Business news 7 May 2024
Poor April weather blamed for drop in sales. BoE expected to keep rates on hold. London must work hard to keep top talent spot. Ofwat, Sick note Britain, automation, sustainability, markets, housing, tax, insolvencies & more business news that we thought would interest our members.
James Salmon, Operations Director.
Poor April weather blamed for drop in sales
Dismal weather and an early Easter bank holiday have been blamed for falling retail sales in April. The 4% drop in sales compared with the same period last year was made worse by the early timing of Easter, which previously pushed March sales unusually high. Food sales rose 4.4% year-on-year, while non-food sales fell 2.8% for the same period. Linda Ellett, head of consumer, retail and leisure at KPMG, said: “The positive sales figures seen in March due to an early Easter demonstrate the importance that triggers such as warmer weather, events and occasions can have in helping to deliver the necessary impact required to get consumers spending again.” Helen Dickinson, head of the British Retail Consortium, added: “Many retailers are hoping for brighter sales over the summer months as social events ramp up.”
BoE expected to keep rates on hold
The Bank of England is expected to keep interest rates on hold for a ninth consecutive month on Thursday. Economists predict a majority of the monetary policy committee (MPC) will vote for no change at 5.25%. The committee is divided on when to cut borrowing costs. There was speculation on June and August as the possible start of monetary easing after consumer price inflation fell to 3.2% in March. Traders are now forecasting that inflation will drop to 2% next month and remain at the target level for most of the year, likely paving the way for a summer rate cut.
London must work hard to keep top talent spot
London has been ranked as the most attractive city for talent worldwide, according to a report by Boston Consulting Group. The city’s reputation as a financial powerhouse, cultural hub, and home to exciting businesses continues to draw workers from around the world. However, challenges lie ahead for London to maintain its top position, including competition from other financial centres and the need to ensure regional cities thrive. The report stresses the importance of access to talent, both from abroad and within the UK, as well as the need for reskilling and upskilling programs. London must strive for consistent excellence and bold ambition to retain its status as a global capital.
Ofwat underestimates water companies’ debt levels
Water companies in the UK are facing a financial crisis due to their high levels of debt, which experts say are much higher than officially reported. Ofwat’s measure masks the true scale of the problem, according to David Hall at the University of Greenwich who explains that Thames Water for example, appears to have a relatively low level of debt at 80%, but using traditional accounting methods, its debt level would be over 1,000%. Using standard methods of accounting, the debt levels for all ten water and sewage monopolies would be almost 460%, compared with the Ofwat average of just 68%, Hall claims.
Ministers roll out new service to ‘fix sick note Britain’
Sweeping reforms have been announced by the Government to address the issue of people opting out of work due to sickness. From October, 60,000 individuals will receive personalised support to help them re-enter the workforce. The WorkWell scheme aims to tackle economic inactivity and reduce the burden on taxpayers and the NHS. The UK currently has 9.3m economically inactive individuals, with 2.8m off work due to long-term sickness. The scheme will provide support in areas where a high number of fit notes were issued, including physiotherapy and counselling. It is voluntary and offers sessions with professionals to address health needs and provide workplace support. Work and Pensions Secretary Mel Stride said: “Too many today are falling out of work in a spiral of sickness that harms their finances, their prospects and ultimately their health, where with the right workplace adjustments and help, this need not be the case.”
Minimum wage rise driving automation
April’s 9.8% increase in the minimum wage is already being reflected in hiring patterns leading to employers cutting back hours and hiring fewer people to cope with the rise. James Reed, chief executive of Reed, said: “We have seen some employers changing their behaviour. They might be taking on people for shorter periods or fewer hours or fewer of them because of the increasing cost.” The mandatory pay increase is particularly acute for large employers and has led to an increase in companies looking for ways to automate processes using artificial intelligence. Mr Reed explained: “A lot of the early gains that they are beginning to experience are in processes that might have been done by people and are being replaced by machines. You see that in accounting and IT. A lot of code is now just being written by AI.”
