Business news 5 November 2024
Economists divided over Budget growth pledge. Budget could make Bank cautious on rate cuts. Dyson: Tax plan could ‘kill off’ family businesses. Retail, funds withdrawals, markets, insolvencies & more business news that we thought would interest our members.
James Salmon, Operations Director.
Economists divided over Budget growth pledge
A poll of leading economists shows that there is uncertainty over whether the Budget will deliver economic growth over the next five years. Asked whether the Chancellor’s financial plans will increase GDP growth, the economists surveyed were evenly split between yes and no. Julian Jessop, economics fellow at the Institute for Economic Affairs, said: “On paper, the additional borrowing in the Budget should provide a small fiscal stimulus,” but added that this “could be more than offset by the drag from higher taxes, more state intervention and the crowding out of private investment.” The Office for Budget Responsibility (OBR) expects the economy to expand by 2% in 2025 before taxes on businesses limit growth to around 1.5% in 2029/30. Suren Thiru, economics director at the ICAEW, said: “Tax rises on businesses combined with poor productivity could mean that growth is shallower than the OBR is expecting.”
Budget could make Bank cautious on rate cuts
Economists expect the Bank of England’s (BoE) Monetary Policy Committee to cut the base rate by a quarter point to 4.75% this week in what will be only the second cut in 2024. Analysts are eager to see whether the Bank offers a more cautious message about further reductions now the Chancellor has delivered the Budget. George Buckley, chief UK economist at Nomura, said: “The market will be much more focused on whether there are signs that December is clearly in play for easing or not,” adding: “Higher growth and inflation should lead to a less dovish BoE.” Modupe Adegbembo, an economist at Jefferies, says the Budget “will be too big for the BoE to ignore,” and “increases the risk the BoE skips the December cut.” Ales Koutny, head of international rates at Vanguard Asset Management, says the Budget may have reduced the likelihood of a rate cut, putting the odds of a reduction at 50-50.
Inflation
A third of Britain’s official “shopping basket” has slipped into deflation, providing another green light for the BOE to cut rates. The share of items that are cheaper than a year earlier is the highest since the spring of 2021.
Dyson: Tax plan could ‘kill off’ family businesses
Entrepreneur Sir James Dyson has criticised last week’s Budget, accusing the Chancellor of “killing off family businesses, individual aspiration and economic growth.” He argued that a hike in inheritance tax on family-run businesses would be “the death of entrepreneurship” and warned: “In a single ignorant swipe at aspiration, Rachel Reeves is killing off established family businesses, and any incentive to start new ones.”
Retailers brace for tough period
The retail sector is facing significant challenges as the “golden quarter” begins, with in-store sales rising by only 1.7% year on year in October and total sales increasing by 4.1%, according to BDO. Sophie Michael, head of retail and wholesale at BDO, said: “This growth is based on the disastrous sales figures recorded in October 2023,” highlighting that sales volumes have not returned to 2022 levels.
Budget uncertainty restricted spending
Data from the British Retail Consortium and KPMG shows that retailers experienced a disappointing October, with sales rising only 0.6% compared to the previous year, significantly below the three-month average of 1.3%. Linda Ellett from KPMG noted that speculation about the Budget and delayed demand for Black Friday promotions affected retail sales, adding: “With clarity now provided by the Budget and many households escaping paying increased tax from their wages, retailers will be hoping for an upturn in consumer confidence and spending.”
Card spending up 0.7% in October
Data from Barclays shows that spending on cards rose by 0.7% in October, marking a slowdown from the 1.2% rise recorded in September. The report shows that spending at department stores rose by 4.7% and clothing purchases increased by 1.9%. Barclays found that a third of consumers have saved items in their online basket to see if they are discounted on Black Friday.
