Business news 7 November 2024
BoE poised to cut rates. Money stress cripples workforce performance. Trump tariffs leave Chancellor in a tight spot. Chancellor promises not to increase taxes again in spring budget Markets, insolvencies & more business news that we thought would interest our members.
James Salmon, Operations Director.
BoE poised to cut rates
The Bank of England is expected to cut interest rates for the second time this year to 4.75% today. Analysts at Nomura said: “We expect that the decision to cut interest rates this time will not be a close one.” They explained: “With domestically generated inflation having eased and pay growth also slower, the Bank finds itself with room to cut rates.” Meanwhile, investors also expect the Fed to cut interest rates by 25 basis points, despite the potential inflationary impact of a second Trump presidency.
Money stress cripples workforce performance
According to a survey conducted by FinancialEducation.co.uk, nearly half of workers (48%) report that financial stress negatively impacts their job performance. The survey revealed that over 61% of employees have taken time off work due to financial issues, with many suffering from mental health problems. Saq Hussain, founder of FinancialEducation and strategic adviser to EY Parthenon, stated: “The cost of living puts immense pressure on people, and for many, this spills over into their work lives.” He stressed the importance of financial education, suggesting it could help employees manage their finances better and improve their focus at work.
Trump tariffs leave Chancellor in a tight spot
Rachel Reeves has said she will make “strong representations” to the incoming Trump administration amid fears within the Labour Government that tariffs imposed by the US will hurt UK growth. President Trump has pledged to impose 10% tariffs on all products imported into the US and 60% tariffs on imports from China as part of moves to restore US manufacturing. The UK exported £60bn of goods to the US last year and the prospect of tariffs on that has already prompted Goldman Sachs to downgrade UK growth from 1.6% to 1.4% for next year. European growth is also expected to be hit while commodities prices fell slightly yesterday on the expectation of lower growth. The Labour leadership will have to move quickly to get on side with the Trump administration as UK Foreign Secretary David Lammy continues to bring embarrassment over his repeated anti-Trump posts on social media – Lammy called Trump a “woman-hating, neo-Nazi-sympathising sociopath” and a “profound threat to the international order”. Tory leader Kemi Badenoch suggested Sir Keir Starmer apologise while Nigel Farage warned that Britain must “roll out the red carpet” for Mr Trump to repair the damage. Meanwhile, Juliet Samuel points out in the Times that Joe Biden’s green subsidies probably did more damage to UK business that Trump’s tariffs will.
Chancellor promises not to increase taxes again in spring budget
Chancellor Rachel Reeves has committed not to increase taxes at Labour’s next budget, stating: “We’re not going to be coming back with more tax increases, or indeed more borrowing.” She told MPs on the Commons Treasury select committee: “We’ve now set the envelope for spending for this parliament.” Following the announcement of the largest tax rise package in three decades, she stressed the need for the Government to “live within the means” of her spending plans.
Markets
Yesterday, the FTSE 100 closed down 0.07% at 8166.68 and the Euro Stoxx 50 closed down 1.43% at 4800.63 as funds flowed across the pond into US equities and traders digested the effect potential Trump tariffs could have for European companies.
UK housebuilders were among the worst performing stocks in London, falling in sympathy as Persimmon declined after warning on growing costs.
Overnight in the US, markets reacted to the Trump win and Wall Street’s three major stock indices, the Dow Jones, Nasdaq and S&P 500, all closed at record highs on Wednesday. The S&P 500 rose 2.53% to 5929.04 (its best post election day in history) and the NASDAQ rose 2.95% to 18983.46.
Traders are now awaiting the Federal Reserve interest rate decision Thursday afternoon.
This morning on currencies, the pound is currently worth $1.292 and €1.201. On Commodities, Oil (Brent) is at $74.93 & Gold is at $2664. On the stock markets, the FTSE 100 is currently up 0.17% at 8180.5 and the Eurostoxx 50 is up 0.7% at 4834.
M&S profits soar, but costs loom
Marks & Spencer (M&S) has reported a pre-tax profit of £407.8m for the six months ending in October, marking a 17% increase compared to the previous year. This growth was driven by an 8.1% rise in food sales and a 4.7% increase in clothing and homeware. However, M&S chief executive Stuart Machin cautioned that the recent budget measures could lead to an additional £120m in costs next year due to increased employer national insurance contributions (NICs) and a rise in the minimum wage.
Wetherspoons prices set to rise
Tim Martin, the boss of JD Wetherspoon, has warned that pub prices are likely to increase following Labour’s Budget. He attributed the expected rise in costs to the Government’s decision to raise the national minimum wage by 6.7% and increase employers’ national insurance contributions from 13.8% to 15%. The trade body Hospitality UK anticipates that these measures will raise the cost of employing a full-time staff member by £2,500. Despite these challenges, Wetherspoon’s reported a pre-tax profit of £74m for the last financial year and continues to outperform the struggling hospitality sector, with like-for-like sales up by 5.9% in the first 14 weeks of the new financial year.
Risks of cost inflation hit housebuilders
The Chancellor’s plans to increase employer National Insurance contributions as well as regulations around fire safety for new homes will likely drive up costs for Persimmon, the housebuilder has warned, wiping out gains its shares made after the Labour Government was elected. The prospect of rising cost inflation also hit Bellway, Berkeley Group, Taylor Wimpey and Barratt Redrow.
UK Construction hit a 10-month low in October and house-building slowed for the first time since June, according to a survey that underscores the challenge facing the new government that wants to speed up building of homes.The UK Construction Purchasing Managers’ Index slowed to 54.3 last month, below September’s 29-month high of 57.2 – and lower than economists’ average expectation of 55.5 in a Reuters poll.
