Business news 6 May 2024
UK services sector hits highest level of growth in a year. Public sector productivity falls again. Export credit agency to expand small business support. Brits warned about ‘brown letters’ from HMRC. Non-doms are already packing their bags. And more business news that we thought would interest our members.
James Salmon, Operations Director.
UK services sector hits highest level of growth in a year
New figures have shown the UK’s services sector continued to grow last month as sunnier economic forecasts boosted orders, despite rising costs. The S&P’s purchasing managers’ index (PMI) for the UK’s services sector jumped to 55.0 in April, the highest level recorded since May 2023.
Improvement in the economic forecast was frequently mentioned as a driving force behind April’s strong sales but several UK services firms pointed to a 10% surge in the national minimum wage as the main cause of the inflationary pressure. “The latest survey results are consistent with the UK economy growing at a quarterly rate of 0.4% and therefore pulling further out of last year’s shallow recession,” said economics director Tim Moore from S&P Global Market Intelligence.
While the services sector experienced a boost, the manufacturing Purchasing Managers’ Index (PMI) slipped back into contraction in April as the sector suffered from uncertain demand and disruption in the Red Sea. The composite PMI index rose from 52.8 to 54.1.
Public sector productivity falls again
Productivity in the UK public sector, particularly in education and healthcare, was 6.8% lower than pre-pandemic levels, according to data from the Office for National Statistics (ONS). The decline in productivity between the third and fourth quarters of 2023 was 1.0%, leaving it 2.3% lower than the previous year. The gap is now at 6.8%. The public sector’s productivity is measured by the volume of services delivered compared to the inputs required to maintain those services. Strikes and a backlog in NHS waiting lists have impacted the sector, with funding disputes and high levels of long-term sickness exacerbating the issue
Export credit agency to expand small business support
UK Export Finance, the Government’s trade finance arm, has announced plans to increase its support for small and medium-sized enterprises (SMEs) to 1,000 a year by 2029. The agency aims to provide more guarantees for working capital and trade finance, help small companies access other business finance, and support their efforts to win work on UKEF-supported projects overseas. It also plans to sign up more alternative small business lenders to its schemes and streamline decision-making processes. The expansion of support is expected to help UK companies secure £12.5bn in export contracts and provide £10bn of “clean growth” financing over the next five years.
Brits warned about ‘brown letters’ from HMRC
HMRC is sending out ‘brown letters’ this month with charges inside, which could cost individuals £783 or more. The letters are a hallmark of this time of year as HMRC determines who underpaid or overpaid their taxes for the previous financial year. The average underpayment is £783, according to a survey by Canada Life. If individuals owe money, the government will demand repayment. However, individuals may be owed money if they overpaid taxes. It is important to cross-check the information in the HMRC letter with the P60 received from employers to ensure there are no mistakes. “Everyone dreads receiving brown envelopes with ‘HMRC’ printed on them. But they can contain good news as well as bad,” said Gillian Wrigley from LV.
Non-doms are already packing their bags
The Telegraph on Sunday detailed how wealthy foreigners are packing their bags and quitting Britain in light of the new rules on non-doms. The Treasury is planning to demolish the regime next April in a switch it hopes will generate at least £2.7bn per year for the UK. However, the plans have triggered a backlash from wealthy business people in the capital and bankers who say the change will force them to leave. “This will be Britain’s second Brexit moment,” says one wealthy entrepreneur who invests throughout Europe and currently claims non-dom status in Britain. “Switzerland, Spain, Italy all offer much better alternatives and are trying to attract massive wealth from London.” Nimesh Shah, chief executive of tax advisory firm Blick Rothenberg, says the regime we are abolishing “has been really the envy of most of the world.”
Richard Harpin on what makes a successful family enterprise
The entrepreneurial streak runs deep in my family, writes Richard Harpin in the Sunday Times. A recent study by PwC suggests that family firms contributed £225bn in taxes in 2021, far exceeding most other kinds of business. Harpin, founder and chairman of HomeServe and Growth Partner, says the best family enterprises are always evolving to create long-term value, with a good governance structure and a distinctive set of values running through the generations. their focus on long-term goals rather than short-term results should be a lesson for Britain’s corporates, Harpin suggests, while family business could learn from American listed businesses which understand that power is not best kept in the hands of the few, “that reinvestment reaps long-term dividends, and that you can never win by drifting.”
Pre-election rate cuts won’t shift the economy or politics
The Sunday Times’ David Smith considers when the Bank of England is likely to cut rates, with its latest decision due on Thursday. Smith doubts the Bank will cut then, but expects a strong signal that the first cut is likely in August. Although Tory politicians are desperate for a cut, “both to help borrowers and to draw a line under the economics of the short-lived Liz Truss premiership,” Smith doubts they would have a transformative effect on UK politics, or suddenly spark the economy into life, because the economic impact of reducing rates is not as clear-cut as it used to be.
US Payrolls
The US Economy added fewer jobs than expected in April while the unemployment rate rose, lifting hopes that the Federal Reserve will be able to cut interest rates in the coming months. Nonfarm payrolls increased by 175,000 on the month, below the 240,000 estimate from the Dow Jones consensus, the Labor Department’s Bureau of Labor Statistics reported Friday. The unemployment rate ticked higher to 3.9% against expectations it would hold steady at 3.8%.
