Business news 6 September 2024
Confidence surge among SMEs. UK economy faces slower growth ahead. Workers’ rights reform may create “two-tier” job market. Construction, house prices, markets, insolvencies & more business news that we thought would interest our members.
James Salmon, Operations Director.
Confidence surge among SMEs
After a challenging period, confidence among SMEs is on the rise, with 86% feeling optimistic about their business prospects. According to research from Shawbrook, only 4% reported a lack of confidence. Key concerns include economic and political uncertainty, cited by 66% and 51% of respondents, respectively. However, with improving macroeconomic conditions and a potential interest rate cut, many SMEs are focusing on growth. Neil Rudge, chief banking officer for commercial at Shawbrook, stated: “With the inflation rate settling back to normal… it’s encouraging to see confidence return.” Priorities for 2024 include increasing profitability (52%) and improving productivity (51%). Despite this optimism, 51% of SME leaders expressed concerns about accessing suitable funding for their growth plans.
UK economy faces slower growth ahead
The British Chambers of Commerce (BCC) has warned that the UK economy is set to grow at a slower pace, with gross domestic product (GDP) expected to decline to 0.4% in the third quarter and 0.2% in the final quarter of the year. Vicky Pryce, chair of the BCC Economic Advisory Council, stated: “The BCC’s latest forecast shows that while the UK economy will perform better this year, it’s unlikely to be heading into the fast lane any time soon.” Despite an upgrade in growth predictions for 2024 from 0.8% to 1.1%, challenges remain, including global economic uncertainty and a cautious government fiscal outlook. Employment growth has also slowed, with businesses reporting a 0.7% increase over the past year, the weakest in three years. The Bank of England noted that the labour market is loosening, which may lead to further interest rate cuts.
Workers’ rights reform may create “two-tier” job market
Angela Rayner’s proposals to enhance workers’ rights may inadvertently create a “two-tier” job market, according to the Resolution Foundation. Economists warn that making it harder for employers to dismiss staff could lead to a rise in temporary contracts, as businesses become hesitant to hire full-time employees. The report states: “Countries with stronger employment protection tend to see greater use of temporary workers,” suggesting that the UK might face a similar trend. Currently, only 5% of workers in Britain are on temporary contracts, compared to over 25% in the Netherlands. Nye Cominetti, the economist behind the report, stressed the need for reforms that protect low-paid workers without discouraging hiring, stating, “Better protection against unfair dismissal must be balanced against the risk of putting firms off hiring.”
Richer Sounds boss backs Labour’s plan for workers
In a recent meeting at the TUC House, Julian Richer, founder of Richer Sounds, expressed his support for Labour’s New Deal for Working People alongside Paul Nowak, General Secretary of the TUC. Richer, who has a wealth of £160m, stated: “Good employers have nothing to fear from Labour’s New Deal for Working People.” The New Deal aims to ban zero-hours contracts and enhance workers’ rights, with a TUC poll revealing that 84% of respondents desire regular hours. Richer, who has implemented fair practices in his own business, emphasised that treating staff well leads to better outcomes, saying: “When you treat staff well, they don’t come in late.”
Thames Water creditors examine cash injection to avoid nationalisation
Thames Water bondholders are attempting to draw up a new funding solution in order to prevent the company falling into special administration if crucial equity raise fails. The group of creditors, who hold £9bn of debt, are working with lawyers at Akin and bankers at Jefferies in parallel with Thames Water’s attempts to attract new equity investors. Meanwhile, Thames Water boss Chris Weston told Sky News he can save the debt-laden utility, adding that he supports the Government’s efforts to ensure improved environmental performance at UK water companies. This comes as the Environment Secretary, Steve Reed, insisted that Labour had ruled out nationalising water companies but promised wider reforms following a comprehensive review.
UK new car sales fall in August
New car registrations in Britain experienced a slight decline of 1.3% year-on-year in August, totalling 84,575 units, as many consumers opted to wait for the new number plates in September. The Society of Motor Manufacturers and Traders (SMMT) noted a significant increase in demand for battery electric vehicles (BEVs), which rose by 10.8% due to summer discounts. SMMT chief Mike Hawes stated: “Encouraging a mass market shift to EVs remains a challenge, however, and urgent action must be taken to help buyers overcome affordability issues and concerns about charge point provision.” Fleet purchases accounted for 60% of registrations, despite a 1.2% decrease compared to the previous year.
Markets
Yesterday, markets were little changed today as investors remained in a cautious mood ahead of the closely-watched US jobs report, due later on Friday. The FTSE 100 closed down 0.21% at 8251.85 and the Euro Stoxx 50 closed down 0.56% at 4821.07. Overnight in the US the S&P 500 dropped 0.3% to 5503.41 but the NASDAQ climbed 0.25% to 17127.66, boosted by Tesla which rallied.
One of the best performing stocks in London was online fashion group ASOS. The retailer said it has agreed a joint venture with Heartland for both the Topshop and Topman brands. Heartland will own 75% of Topshop and Topman, while Asos will retain 25% and receive £135 million in cash. ASOS shares were almost 20% higher in late trading.