UK sees record fund withdrawals
Analysis by Calastone shows that UK equity fund withdrawals reached their largest on record in October, with investors pulling out money amid concerns over tax rises in the Budget. The report shows that investors withdrew £2.7bn last month, up from £564m in September, with sell orders up 36% month-on-month. UK-focused funds were hardest hit, with UK equity funds losing £988m during October. Charles Hall, head of research at Peel Hunt, said the outflows show “the scale of negative vibes around the Budget and reinforces exactly why the Government urgently needs to encourage investment in UK assets.” While there had been speculation that the top rate of capital gains tax could be hiked to 39% in the Budget, the Chancellor actually increased the rate from 20% to 24%.
Banks’ credit ratings at risk from motor finance scandal
The motor finance scandal poses a significant threat to banks’ credit ratings, Fitch has warned. The agency highlighted that “lenders face considerable uncertainty and potentially significant implications” following a Court of Appeal ruling that favoured consumers against MotoNovo Finance and Close Brothers. The court determined that car dealers must fully disclose commissions, leading to potential claims and liabilities for lenders. The Royal Bank of Canada estimates that compensation costs could reach £13bn. The Financial Conduct Authority is reviewing the ruling’s impact and will report by May 2025.
Employees lead the AI shift
Lorraine Barnes, GenAI lead at Deloitte UK, says a significant shift is occurring as employees increasingly utilise generative AI (GenAI) tools, often at their own expense. According to Deloitte’s Trust in GenAI research, nearly a third of UK employees are funding their own GenAI usage, surpassing their employers’ adoption rates. Ms Barnes emphasises the need for businesses to accelerate their AI integration, saying: “We, as business leaders, need to build more trust in tech.”
Markets
Yesterday, the FTSE 100 closed up 0.09% at 8184.24 and the Euro Stoxx 50 closed down 0.53% at 4852.10. Overnight in the US the S&P 500 fell 0.28% to 5712.69 and the NASDAQ fell 0.33% to 18179.98 ahead of their election.
Markets show that traders are unclear who will win although the dollar’s fall indicates a shift to Harris as a Trup win would fuel inflation and lead to higher interest rates.
UK gilt prices continued to settle down with ten year yields up 1 basis point at 4.45% and 30 year yields up 2 basis points at 4.92%.
Berkshire Hathaway has reported a record cash holdings of US$325bn and an Apple position that is just one third of his previous holding.
This morning on currencies, the pound is currently worth $1.2985 and €1.192. On Commodities, Oil (Brent) is at $75.35 & Gold is at $2738. On the stock markets, the FTSE 100 is currently up 0.25% at 8205 and the Eurostoxx 50 is up 0.06% at 4855.
Vodafone and Three.
The UK Competition & Markets Authority said Vodafone and Three could address competition concerns regarding their planned £15 billion merger announced last summer, through investing in networks and customer protections. A “multi-billion-pound commitment to upgrade the merged company’s network across the UK, including the roll-out of 5G, combined with short-term customer protections” could resolve issues its investigation identified in September and let the merger, which would create the UK’s largest mobile phone network, go ahead.
Boeing
Boeing strike ends as workers back 38% pay rise deal, ending a damaging seven-week-long strike.
Smoking
According to the Guardian, smoking outdoors in the UK, is set to be banned in a bill that will be put forward to parliament today. Smoking will be prohibited outside schools and hospitals, and the advertising of vapes will also be restricted.
Profit warnings hit two-year high
Profit warnings from UK-listed companies reached a two-year high between July and September, analysis by EY-Parthenon shows. Data shows that there were 84 alerts issued in the three-month period, with this up 11% on Q3 2023. It was also shown that almost one in five UK-listed companies (19.2%) issued a profit warning in the past 12 months, with this the highest percentage since during the pandemic. Contract and order cancellations or delays were cited by 38% of companies that issued warnings, while lower sales contributed to 33%. The hardest hit sectors in Q3 were industrials and technology. Jo Robinson, turnaround and restructuring strategy leader at EY-Parthenon, said: “Time will tell whether this rise in profit warnings is a temporary spike or indicative of a longer-term trend but companies must proactively address emerging issues before they escalate.”
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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.