Business news 6 November 2023

James Salmon, Operations Director.

Cash flow identified as top challenge for SMEs. UK economy contracts, raising recession fears. Services sector activity falls. Tax, profit margins, Savings rates & lots more business news from the weekend that we thought would interest our members.

Cash flow identified as top challenge for SMEs

Millbrook Business Finance has released the findings of its latest survey of SME business owners, revealing that cash flow is the biggest challenge for nearly half of the respondents. Other issues faced by businesses include the cost-of-living crisis, energy prices, supply chain disruption, inflation, recruitment, building overheads, and unexpected tax bills. The survey also found that 40% of businesses planning to take out finance in the next year are doing so to address cash flow issues. Justin Amos, managing director of Millbrook Business Finance, commented on the challenges faced by SMEs, stating that late payments and suppressed customer demand worsen cash flow for businesses during economic downturns. He also highlighted the ongoing cost of living crisis and high energy costs as contributing factors to the financial challenges faced by SMEs.

UK economy contracts, raising recession fears

The Office for National Statistics is expected to say on Friday that the UK economy contracted by 0.1% in the third quarter, raising concerns of a recession. Falling construction output, lower business and consumer spending, and strikes by rail workers and doctors contributed to the decline. Economists predict a shallow recession as high interest rates and weaker industrial activity weigh on the economy. The EY ITEM Club think tank believes the economy may avoid recession, but warns of the danger of stagnation. Confidence among small businesses in the manufacturing and construction sectors is plummeting, with fewer owners forecasting growth compared to previous quarters.

UK services sector activity falls for third consecutive month

The UK’s services sector experienced a lacklustre October as activity fell for the third consecutive month, indicating that businesses are “skirting with recession”. The S&P Global/CIPS UK services PMI survey showed a reading of 49.5 in October, slightly higher than September’s 49.3. However, any score below 50 suggests contraction in the industry. The sector, which includes hospitality, healthcare, transport, and financial services, has been grappling with higher business costs and squeezed household budgets. Forward-looking indicators suggest service providers will continue to struggle, leading to weaker demand and less new work. Tim Moore, economics director at S&P Global Market Intelligence, stated that the degree of optimism towards the business outlook is the lowest in 2023 so far, despite relief from interest rate hikes.

Businesses back plans for permanent £10bn tax break

Business groups have welcomed the news that Jeremy Hunt is considering making a £10bn investment tax break permanent as part of this month’s Autumn statement. Mohammad Jamei, economic policy director at the Confederation of British Industry, said it could see a permanent 21% boost to business investment and a 2% uplift in GDP by 2030. “Extending full capital expensing beyond the current window could be a game changer in terms of unlocking the vital business investment we need to drive economic growth,” he said. The policy was launched at April’s Spring statement as a swap for 2021’s ‘super-deduction’ programme, and meant to support firms with the 19 to 25% corporation tax increase. But the Office for Budget Responsibility has said previously that the scheme comes at a cost of £10bn to the public purse, although supporters of the policy argue the figure is an overestimation and closer to £3bn.

Profit margins shrink, casting doubt on price inflation claims

Companies reported narrower profit margins in Q2, raising doubts about claims of inflation fuelled by corporate pricing power. Official figures from the Office for National Statistics show that margins in private-sector businesses shrank from 10.7% to 9.6% in the three months to June. Corporate profitability has fallen below pre-pandemic levels. The fall in profitability is attributed to lower government subsidies for businesses’ energy bills. Oil and gas companies also reported falling profitability, with margins down by 3.2%. The ONS highlighted figures from EY showing that 66 profit warnings had been issued in the quarter, the highest since 2020.

FCA tells banks to offer small firms fairer savings rate

The Financial Conduct Authority (FCA) is set to warn banks about exploiting small businesses by offering low interest rates on their deposits. A recent study revealed that small businesses are losing over £7.5bn annually due to deposits sitting in accounts with no interest, and are being offered worse rates compared to larger companies. The FCA believes that small and medium-sized companies should be treated like individual customers and receive fair rates on savings. The regulator has already taken action to pressure banks to pass on interest rate rises to savers. The FCA is expected to provide an update on their assessment of banks’ performance in the coming weeks. The Treasury select committee and the Federation of Small Businesses are also investigating the inequality in the business savings market. Martin McTague, national chairman of the Federation of Small Businesses, stated that small businesses face significant barriers due to high interest rates on loans. UK Finance, the banking trade body, suggests that smaller companies should “shop around” in the competitive deposits market.