Persimmon said trading in its third quarter remained in line with full-year expectations, as its net private sales rate grew. The York-based housebuilder said it delivered a net private sales rate per outlet per week of 0.70 for the period between July 1 and November 3, which was up 37% from 0.51 a year before. Excluding bulk sales, the net private sales rate per outlet was up 30% to 0.61 from 0.47. Persimmon’s forward sales position increased 17% to £2.02 billion from £1.73 billion in 2023. Within this, the private forward sales position rose 39% to £1.45 billion from £1.04 billion.
One in four house sales fall through every year
New research reveals that failed house moves are costing buyers and sellers £900m annually, with one in four transactions in England and Wales falling through. The average expenditure before a deal collapses is £3,370, primarily due to buyers struggling to secure mortgages, which accounts for 40% of failures. Other reasons include changes of mind and negotiation breakdowns. The failure rate has increased by 2% compared to last year, although it has decreased by 10% from the same quarter in 2022.
House Prices
UK House Prices edged up to a record high in October, data published by Halifax showed Thursday. The average house price rose by 0.2% monthly to £293,999 in October. It was up 3.9% from a year ago when it stood at £283,053, however the growth was slowed from 4.6% in September. “Despite the affordability challenge, market activity has been improving. The number of new mortgages agreed recently reached its highest level in two years,” said Amanda Bryden, head of Mortgages at Halifax.
British Telecom
BT reported a pretax profit of £967 million for its first half year, down 10% from £1.08 billion last year. Revenue decreased 3% to £10.12 billion from £10.41 billion. The company meanwhile lowered its full-year revenue guidance, now expecting revenue to decline by between 1% and 2% due to weaker non-UK trading, as well as softer Corporate and Public Sector markets. It confirmed expectations of £8.25 billion in adjusted Ebitda, which for the first half rose 1% on-year to £4.13 billion from £4.09 billion.
Rolls-Royce
Rolls-Royce has doubled down on guidance despite ongoing supply chain issues as demand across the defence and civil aerospace sectors remains strong. Full-year guidance for operating profit of £2.1 billion to £2.3 billion and free cash flow between £2.1 billion and £2.2 billion was reiterated in a third quarter update earlier.
Farmland will be turned into net zero forests under Labour
The Country and Land Business Association (CLA) has warned that Sir Keir Starmer’s inheritance tax raid on farmers will leave farmland at risk of being turned into net zero forests by foreign corporations so they can offset their carbon footprints. It’s the latest complaint about the change to agricultural property relief which has led to distress for small farmers, who have accused the Government of vastly underestimating the number of working farms that will be affected by the changes. It comes as Kemi Badenoch blasted Labour’s tax on farms as “cruel” during PMQs as she pledged to reverse the controversial Budget measures if her party returned to power. Meanwhile, Britain’s farmers are considering a strike to disrupt the food supply chain over the proposals.
ITV
ITV said group revenue declined 8% to £2.74 billion from £2.98 billion the prior year. Media & Entertainment revenue rose 4% to £1.52 billion and advertising revenue was flat, while Studios revenue plummeted 20% to £1.22 billion, hurt as expected – ITV said – by the 2023 US writers’ and actors’ strikes. ITV said it expects record adjusted Ebitda from ITV Studio in the full year, with margins within its 13% to 15% target range, with total ad revenue up 2.5%.
Sainsbury’s
Sainsbury’s reported increasing momentum in its second quarter as it reiterated guidance for strong underlying profit growth this financial year, helped by improving grocery volumes and a stronger performance from Argos in the second half.
Climate
This year is “virtually certain” to be the hottest on record, the Copernicus Climate Change Service, an EU agency, found ahead of next week’s COP29 climate summit. For the first time, average temperatures in 2024 will probably be more than 1.5°C higher than before the Industrial Revolution. Mr Trump has vowed to undo climate-protection measures and increase energy exploration.
Veterans charity fears for its future
Jeremy Hibbard, chief executive of the charity Veterans Outdoors, has said Labour’s national insurance rise was a threat to its very existence. The National Council for Voluntary Organisations estimated the increase would cost the sector £1.4bn a year, but, despite pressure from charities and hospices to be exempt from the tax hike, Labour has refused to change position. Mr Hibbard said: “We save the NHS in the South West as much as £2m a year. We provide effective levels of long-term care that the NHS, with its complex systems and much higher overheads, just can’t.” Elsewhere, Sarah West, of Hospice UK, said: “It’s disheartening that the recently announced National Insurance increase does not exempt hospices, which support the NHS but are not part of it.”
Accountants fail to dominate legal scene
Once seen as the future of corporate legal services, accountancy firms, particularly the “big four” – KPMG, PwC, Deloitte, and EY – have struggled to make a significant impact in the legal sector. Research from The Lawyer reveals that the market share of accountants in legal services has declined from 1% in 2002 to just 0.7% today. PwC’s law firm branch, which was expected to generate £100m, currently only achieves around £77m annually, highlighting the challenges faced by these firms in the legal landscape.
Super Micro shares plunge on report worries
Super Micro Computer’s shares fell over 20% in premarket trading due to an unclear timeline for its annual report and disappointing quarterly forecasts. The company’s auditor, Ernst & Young, unexpectedly resigned after raising concerns about financial reporting. JP Morgan analysts noted: “The actions of the prior auditor and the Special Committee are at odds to each other further increasing confusion around the current developments.” Super Micro also delayed its annual report filing to assess its internal controls over financial reporting, following allegations of “accounting manipulation” from short-seller Hindenburg Research. The company risks delisting from Nasdaq if it fails to meet upcoming deadlines.
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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.