday.
Sterling was lower following comments from the Bank of England Governor Andrew Bailey, suggesting that the central bank could become ‘more aggressive’ in cutting interest rates provided the news on inflation continued to be favourable. On Monday cable was above $1.34, now it is down 2.5 cents. A cheaper pound is a positive for the UK market, increasing the value of overseas income and making UK assets more attractive.
This morning on currencies, the pound is currently worth $1.315 and €1.194. On Commodities, Oil (Brent) is at $78.32 & Gold is at $2660. On the stock markets, the FTSE 100 is currently down 0.32% at 8257 and the Eurostoxx 50 is up 0.14% at 4928.
UK Services PMI came in lower than expected but had encouraging news on inflation. September’s final services PMI reading was 52.4, down from 53.7 in August and below the 52.8 flash estimate. A reading above 50 indicates growth.
The US Services Sector turned in its strongest performance in more than a year and a half during September, according to a survey Thursday from the Institute for Supply Management. The ISM services index showed that 54.9% of businesses reported expansion, up from 51.9% in August and better than the estimate for 55.4%. This was the highest reading since February 2023.
US Jobless Claims nudged higher last week and were a bit above expectations, the US Labor Department reported Thursday. First-time claims totaled 225,000 for the week ending Sept. 28, up 6,000 from the upwardly revised previous total and higher than the 220,000 consensus estimate.
North Sea oil’s future in jeopardy
The future of the North Sea’s oil and gas industry is at risk due to a lack of clarity around the fiscal regime, according to a new report from Wood Mackenzie. The report criticises recent changes to the Energy Profits Levy (EPL), which is set to increase from 35% to 38% on November 1, creating significant uncertainty for investors. Graham Kellas from Wood Mackenzie commented: “Price responsiveness, predictability, fairness, simplicity and transparency must all be considered to ensure the correct outcome is reached at what is a crucial juncture for the sector.” Meanwhile, Ineos UK E&P, owned by Sir Jim Ratcliffe, has reported a staggering £280m loss for 2023, attributed to a significant tax burden. The total tax bill soared to £585m, largely due to the energy profits levy and decommissioning costs.
CGT hike would probably cost Treasury money
Leading tax experts at EY have cautioned that increasing capital gains tax (CGT) could ultimately cost the Treasury more than it generates. Chris Sanger, EY’s UK tax policy lead, said: “This would be one of the areas which is likely to have a lot of impact on particular people’s decisions, but probably not result in much in terms of gains for the Government.” Sanger points out that the Treasury’s own figures show a 10 percentage point increase in CGT rates could cost the Treasury £2bn by 2027-28, demonstrating “it was on the wrong side of the Laffer curve.” Sarah Farrow, a partner at EY, explains that the fall in tax take would be the result of investors hanging on to their assets if they felt CGT rates were too onerous.
Labour’s EPC plan threatens rental market
Labour’s new energy performance certificate (EPC) agenda, led by Ed Miliband, poses significant challenges for private landlords in the UK, writes Tom Haynes in the Telegraph. By 2030, landlords must ensure their properties achieve at least a C rating for energy efficiency, or face being banned from letting. But critics argue that the current EPC grading system is flawed, with a Leeds Beckett University study revealing that around 27% of EPCs from 2008 to 2016 contained discrepancies. Chris Norris from the National Residential Landlords Association described EPCs as a “blunt tool,” while Michelle Lawson of Lawson Financial warned that landlords may pass on the costs of compliance to tenants through higher rents. The estimated cost to upgrade properties to meet the new standards could reach £36bn, raising concerns about the impact on the rental market and affordability for tenants.
Labour’s ‘anti-landlord’ tax will hurt tenants the most
Sam Mitchell, chief executive of Purplebricks, has warned that proposed increases in capital gains tax (CGT) could exacerbate the housing crisis and lead to higher rents for tenants and first-time buyers. He warned: “If you put capital gains tax up, you will have this rush of landlords selling up which is bad for tenants.” Mitchell expressed doubt that the policy would increase housing supply or generate significant revenue for the Treasury, suggesting that tax relief for landlords could be a more effective solution. He noted that the number of homes available to let has decreased by 24% since before the pandemic, while average rents have risen by 5% in the past year.
JD Wetherspoon
JD Wetherspoon said financial 2024 revenue increased 5.7% to £2.04 billion from £1.93 billion the prior year. Pretax profit however fell 33% to £60.6 million from £90.5 million. Having not paid a dividend for financial 2023, for its latest year the firm declared a final payout of 12 pence per share. Going forward, Chair Tim Martin commented that Wetherspoon “currently anticipates a reasonable outcome for the current financial year, subject to our future sales performance”.
Frasers & Mulberry
Frasers confirmed that it has successfully applied to luxury fashion retailer Mulberry for a subscription to 4 million shares at 100 pence each. Frasers said it will consequently hold a 36.9% to 37.3% stake in Mulberry. The range of Frasers’ shareholding is based on the outcomes of Mulberry’s retail offer, which remains open and pursuant to which up to a further 750,000 shares may be issued to existing shareholders in Mulberry, Frasers said.
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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.