ArcelorMittal warns that one of its main divisions could quit UK
ArcelorMittal has written to Michael Gove, the levelling-up secretary, warning that the closure and subsequent redevelopment of a part of Chatham Docks in Kent could force the company to remove one of its largest divisions from the UK. Matthew Brooks, who runs ArcelorMittal’s construction solutions arm in the UK, said other businesses at the Docks would also be forced to leave. “This would have a significant impact on Britain’s manufacturing and construction industries, delay countless critical national infrastructure projects, come at a significant cost to the economy, and leave Britain vulnerable and exposed to the volatility of international supply chain shocks,” Brooks warned.
Eight in 10 businesses plan to continue with sustainability initiatives
A recent study has found that 80% of businesses are planning to increase or maintain their investment in sustainability initiatives over the next two years. The study, which surveyed 1,400 bosses, revealed that tree planting and renewable energy projects are among the top priorities for funding. The research also highlighted that sustainability is a core business strategy for 76% of the polled businesses. However, only 37% of businesses have started measuring their carbon footprint in the last year, and 60% have set environmental and sustainability targets. Financial restraints, lack of governmental support, and limited time availability are the main barriers organisations face.
UK space SMEs need help to go interstellar
The UK’s space industry has the potential to go interstellar, according to Air Marshal Andrew Turner, co-Founder Space4Sight. With the right incentives and regulatory environment, the industry can contribute significantly to the UK’s GDP. The space sector, which could be worth $1tn by 2030, offers immense opportunities for growth. However, few of the 2000 space SMEs in the UK have managed to scale beyond Series B funding. To unlock the benefits of the space industry, the Government needs to implement investor-friendly policies, a national space strategy, and tax policies that attract and retain space talent, says Turner.
Global trade growth set to more than double this year
The OECD, IMF and World Trade Organization are all predicting a sharp rebound in global flows of products this year as inflation eases and a booming US economy helps to drive activity.
Markets
Beating earning forecasts in the S&P 500 may no longer be enough to keep the stock rally going. Profit outlooks are taking focus. With more than 400 members of the S&P 500 Index having reported earnings this season, 79% of them have beaten profit expectations. However, the median stock outperformed the index by less than 0.1% after their announcement, the smallest margin since late 2020. Investors are still nervous about the future and doubt even earning beaters can continue to out-deliver.
Overnight in the US the S&P 500 rose1..03% to 5180.74, the Nasdaq rose 1.19% to 16349.25. The pound is currently worth $1.2542 and €1.1657. Brent is at $83.50, Gold is at $2315. The FTSE 100 is up 1.09% at 8302.7 and the Eurostoxx 50 is up .62% at 4988.
AIM liquidity plunges as investors turn to US
London’s junior market, the Alternative Investment Market (AIM), has experienced a significant decline in liquidity as investors increasingly turn to the US, wrote Emily Hawkins in the Mail yesterday. The average value of daily trading of AIM shares has fallen by 15.4%, with average liquidity dropping to £248,990 for the year to February. This decline is attributed to British investors trading in stocks listed elsewhere, such as tech stocks like Nvidia. The decrease in liquidity raises concerns about the attractiveness of UK stock markets, as more companies give up their listings on AIM and choose overseas listings. Colin Wright from UHY Hacker Young suggests that more needs to be done to maintain the appeal of UK stock markets for trading and investing. At the end of March, the number of companies listed on AIM had fallen to 738, compared to 1,700 in 2007.
New homes could plummet in number
The number of new homes being built in England is predicted to drop to 160,000 this year, down from an annual average of 210,000 over the last five years. Higher borrowing costs are cited as the main reason for the decline. Without a change in policy, completion rates are expected to remain low until at least 2030. Both the current government and the Labour opposition have pledged to build 300,000 homes a year, but experts warn that urgent action is needed to meet this target. The decline in homebuilding is attributed to the planning system, higher building costs, and weaker sales due to elevated mortgage rates. The Home Builders Federation calls for more help to buyers, highlighting the lack of affordable mortgage availability.
A resurgent economy set to fuel house price boom
UK property prices are expected to rise by at least 20% in the coming years, according to new analysis. The upbeat assessment by real estate giant Savills predicts that average house prices could reach £346,500 by 2028. Falling inflation, anticipated interest rate cuts, and the resilience of the housing market are contributing to the positive outlook. Savills revised its forecast for property values, now expecting a 21.6% increase by the end of 2028. The North West is predicted to see the highest growth at 28.8%, followed by Yorkshire and the Humber at 28.2% and Wales at 26.4%. The analysis is based on data from Oxford Economics and Nationwide Building Society.
