Business news 6 November 2024
‘Insolvency avoidance scheme’ still active. Markets react to Trump win. Service sector growth stalls. Economists: Rate cut is coming. Treasury should have disclosed overspend, says OBR & more business news that we thought would interest our members.
James Salmon, Operations Director.
‘Insolvency avoidance scheme’ still active
A scheme that has helped the directors of more than 1,000 struggling companies drop debts is still running, despite Insolvency Service (IS) attempts to shut it down. Officials say a group called Atherton encourages directors battling with company debts to “sell their businesses and avoid liquidation” via a scheme that enables people running struggling companies to distance themselves from a failure. Tax Policy Associates analysis suggests that directors have passed on tens of millions of pounds in debt to Atherton, including money owed to HMRC. The IS closed seven companies that were part of a group that allegedly “deliberately undermined the insolvency regime.”
Markets react to Trump win
Yesterday, the FTSE 100 closed down 0.11% at 8175.63 and the Euro Stoxx 50 closed up 0.39% at 4870.88. Overnight in the US the S&P 500 rose 1.23% to 5782.76 and the NASDAQ rose 1.43% to 18439.17.
With Trump looking like he has won the presidency, markets are up with US stock futures rallying, US Treasury yields jumping and the dollar surging the most since March 2020.
This morning on currencies, the pound is currently worth $1.289 and €1.199. On Commodities, Oil (Brent) is at $74.65 & Gold is at $2723. On the stock markets, the FTSE 100 is currently up 1.33% at 8280 and the Eurostoxx 50 is up 0.8% at 4909.
Service sector growth stalls
Output from Britain’s service industries expanded at its slowest rate in nearly a year last month, with the S&P Global/Chartered Institute of Procurement and Supply final purchasing managers’ index for the £1.7trn sector dropping from 52.4 to 52.0 in October on an index where a reading above 50 points to growth. Tim Moore, economics director at S&P Global Market Intelligence, attributed the slowdown to “heightened business uncertainty” ahead of the Budget, adding that the “wait for clarity” on government policy ahead of the Budget “was widely reported to have weighed on business confidence and spending.” Elliott Jordan-Doak, senior UK economist at Pantheon Macroeconomics, said the slowdown would give the Bank of England’s monetary policy committee “further confidence” to cut interest rates, while Matt Swannell, chief economic adviser to the EY Item Club, said the data was not “a major cause for concern.”
Meanwhile US Services unexpectedly accelerated in October to a more-than two-year high, and employment strengthened, more evidence that the economy is in solid shape as the nation heads to the polls to pick the next president.The Institute for Supply Management (ISM) said on Tuesday that its non-manufacturing purchasing managers (PMI) index accelerated to 56.0 last month from 54.9 the prior month. It was the highest level since August 2022.
Economists: Rate cut is coming
Analysts expect the Bank of England to cut interest rates this week, with the Bank’s Monetary Policy Committee (MPC) forecast to reduce the benchmark rate from 5% to 4.75%. This would take the base rate to its lowest level since June 2023. Paul Heywood, chief data & analytics officer at credit agency Equifax UK, said: “With inflation below target, a further base rate cut remains the most likely scenario, but consumer affordability pressures won’t disappear overnight and could yet persist for longer.” Looking further ahead, Thomas Pugh, an economist at RSM UK, said: “The big stimulus coming from the Budget, combined with higher employment costs, means inflation will be materially higher in 2025 and 2026, so a December rate cut now looks very unlikely.”
Treasury should have disclosed overspend, says OBR
Richard Hughes, chair of the Office for Budget Responsibility (OBR), says the Treasury should have disclosed a £9.5bn overspend in the public finances ahead of the previous government’s final Budget. He told the Treasury Committee that there were questions to be answered as to why the information was not provided to the spending watchdog. Asked whether the Treasury broke the law over not disclosing an overspend, Mr Hughes said there may “have been a misunderstanding of how the law ought to be interpreted.” Committee chair Meg Hillier said: “The Treasury may have even broken the law … in not disclosing all the spending information.”
OBR: Workers harder hit by NI rise than employers
The Office for Budget Responsibility (OBR) says workers will take most of the hit from an increase to employers’ National Insurance (NI) contributions announced in the Budget. The OBR has calculated that three quarters of the impact will be felt by employees, with employers likely to hold back on pay rises and hiring due to the increase in wage bills. The OBR’s Prof David Miles told the Treasury Select Committee it was “very plausible” that low-paid workers would be disproportionately affected. As of April, employers will pay NI at a rate of 15% on salaries above £5,000, up from 13.8% on salaries above £9,100. James Smith, research director at the Resolution Foundation think-tank, has warned that these changes are “definitely a tax on working people.”