Tight labour market feeding inflation, BoE policymakers say

Bank of England policy makers have said the country’s tight labour market is driving a wage-price spiral and unemployment may need to rise to 6% to curb inflationary pressures. BoE rate-setter Jonathan Haskel and chief economist Huw Pill both indicated that the Bank is looking for a much larger loosening in the jobs market to bring inflation under control. Unemployment currently sits at 4.2% and an increase to 6% would imply more than 500,000 job losses and the highest level of joblessness since 2014.

Almost two thirds of UK adults planning to cut back on Christmas spending

Almost two thirds of UK adults are planning to cut back on spending this Christmas, according to research from Accenture. Britons are looking to reduce their spending on presents, on eating out, and on food and drink at home due to worries about the cost of living. The survey also found that more than half of UK adults were not planning to take advantage of discounts on Black Friday, Cyber Monday, or Boxing Day. Surveys published last month by Deloitte and PwC were more optimistic, with both saying about one third of Britons planned to spend less this Christmas.

Rising number of people choose to work remotely

Mainstream workers are joining the ranks of digital nomads as more countries offer visas for remote work. With over 50 countries now providing digital nomad visas, the ability to work from anywhere has become an attractive option, especially with the rising cost of living in the UK. The number of digital nomads globally is expected to reach 40m this year and 60m by 2030. While the visa schemes vary in terms of eligibility and restrictions, the demographic of digital nomads has expanded beyond the tech industry to include professionals such as lawyers and accountants. Digital nomads often seek out long-term stays in one location to establish roots and better understand the local culture. However, digital nomads should be aware of tax implications and ensure they have the right to work in their chosen country, says Morag Ofili, a managing associate at the law firm Harbottle & Lewis.

Nearly a quarter of UK employees considering freelancing

Nearly a quarter of Britain’s full-time employees are considering switching to contracting or becoming freelancers, according to small business services provider Workwell. The research from Workwell and independent professionals trade group IPSE also found that almost 20% could make the switch within the next year. The attraction for 55% of employees is more flexibility over how, when, and where they work, while 45% want to be their own boss. One in five employees want to go freelance to make more money, and 30% want to become independent contractors because they do not like their current workplace. Chris Mollan, head of accountancy services at Workwell, said that the motivation to switch is more about having increased flexibility and being your own boss than earning more.

Self-employed warned over sleepwalking to tax bill shocks

Tax experts warn that many self-employed people are “sleepwalking” into giant tax bills due to a little-publicised change – designed to prevent double taxation – to the way businesses report their profits. From 2024, business will be taxed on profits calculated for the tax year, which ends on April 5. Previously, businesses reported profits according to their accounting year end date, which could differ from the tax year end. HMRC says the new rules will make reporting profits “simpler, fairer and more transparent” but an estimated 528,000 sole traders and partners have business accounting year ends that do not match the tax year. Due to a “transition period” in the 2023-24 tax year people with an April 30 year-end will pay tax on up to 23 months of profit. “It’s a very serious tax grab and people are not aware of it,” said Guy Sterling, a tax partner with Moore Kingston Smith. “This is legislation that’s already in place. People will be sleepwalking into large tax bills.” Chris Etherington, of the tax firm RSM, said the rules “are still not widely understood” but noted those impacted will be allowed to spread the extra tax due in January 2025 over five years or elect to “accelerate” the tax charge in one year. But Emma Rawson of the Association of Taxation Technicians said: “Even if you claim the relief, you’re still paying a higher tax bill despite the fact you haven’t made more money. That’s going to be uncomfortable for a lot of people, especially in the current economic climate.”