EU Unemployment
EU Unemployment held steady at a record low for the fifth straight month in March, according to figures released on Friday by Eurostat. The unemployment rate for the 20-member bloc was unchanged at 6.5% – having stayed at that level since November – matching economists’ expectations.
Children expected to be worse off than their parents
Three quarters of parents are concerned about their children’s financial future, according to a study by private bank Arbuthnot Latham. However, only 14% of parents regularly discuss money and inheritance with their children. The study also found that just 26% of parents have taken steps to reduce the amount of inheritance tax their children will pay. Rachel Wyatt, wealth planner at Arbuthnot Latham, stressed the importance of open and honest conversations about passing down wealth. The survey challenges the perception that younger generations will always be better off than their parents. Rising house prices and the cost of living have made it difficult for younger people to match their parents’ financial quality of life. As more young people rely on financial support from their parents, it is crucial for those planning to leave an inheritance to have a proper estate plan in place. This can include making lifetime gifts, setting up trusts, or investing in self-invested private pensions.
Hunt may hold off on autumn tax cuts
Jeremy Hunt is considering not holding another tax-cutting autumn statement before the next election due to uncertainty about the public finances. Instead, he may include further tax-cutting pledges in the next Tory manifesto. The Chancellor has raised the possibility of further cuts to national insurance, but recent figures suggest he may have less scope for tax cuts than previously thought. The Government borrowed more than expected in the last financial year, and tax receipts were lower than anticipated.
Markets
The FTSE 100 closed on Friday, up 0.51% at 8213.49 and the Euro stoxx 50 closed up 0.63% at 4921.48. In the US the S&P 500 rose 1.26% to 5127.79, the Nasdaq rose 1.99% to 16156.33. The pound is currently worth $1.258 and €1.168. Brent is at $83.7, Gold is at $2317.
Investors turn their back on small British companies
The Alternative Investment Market (Aim) has been struggling to keep up with the FTSE 100, with its value falling and the number of companies listed decreasing. Aim, which was set up in 1995 to provide small and recently established companies access to public capital, has seen a decline in investor interest and outflows of retail money. This has led to a re-rating of Aim shares and a decrease in the market’s value. Some Aim participants are now turning their backs on the market in favour of private fundraising. However, experts believe that the market will eventually rebound, as it has done in the past. They suggest that interest rate cuts could reawaken investors’ appetite for risk and lead to a resurgence of the market.
London falls out of top 20 global IPO destination rankings
The London Stock Exchange has fallen out of the top 20 global IPO destinations of 2024, raising only as much money as Kazakhstan’s stock market. Data shows that the London Stock Exchange’s main market has had only one float, putting it behind smaller exchanges like Istanbul, Athens, and Oslo. The lack of IPOs comes as a number of top quoted firms are leaving the City, either to go private or move their listings to the US, which “should be of clear concern to government and policy makers,” says Charles Hall, head of research at investment bank Peel Hunt. Dan Coatsworth, investment analyst at AJ Bell, says many companies are waiting until after the election but given the time it takes to actually list, the recovery may not happen “until 2025 at the earliest.”
HMRC error could see workers lose NI benefits
The Low Incomes Tax Reform Group (LITRG) has warned that self-employed workers may lose out on National Insurance-related benefits due to an error by HMRC. The issue arises from the late payment of voluntary Class 2 National Insurance contributions, resulting in automatic rejection and refund. This error could lead to a loss of entitlement to the state pension and other employment benefits. LITRG has called on HMRC to identify and contact those affected to correct their National Insurance records. Antonia Stokes, LITRG Technical Officer, advises affected taxpayers to check for refunds and contact the National Insurance contributions helpline if necessary.
Stamp duty is killing Britain’s stagnant housing market
Stamp duty is having a detrimental effect on the housing market in the UK, according to the Family Building Society. Transactions have fallen to pre-pandemic levels, house prices remain high, and many households are “under-occupied”. The average stamp duty bill has increased to £9,000, discouraging first-time buyers and downsizers. Alistair Nimmo, of Family Building Society, said: “It’s a regressive, transactional tax – and it is clear our members feel the same. One told us he’d rather be carried out of his house in a box than pay stamp duty.” Amid rumours that Jeremy Hunt could announce another temporary cut to the stamp duty thresholds in the Autumn Statement, Chris Etherington and Michaela Seager, of accountants RSM, argue that “a more sustainable and long-term approach to increasing stamp duty thresholds might ultimately leave [taxpayers] better off.”
Tether beefs up monitoring to combat illicit finance
Tether, the world’s largest stablecoin, has partnered with blockchain analytics company Chainalysis to combat illicit finance in crypto markets. The collaboration aims to identify transactions associated with sanctioned entities and analyse major holders of Tether tokens. Tether’s move comes after reports of its use in evading Western sanctions by Russian middlemen and increasing use by Venezuela’s state-run oil company PDVSA. Tether has previously emphasized the traceability and online nature of its cryptocurrency, stating that every action can be seized and every criminal can be caught. With $100bn in circulation, Tether has become popular as an alternative to the dollar in emerging markets. The company, registered in Hong Kong and owned by a British Virgin Islands-based company, has the ability to freeze its tokens upon law enforcement requests.
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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 last one was particularly deadly for suppliers fand we are still seeing elevated insolvencies as businesses struggle.
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!
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Check our compensation calculator to see how much your business could be owed!
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.