This morning on currencies, the pound is currently worth $1.318 and €1.186. On Commodities, Oil (Brent) is at $72.9 & Gold is at $2519. On the stock markets, the FTSE 100 is currently down 0.55% at 8195 and the Eurostoxx 50 is down 0.75% at 4778.
OPEC+ oil alliance have delayed plans to hike production by a scheduled 180,000 barrels per day in October, as part of a program to gradually return a broader 2.2 million barrels per day to the market over the following months.
All eyes are now on the US Jobs report which will indicate how much the FED will need to cut interest rates later this month.
Construction
UK construction companies enjoyed a sustained rebound in activity in August, according to data released yesterday, though the pace of this recovery moderated from July. The headline construction PMI registered 53.6 in August, lower than 55.3 in July, and consensus of 54.9.
Tim Moore, economics director at S&P Global Market Intelligence, highlighted that the recovery in housebuilding was the “most notable development” during this period. Housebuilding activity surged to its fastest pace since September 2022, driven by improved market conditions and lower borrowing costs.
Peter Arnold, chief economist at EY UK, noted that the recovery is expected to strengthen as interest rate cuts are anticipated. He stated: “House prices and transactions have passed the bottom and are starting to recover.” Despite concerns over long-term infrastructure spending due to funding cuts, the overall sentiment in the sector remains positive, supported by stable economic conditions and increased customer demand.
This data fed through to an earnings report from housebuilding group Vistry (formerly Bovis Homes), which reported a rise in profit in the first half of 2024. Vistry went on to announce a new £130 million share buyback programme.
House Prices
UK House Prices continued to tick up in August, bouncing back from weakness seen last year. According to Halifax, average prices climbed 4.3% on an annual basis in August to £292,505. This meant house prices were at their highest level since the same month in 2022 and sat just £1,000 off the record seen in June of that year. Prices increased by 0.3% on a monthly basis, following a 0.9% uptick in July.
Nationwide & Virgin
Nationwide Building Society has been given the official go-head from the British regulators to finalise the £2.9 billion acquisition of Virgin Money UK first announced in March. Virgin Money approved the acquisition in May.
7 Eleven
Seven & i Holdings, the Japanese conglomorate that owns the 7-Eleven brand of convenience stores, rejected a $38 billion takeover approach from Alimentation Couche-Tard, owner of competitor Circle K, a Canadian rival, as too low.
FCA ramps up enforcement action
The Financial Conduct Authority (FCA) has significantly increased its enforcement actions, cancelling the authorisation of 1,261 firms in the year ending March, more than double the previous year’s figure. This move is part of a broader strategy to enhance regulatory oversight and address concerns over compliance. In its annual report, the regulator also said is ha charged 21 individuals with financial crime offences – the highest number brought in a single year. “As we have shown this year, we are fully committed to both supporting and balancing the different needs of consumers, businesses, and the wider economy, enabling all to flourish,” Nikhil Rathi, chief executive of the FCA, said in a statement.
TUC pressures PM to hike CGT
The general secretary of the Trades Union Congress (TUC) has called on the Labour Government to align capital gains tax (CGT) with income tax. Paul Nowak’s comments during interviews before the TUC conference will put more pressure on Sir Keir Starmer to hike taxes on wealth. Mr Nowak told the New Statesman: “I just think it’s crazy that the people who go out to work in a warehouse or a supermarket can pay a higher effective tax rate than someone who makes their income through shares or property. That to me just feels fundamentally unfair.”
CVC boss warns tax hikes will drive away talent
Rob Lucas, chief executive of CVC Capital, has cautioned that tax increases on wealth could lead to a significant departure of financiers from London. He stated: “The international finance world is an incredibly dynamic world. People are moving all the time,” highlighting the potential impact of tax changes on the decisions of non-British partners and staff. The Chancellor is considering adjustments to capital gains taxes and a crackdown on carried interest, which is currently taxed between 18% and 28%. Despite these concerns, Lucas believes that changes to carried interest will not significantly affect CVC’s operations. Fred Watt, CVC’s chief financial officer, expressed confidence that the Government will ensure the UK remains competitive in attracting investment. Separately, Lloyd’s of London boss John Neal has also cautioned against high taxes, stressing the need for continued profitability to attract businesses to the UK.
Body Shop owner lines up financing
Aurea, led by cosmetics entrepreneur Mike Jatania, is nearing the completion of its acquisition of The Body Shop, with plans to secure over £30m in working capital from Hilco Capital. This financing aims to restore the cosmetics chain to a growth trajectory following its administration. Banking sources indicate that the deal with FRP Advisory, the administrators, is expected to be finalised shortly. The Body Shop, which now operates around 100 stores, has faced significant challenges, including a recent restructuring effort deemed unviable. The company, founded by Dame Anita Roddick and her husband Gordon, has changed hands multiple times, with Natura & Co previously acquiring it for over $1bn in 2017.
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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.