Business news 6 December 2024
Over half of UK firms plan to raise prices. PM redefines economic growth goals in policy reset. UK start-ups thrive despite challenges, markets, insolvencies & more business news that we thought would interest our members.
James Salmon, Operations Director.
Over half of UK firms plan to raise prices
According to a survey by the Bank of England, over half of UK firms anticipate raising prices due to Labour’s recent National Insurance hike. Specifically, 54% of firms expect to increase prices, while 38% plan to reduce employee wages and 54% foresee a decrease in employment levels. Chancellor Rachel Reeves’ Budget raised the employers’ NICs rate to 15% and lowered the payment threshold. Michael Saunders, a former member of the Bank’s interest rate-setting Monetary Policy Committee (MPC), said that however the effects of the tax hike are spread, the result is the policy is reducing real activity. He predicts a cut to interest rates to boost a flagging economy early next year. Meanwhile, the British Chambers of Commerce (BCC) has revised its growth forecast for the UK economy from 1.1% to 0.8%, attributing this downturn to the Chancellor’s tax raids. Vicky Pryce from the BCC stated that businesses are “licking their wounds as the fallout from the tough autumn Budget continues.”
PM redefines economic growth goals in policy reset
The Prime Minister has unveiled a new blueprint for his Labour Government as the economy struggles following the Chancellor’s crippling Budget. Sir Keir Starmer made promises on energy supply, house building and NHS waiting lists as well as plotting targets for public sector reform. But key election pledges were watered down, namely a promise to secure the highest economic growth in the G7 – this has now become an “aim – and securing clean energy by 2030. In the PM’s the Plan For Change, this promise has now become “putting us on track to at least 95% clean power by 2030” Sir Keir also announced a new promise: to increase GDP per person and real household disposable income before the next general election – something every parliament since the WWII has achieved. Tom Waters, of the Institute for Fiscal Studies, said: “A target of merely having incomes higher after five years than they are now is very unambitious.”
UK start-ups thrive despite challenges
Despite concerns surrounding the UK’s start-up ecosystem, Ashish Patel, managing director at Houlihan Lokey’s Capital Market Group, asserts that international investment is on the rise. He highlights significant funding successes, such as Wayve’s $1bn raise for self-driving cars and Monzo’s $430m funding round. Patel states: “Following the global investment declines of 2022, investment in UK-based businesses is picking up.” The British Venture Capital Association’s 2023 report reveals that US investors contribute 33.8% of capital to UK start-ups, with increasing interest from the Middle East. However, Michael Moore, BVCA chief executive, warns that UK investors may be missing out on returns, as only 40% of capital raised comes from domestic sources. He stresses the need for pension reforms to channel more domestic funding into venture capital, stating: “The lack of capital at the later funding stages is something we need to fix.”
More tax rises loom – ING
Analysts at ING have warned that Chancellor Rachel Reeves will likely need to implement further tax rises during this parliament, despite her previous assurances against additional hikes. In their outlook for 2025, they stated that Reeves’ October Budget is “likely just the beginning” of a series of Budgets marked by tax increases.
One in 4 cars sold in November electric
One in four cars sold in the UK last month was electric, according to industry figures, but new registrations were driven by steep discounting. Electric car sales grew in November for the 11th consecutive month, according to the Society of Motor Manufacturers and Traders (SMMT) as carmakers raced to meet tough targets. SMMT chief executive Mike Hawes said manufacturers were investing in electric vehicles “at unprecedented levels” and “spending billions on compelling offers”. Sales of new petrol cars fell by more than 17%, diesel cars fell by more than 10%, while hybrids and plug-in hybrids dropped by more than 3% and 1% respectively.
HMRC weighs challenge to Gupta’s restructuring plans
Sanjeev Gupta’s plans to restructure his Speciality Steels UK division are facing opposition from HMRC, which is considering voting against the court-led restructuring. The tax authority is in discussions with Gupta’s Liberty Steel regarding a proposal that could see HMRC forfeit up to 80% of the £170m owed. The restructuring hearing has been postponed to allow further negotiations with creditors, and a vote on the plan is not expected until next year. Despite these challenges, the restructuring is not anticipated to affect the 1,500 employees at Speciality Steels UK.
Markets
Yesterday, the FTSE 100 closed up 0.16% at 8349.38 and the Euro Stoxx 50 closed up 0.66% at 4951.58. Overnight in the US stocks bucked the tech rally and the S&P 500 fell 0.19% to 6075.11 and the NASDAQ fell 0.17% to 19700.72. Markets are focused on the crucial US monthly jobs report, which is scheduled for release later today.
This morning on currencies, the pound is currently worth $1.276 and €1.2063. On Commodities, Oil (Brent) is at $71.77 & Gold is at $2643. On the stock markets, the FTSE 100 is currently flat at 8349 and the Eurostoxx 50 is up 0.39% at 4970.85.
Direct Line & Aviva
Aviva has offered to buy the Car Insurer for 275p a share – a 73% premium on the price pre-offer (its since risen to just 16.5% less than the offer).