EU prepared to protect industry from Chinese imports
The EU remains prepared to launch a trade war with China over imports of cheap electric cars, steel and cheap solar and wind technology, Ursula von der Leyen, the head of the European Commission has said. After a meeting with the Chinese president, Xi Jinping, on his tour of Europe, von der Leyen said the “imbalances” caused by state support for Chinese industry were “a matter of great concern” and that Europe “will not waver from making tough decisions needed to protect its economy and security.”
Qantas
Australia’s biggest airline agreed to pay a $66m penalty to settle a lawsuit over claims that it sold thousands of tickets for flights that were already cancelled. The firm will also pay up to $13.2m to compensate affected customers. Last week Qantas said it was investigating a privacy breach on its mobile-phone app.
BP
BP reported a fall in first-quarter profit, with results coming in below analyst expectations amid a “significantly weaker” margin in fuels and lower gas and oil prices. The British energy giant logged underlying replacement cost profit, used as a proxy for net profit, of $2.7 billion. That was down from $3 billion the previous quarter and compared with an estimate in an LSEG-compiled consensus of $2.9 billion. The results reflect lower oil and gas realizations and a “significantly weaker” fuels margin, the company said in its Tuesday statement.
Tax burden set to reach 80-year high by 2028
The tax burden in the UK is projected to reach an 80-year high of 37.1% by 2028, according to analysis by the TaxPayers’ Alliance. Despite a slight drop in 2024, taxpayers will face an increasing burden every year. The current Government is set to become the biggest tax-raiser in history, with a rise of 3.3% since 2019. The CEO of the TaxPayers’ Alliance warns that an 80-year high tax burden will have a negative impact on taxpayers and businesses, suffocating the economy. The Institute for Fiscal Studies suggests that the average worker will be £340 better off next year, but those earning below £26,000 will be worse off.
Braverman: Only tax cuts and a cap on migration can save Tories
Suella Braverman has warned that unless Rishi Sunak cuts taxes, caps legal migration and pulls Britain out of the European Convention on Human Rights the Conservatives will be lucky to have any MPs left after the next election. The former Home Secretary told the BBC she was in despair at the local election results and that she regretted backing Sunak to be Prime Minister. However, she conceded it was too late to change leader. But Transport Secretary Mark Harper insisted that his close ally Mr Sunak would stick with his agenda, he wouldn’t swerve right and the next election is not preordained.
Taxpayers hit by allowance freeze and inflation
Capital gains tax used to be indexed to inflation, writes Charlotte Gifford in the Telegraph, but that was scrapped by Labour in 1998. Now, with rampant inflation and severe cuts to the annual exemption investors and landlords risk paying tax on their losses as well as their profits. With CPI increasing by 21% over the last three years the average 10% gain on a property over that period turns into an 11% loss post-inflation. Jason Hollands, of stockbroker Bestinvest, said: “While the effect of the removal of inflation-adjusting capital gains has gone largely unnoticed due to low inflation, the inflationary surge that began in 2021 has had a major impact when coinciding with aggressive cuts to capital gains tax exemptions.” The latest figures show that a record 394,000 taxpayers forked out £16.7bn in capital gains tax in 2021-22, a higher sum than in any year previously.
Latest Insolvencies
Appointment of Administrator – LODGE COTTRELL LTD.
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Appointment of Liquidators – KETTERING CAPITAL LIMITED
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Appointment of Liquidators – PEMBERTON IT LIMITED
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Appointment of Liquidators – BCR RESTAURANTS LIMITED
Appointment of Liquidators – JAMES LIPMAN LTD
Appointment of Liquidators – INTEGRATED IT CONSULTANCY LTD
Appointment of Liquidators – REDSTONE MORTGAGES LIMITED
Petitions to wind up (Companies) – RACKIT LTD
Appointment of Liquidators – PACE ENGINEERING & CONSTRUCTION LIMITED
Appointment of Liquidators – DERBY CEILINGS & INTERIORS LIMITED
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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!
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.