IHT raid will hit family businesses
Industry leaders have voiced concern over changes to inheritance tax, saying measures set out in the Budget could prompt a wave of closures and job losses and have a negative affect on up to 140,000 family-owned businesses. The Budget introduced a £1m cap on tax-free business property relief, significantly reducing the benefits for entrepreneurs passing their firms to their children. Sir James Wates, chairman of Family Business UK, labelled the changes as “economic illiteracy,” warning that they could lead to closures and job losses. He said: “In the real world businesses will shrink.” Analysis carried out by CBI Economics earlier this year found that completely scrapping tax relief for passing on businesses would have led to £29bn of damage and 391,000 job losses. While the impact of the changes delivered in last week’s Budget will be less severe, experts have warned that the £1m cap will only protect the smallest of companies.
Tax rises will hinder investment
Business leaders across the hospitality sector have reportedly warned the Government that the tax rises announced in the Budget will drive up costs and lead to a fall in investment. Morrisons’ chief executive Rami Baitieh has told Business Secretary Jonathan Reynolds that the Budget has exacerbated “an avalanche of costs,” while Kate Nicholls, chief executive of UKHospitality, said “rising taxes, increasing costs and fragile consumer confidence risk bringing growth to a grinding halt.” Rain Newton-Smith, chief executive of the Confederation of British Industry, said a hike in NI contributions, “alongside other increases to the employer cost base,” will “increase the burden on business and hit the ability to invest and ultimately make it more expensive to hire people or give pay rises.”
Primark owner fears tax hike impact
Primark owner Associated British Foods (ABF) says it may look to invest more outside the UK over fears that retailers will be hit by tax rises set out in the Budget. George Weston, chief executive of ABF, said changes including an increase in employers’ National Insurance contributions would see his firm’s wage bill “go up by tens of millions.” He added: “It’s quite clear to me that this a Budget where the weight of the tax rises are falling on business – within that, it’s fallen particularly on the high street.”
Farmers plan IHT protest
Farmers are planning a strike to disrupt the food supply chain in response to a proposed 20% inheritance tax on farms worth more than £1m.
Stamp duty bill could jump 148%
Home buyers in England are facing a 148% increase in their stamp duty bills. By 2029, the average stamp duty bill is projected to rise from £2,979 to £7,391, according to Hamptons. The nil-rate threshold will increase from £125,000 to £250,000, while landlords and second-home buyers will see their bills surge from £12,266 to £24,781. The Treasury’s revenue from property taxation is expected to double from £12.8bn in 2023/24 to £25.4bn in 2029/30, according to the Office for Budget Responsibility. Lucian Cook, head of residential research at Savills, says stamp duty has become “something of a cash cow” for the Treasury, adding that the tax has a “stealth nature.” The Office for Budget Responsibility expects house prices to rise by 0.9% next year, 2.1% in 2026, 2.8% in 2027 and 3% in both 2028 and 2029, with these price increases dragging more buyers into higher tax bands.
Landlords undeterred by stamp duty increase
With the Budget seeing stamp duty increased to 5%, estate agent Benham and Reeves has polled landlords to gauge the impact of the move on the sector. While 47% of those who were planning to expand their portfolios said the 2% increase may see them pull back on their plans to some degree, the remaining 53% intend to push on as planned. Before the Budget, 19% of landlords paused buy-to-let investments due to uncertainty around potential hikes in capital gains tax, with 22% saying they would have reduced their portfolios if the Chancellor announced an increase. With no change in residential property thresholds for CGT announced in the Budget, 84% say they plan to maintain their portfolios over the next year.
Netflix offices raided in tax fraud probe
Netflix’s offices in Paris and Amsterdam have been raided by police as part of an investigation into tax fraud. France’s National Financial Prosecutor, a special unit dedicated to high-profile white-collar crime, said the investigation relates to suspicions of “covering up serious tax fraud and off-the-books work.” The company is also under investigation over tax filings for 2019, 2020 and 2021.
Marks & Spencers
Marks & Spencers has released its half-year results, with pretax profit up 20% to £391.9 million from £325.6 million the year before. Revenue rose 5.7% to £6.48 billion from £6.13 billion. Marks & Spencer said trading for the second half is on track and it expects to make further progress in the rest of 2024, although it expects the currently uncertain environment with elevated cost inflation to persist.
JD Wetherspoon
JD Wetherspoon forecasts that annual taxes and business costs will increase by around £60 million, including a dramatic 67% increase in National Insurance Contributions. The industry immediately called out Labour Chancellor Rachel Reeves’ high-tax Budget, with trade body UKHospitality calling it “the latest blow for hospitality businesses”.
Wooden satellite
Japan launched the world’s first wooden satellite as part of a study exploring whether timber could be used as a renewable building material in future space exploration. LignoSat weighs just 900g and arrived at the International Space Station, from where it will be released into orbit. It is set to burn up on re-entry.
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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.