Housebuilding struggles amid high costs
Activity in Britain’s housebuilding sector has continued to decline, primarily due to high borrowing costs and weak consumer confidence. The S&P Global/CIPS UK Purchasing Managers’ Index for construction rose slightly to 55.2, up from 54.3 in October, but residential housebuilding faced its steepest decline since June. Tim Moore, economics director at S&P Global Market Intelligence, noted that “the high cost of borrowing continued to hit new orders.” While commercial construction saw robust growth, overall confidence in the sector is at its lowest since October 2023. Concerns over rising employment costs and national insurance contributions announced by Rachel Reeves are further dampening optimism.
Thames Water
Covalis Capital has £5 billion to take over the cash strapped Thames Water. The infrastructure funds offer includes plans to review the business, potentially sell assets and then list the restructured firm on the stock exchange.
OPEC+
OPEC+ postponed its planned increase in output until April 2025. Since 2022 the cartel has been cutting production in an attempt to maintain oil prices, where they have been at around $70-80 per barrel since the start of the year.
Shell and Equinor combine North Sea assets
Britain’s oil industry is now in decline following repeated tax raids on the sector, a natural decline in output and pressure from climate campaigners, according to Shell. As a result, the oil and gas giant plans a significant overhaul of its North Sea assets, beginning with a deal to combine resources in the area with Norwegian rival Equinor. “With the once prolific basin now maturing and production naturally declining, the combination of portfolios and expertise will allow continued economic recovery of this vital UK resource,” Shell said.
House prices
UK House Prices have hit a new record high after climbing at the fastest pace in two years during the year to November. According to Halifax, the typical house now costs £298,083, after prices increased by 4.8% over the year to November for the largest uptick since the same month in 2022. Month on month, prices ticked up by 1.3%, marking the fifth consecutive positive reading.
Prime property market faces downturn
The October Budget is set to negatively impact the UK’s prime property market, with a forecasted decline of 4% in the value of prime central London homes. According to Savills, changes in stamp duty for second homes, VAT on school fees, and non-dom reforms introduced by Chancellor Rachel Reeves will hinder the upper end of London’s property market. Lucian Cook, Savills’ head of residential research, stated: “In a normal housing market recovery, you would expect the top-end of the market to recover first.” However, the new tax measures are expected to dampen demand, particularly for homes valued over £4.5m. While the mainstream property market is anticipated to grow by 4% next year, the prime market is expected to lag, with predictions of a 9.8% growth in the next five years
Investing in environment could push up IHT
The Government is urging farmers to invest in environmental schemes, but this could inadvertently increase their land value and trigger inheritance tax liabilities just as the levy increases. Farmers, including Martin Lines, chief executive of the Natural Friendly Farming Network, have expressed concern over this “catch-22” situation, stating: “They are now caught between investing in long-term sustainability or holding back on improvements to avoid triggering future tax liabilities.” Meanwhile, ministers have defended the decision to hike inheritance tax on farming estates after a petition signed by more than 130,000 called for the Government to retain IHT relief for working farms.
More taxpayers fall victim to 60% tax trap
Figures from HMRC reveal that an additional 100,000 workers have been dragged into a ‘60% tax trap’ in the past year. The tax trap applies when the personal allowance, which is £12,570 for the 2024/25 tax year, begins to fall because the worker earns £100,000. Mark Incledon, chief executive of wealth manager Bowmore Financial Planning, which obtained the figures, said: “It’s very surprising the Government chose to not address this in the latest Budget – the effective tax rate for those earning £100k-125k is known by Treasury officials but they’ve chosen not to address it. Rather than trying to fix the problem, the Government has allowed it to get bigger.”
IHT on pensions unworkable
The Government’s proposal to impose inheritance tax on pensions has been deemed unworkable and costly by Michael Summersgill, chief executive of AJ Bell. He stated: “It is arguably the most complex and costly way of raising tax from pensions on death,” criticising Rachel Reeves for not consulting the industry prior to the announcement. Summersgill suggested that a simpler approach would be to impose income tax on beneficiaries at their highest marginal rate. He also highlighted the complications in valuing pension pots for probate, especially with reforms encouraging investments in illiquid assets. The Treasury estimates that this reform will generate £640m in 2027-28, rising to £1.46bn by 2029-30.
People with disabilities face harassment at work
According to a recent report by Deloitte, 40% of individuals with disabilities and chronic health conditions have experienced bullying and harassment at work. The study highlights that 23% of respondents felt their competence was questioned, while 24% were overlooked for promotions. In the UK, only about 50% of disabled individuals are employed, compared to 81% of non-disabled individuals. Louise Rubin from Scope stated: “Employers are missing out on a massive pool of talent,” emphasising the need for businesses to adopt inclusive practices. ActionAble 2025, led by Sara Weller, advocates for actionable steps towards diversity, urging firms to report on disability inclusion goals. Jackie Henry from Deloitte stressed the importance of addressing barriers to foster a supportive work environment.
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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.