Business news 5 January 2024
James Salmon, Operations Director.
UK services sector rebounds. Consumer borrowing rose in November. Retail footfall slumps. Goldmans expects faster cuts to interest rates. UN warns of prolonged economic weakness. And more business news that we thought would interest our members.
UK services sector rebounds with optimism high for the year ahead
The UK services sector has reported its fastest jump in activity for six months with the S&P Global/CIPS UK Services PMI recording an increase in output and new work for the second month running in December and at the strongest rate for half a year. The survey recorded a score of 53.4 for December, up from 50.9 in November. Any figure above 50 suggests growth. The poll also found a seven-month high in optimism about the outlook for 2024. The services sector had “ended last year on a high” said Tim Moore, economics director at S&P Global, adding: The recovery in client demand was attributed to hopes of lower borrowing costs and an improving global economic backdrop in 2024. However, many firms continued to cite challenging underlying business conditions due to the stagnating UK economy and strong pressure on margins from rising labour costs.”
Consumer borrowing rose in November, despite higher interest rates
Data from the Bank of England shows consumer borrowing rose to £2bn in November, up from £1.4bn the month before. This is up on the £1.3bn expected by analysts. Higher borrowing on credit cards, which doubled to £1bn in November, was the main driver of the increase, while other forms of personal credit, such as personal and car loans, increased slightly from £900m to £1bn. “If November’s unexpectedly strong increase in lending is maintained, this could present an upside for consumer spending growth this year,” Martin Beck, chief economic advisor to the EY Item Club said.
Retail footfall slumps
UK Retail Footfall slumped in the final month of the year, with rainy weather keeping shoppers away from the high street, numbers on Friday showed. According to the latest British Retail Consortium-Sensormatic IQ data, footfall in UK retail destinations declined 5.0% on-year in December, worsening from a 0.7% fall in November.
Goldmans expects faster cuts to interest rates
Economists at Goldman Sachs expect the Bank of England to cut interest rates faster than previously expected, easing the pain for UK households from higher mortgage rates. Goldmans now expects the BoE to begin reducing borrowing costs from May with rate setters cutting interest rates by 0.25 percentage points at each policy meeting until the base rate hits 3% by May 2025. The forecast means UK households would face “a cumulative increase in mortgage payments of £19bn by the end of 2025, notably lower than our previous estimate of roughly £30bn,” Goldmans economist James Moberly said. The improvement for household finances means UK GDP is now expected to grow by 0.6% this year, up from a previous forecast of 0.5%. The economy is expected to expand by 1.3% in 2025, uprated from 1%.
UN warns of prolonged weakness in global economy
The UN has warned that weak economic growth will hinder progress on sustainable development and climate action. The World Economic Situation and Prospects report forecasts a slowdown in global growth to 2.4% this year, below the pre-pandemic trend of 3%. The report highlights the impact of higher borrowing costs, geopolitical tensions, and climate disasters. The UN secretary general, António Guterres, called for increased investment to drive sustainable development and climate action. The report also warns of elevated price pressures and the risk of renewed inflationary bursts due to geopolitical conflicts. The UN pointed to the need for international cooperation, financial support, and a scaling up global climate finance to strengthen climate action worldwide.
MPs to grill BoE on rates threat to financial stability
Bank of England governor Andrew Bailey is set to face questions from MPs regarding the potential threat of interest rate hikes to Britain’s financial stability. The hearing, led by the Commons Treasury Committee, will also include other members of the bank’s Financial Policy Committee. The committee will inquire about the impact of increasing debt levels on financial stability and whether artificial intelligence poses a risk.
Electric Vehicle sales
The market share of electric vehicles has stalled and car manufacturers are asking for the Government to incentivize consumers with a tax cut to encourage sales. About one in six of new cars sold were electric, the same as the year before.
House Prices
UK House Prices rise for third consecutive month, according to latest figures. Halifax said average house prices rose by 1.1% in December, and by 1.7% overall in 2023 The typical UK home now costs £287,105, just over £3,000 more than last month, the lender said.
Record number of properties hit the market on Boxing Day
A record number of sellers put their properties up for sale on Boxing Day, with a 26% jump in new seller listings compared to last year. The number of buyers contacting estate agents about homes for sale on Boxing Day was also 17% higher than in 2022. Tim Bannister, a property expert at Rightmove, believes this surge in activity may be a sign of things to come and that home-mover activity will increase at the start of this year. He states, “The scale of this year’s Boxing Day bounce is an early positive sign that buyers and sellers are out there and taking action.”
Rate rises on new mortgages slowed in November
Figures from the Bank of England showed the rate paid on new mortgages edged up at a much slower pace in November, raising hopes that the worst may now be over for homebuyers. The average rate rose by 0.09 percentage points to 5.34%, a smaller increase than was seen in October and September. Thomas Pugh, economist at RSM UK, said: “If house prices haven’t quite reached their lowest point, they’re probably not far off it. Indeed, now that attention has firmly turned to when interest rates will start to fall and mortgage rates have started to drop, the housing market is likely to stabilise. A gradual rebound in housing transactions this year will also support an economic recovery later this year.”
PM working towards autumn election
Rishi Sunak is planning to hold a general election in the autumn, the Prime Minister said on Thursday, with sources saying this would hopefully mean people have the chance to feel the benefit of any tax cuts made in the spring Budget. Downing Street is considering cuts to inheritance and income tax in the Budget on March 6. With inflation gradually coming down and interest rates falling, people should feel a bit better off by the end of the year than they are now, Andrew Goodwin of Oxford Economics said. National Insurance will be cut by 2p from Saturday, saving the average employee £450 a year, and Mr Sunak said he wanted to do more on tax cuts. But the opposition accused Mr Sunak of clinging on to power by refusing to hold an election in May. “All we have learned today is that our unelected prime minister has yet again bottled holding the election,” said Pat McFadden, Labour’s national campaign co-ordinator. He added: “He needs to stop hiding, stop being so weak, stop squatting in Number 10 without a mandate.”
Tui
Tui said its board has recommended that the company cancels its UK listing. Tui is listed in both London and Frankfurt, but said last month that shareholders had questioned whether the structure was “optimal & advantageous”. In a statement on Thursday, the tour operator said that liquidity in the shares had moved from London to Frankfurt in recent years.
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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!
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.