Conservatives no longer the party of the self-employed

The number of self-employed workers in the UK has reached its lowest level in a decade, with over 700,000 freelancers leaving the workforce since the end of 2019. The pandemic, gaps in government Covid support, and tax hikes have all contributed to the decline. Reforms to the off-payroll working rules (IR35) have also added stress and bureaucracy for entrepreneurs, costing them £1.5bn annually in tax. Mike Warburton, former tax director at Grant Thornton, said the rules have since “become a blight on contractors and, along with inheritance tax, arguably our most hated tax”. Andrew Chamberlain, of the Association of Independent Professionals and the Self-Employed, said the figures from the Office for National Statistics were shocking. He said: “We might have expected, as we go through 2023, to see self-employment bounce back. But that hasn’t happened.”

Crisis in local government as councils fail to publish audited accounts

The “early warning” system designed to spot councils in serious financial difficulty is in crisis, with hundreds of English local authorities failing to meet the legal deadline to publish audited accounts covering £100bn of public spending. The vast majority – 99% of English councils – did not have their 2022-23 accounts signed off by the deadline this year, which experts say increases the risk of financial irregularities and risky behaviours going undetected. Overall more than 900 sets of accounts for councils and other public bodies going back to 2017 remain unaudited. Ministers are considering an amnesty whereby incomplete past audits would in effect be cancelled to clear the backlog. Ten public bodies – including Slough council, which declared itself effective bankrupt in 2021 – have not had their accounts audited for five years. “This lack of scrutiny of councils’ finances removes any early warning system for local authorities in financial difficulty. The implications for public services do not bear thinking about at both the local and national level, and for the lives of people who depend on them,” said Dame Meg Hillier, chair of the commons public accounts committee.

Stocks and bonds rally on rate hopes

New data from the US showing lower-than-expected labour market growth spurred global markets on Friday as investors bet the Federal Reserve had finished raising rates in the current cycle. Michael Feroli at JPMorgan said the jobs report “seemed tailor-made” to match the Fed’s message that the US was on course for a soft economic landing. The Bank of England held rates steady on Thursday, with traders expecting two cuts next year, and markets are also stepping up expectations for interest rate cuts from the European Central Bank. The FTSE 100 rose 1.7% for the week, Europe’s region-wide Stoxx 600 finished the week up 3.2% while the US S&P 500 was up 5.9% on last Friday for its best week since early November 2022.

Berkshire Hathaway

Warren Buffets company is reported to be sitting on a record $157 billion in cash as it struggles to find things it wants to buy.


Tesla is set to build a new model car at its Berlin plant that will cost $25,000


The major move on market sentiment also impacted the US dollar. The pound strengthened against the dollar buying 1.24$ today compared with just below $1.22 last week.

London Skyline

Bloomberg reports that the London Skyline is set to become strikingly different in just 6 years with 11 new towers planned for the city, with the tallest to be highest in the square mile. The construction work has puzzled some with office vacancies already standing at 8.5%.

LSE on track to lose dozens of £100m-plus firms this year

Analysts at Peel Hunt says as many as thirty companies worth £100m-plus are set to leave the UK’s public markets this year. Thirteen firms have announced and completed a takeover so far this year while seventeen more takeovers or delistings have been announced and are awaiting completion. Meanwhile, a slew of small-caps under the £100m threshold have also either gone private, gone bust or announced plans to delist. The scale of takeovers and delistings demonstrates the challenge facing London Stock Exchange bosses, City regulators and politicians to turn around the capital’s flagship bourse, City AM says.

UK and Germany sign energy partnership

Germany and the UK are to build a new power cable outside Scotland that would also allow for the transfer of offshore wind power. The two countries are so far cooperating on two other cross-border projects but those power lines won’t connect wind farms like so-called multi-purpose interconnectors do. The UK aims to have 18 gigawatts of interconnectors by 2030, more than double its current capacity. The collaboration on subsea cables comes as the two countries sign a new energy & climate partnership.

Offshore production licences to be awarded annually

Licences for oil and gas projects in the North Sea are set to be awarded annually, under government plans. There is currently no fixed period between licensing rounds – but this would change under a bill to be announced in Tuesday’s King’s Speech. Ministers said projects would have to meet net zero targets and claimed the policy would guarantee energy security. However, Greenpeace said oil and gas exploration was “backward-facing” and vowed to fight new licences in court.

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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 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 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!

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.