Business news 8 May 2024
Reasons for optimism for small businesses in the UK . Banks must stop making life tough for small businesses. Global debt surges to a new record high. UK expected to have come out of recession. And more business news that we thought would interest our members.
James Salmon, Operations Director.
Reasons for optimism for small businesses in the UK
Many small business leaders entered 2024 with trepidation as the UK Insolvency Service reported a 30-year high in business insolvencies. However, there are reasons for optimism as business confidence is high, inflation is nearing the Bank of England’s target, and GDP figures indicate economic growth.
Small businesses account for 99.9% of the UK’s business population and are responsible for three-fifths of employment and half of the private sector turnover. Government initiatives like the Recovery Loan Scheme have provided SMEs with access to £5.3bn, but business leaders are seeking consistency and continuity. Small business-first policy is crucial regardless of political affiliations, and addressing regional disparities in business support is paramount. Closing the SME funding gap and implementing a robust policy framework are essential for SME success and the UK’s economic recovery.
“Through targeted and concerted policy efforts, we can empower SMEs to thrive in the face of adversity and contribute to the nation’s economic recovery and prosperity,” says Richard Chadwick, Chief Risk Officer at Simply Asset Finance.
Banks must stop making life tough for small businesses
Unfair banking practices, inadequate regulation, and barriers to accessing finance for smaller businesses are posing a risk to growth and innovation in the UK, according to a report by the House of Commons Treasury select committee. The report highlights the difficulties faced by SMEs seeking finance after the COVID-19 crisis and the energy shock linked to Russia’s invasion of Ukraine.
The committee recommends giving the Financial Conduct Authority powers to force banks to disclose the number of accounts they close and the reasons behind the decision. It also suggests giving the Financial Ombudsman Service new powers to address unfair requests for guarantees. The committee urges the government to crack down on debanking and raise the minimum notice period for bank account closures. The report warns that the Prudential Regulation Authority’s plans to introduce Basel 3.1 could further tighten conditions for SMEs.
Writing in the Telegraph, chair of the committee, Dame Harriett Baldwin, provides more detail, stressing that “banks must stop making a tough landscape for small businesses needlessly tougher.”
Global debt surges to a new record high
Figures from the Institute of International Finance (IIF) show global debt has hit a record high of $315trn (£250trn) with emerging markets the prime source of the surge in borrowing. Analysis by the IIF showed total world debt rose by $1.3trn to a new record high of $315trn in the first quarter of the year as global debt-to-GDP “resumed its upward trajectory” after falling for a sustained period after Covid lockdowns.
UK expected to have come out of recession
Figures due this week are expected to show the UK grew 0.1% in March, bringing last year’s shallow recession to an end. First quarter growth is forecasted to come in at 0.4% after GDP fell by 0.4% across the second half of last year. The Bank of England had predicted growth of just 0.1% in the first quarter.
Sanjay Raja, chief UK economist at Deutsche Bank, said: “The economic recovery in Q1-24, in our view, likely reflects in part some positive payback following the surprising Q4-23 GDP contraction, as well as a genuine lift in activity driven by positive household and business sentiment.”
Some economists believe the improving outlook for households will contribute to a stronger recovery over the course of the year. Peter Arnold, EY UK Chief Economist, said: “The EY ITEM Club expects the underlying momentum in the economy to gradually build throughout the year, as real household incomes continue to improve.”
HMRC launches crackdown on ‘digital side hustles’
HM Revenue & Customs (HMRC) is cracking down on tax compliance for digital side hustles and content creators. Thousands of letters are being sent to individuals suspected of not declaring all their income. Liam Quirk, CEO of Quirky Digital, warns that digital footprints are bigger than ever and it is crucial to declare all sources of income on tax returns. Failure to do so could result in fines up to 100% of the tax owed. Keeping accurate records and understanding tax regulations is essential to avoid penalties. If individuals receive a nudge letter from HMRC, it is an invitation to review and correct financial details.
UK construction firms enjoy surge in expansion
British construction companies enjoyed their fastest expansion in more than a year during April, despite a further drop in house building. The S&P Global construction purchasing managers’ index (PMI) for April scored 53.0, up from 50.2 in March, marking the highest level since February of the previous year. S&P Global Market Intelligence’s economics director Tim Moore commented: “Demand was boosted by greater confidence regarding the broader UK economic outlook. Lacklustre market conditions in the housebuilding segment continued to weigh on activity.”
Markets
The FTSE 100 closed up 1.22% yesterday at 8313.67 and the Euro Stoxx 50 closed up 1.19% at 5016.10 as the recent rally gathered steam, and were helped by significant gains in UK and US bond prices. The UK 2 year gilt yield fell 6 basis points to 4.28% whilst the ten year gilt yield fell 9 basis points to 4.13%.
Investors paused, seeking firm evidence of an earnings recovery before taking this month’s rally further.
Overnight in the US the S&P 500 rose just 0.13% to 5187.7, the Nasdaq fell 0.1% to 16332.56. The pound is currently worth $1.2488 and €1.1617. Brent is down 1.5% at $81.9 (US inventories rose, dampening demand) , Gold is at $2311. The FTSE 100 is up 0.4% at 8348.5 and the Eurostoxx 50 is up 0.56% at 5044.
Renewables
Climate think tank Ember said that renewables accounted for 30% of global electrical output in 2023, driven by a solar energy surge. COP28 last year vowed to hit a 60% target for renewables by 2030.
Octopus Energy
Octopus Energy has been valued at £7.2 billion, making it one of the UK’s top privately-owned companies. It comes after shareholders Generation Investment Management and Canada Pension Plan Investment Board hiked their stakes in the energy firm. Both investors recently spent a total of £300 million in upping their stakes in the UK’s largest electricity supplier, Sky News-cited sources said on Tuesday.
Disney
Disney reported fiscal second-quarter earnings Tuesday that beat analyst estimates after narrowing streaming losses. Revenue was in line with expectations. Disney’s total segment operating income jumped 17% as the company’s entertainment streaming applications — Disney+ and Hulu — turned a profit in the quarter for the first time. When combined with ESPN+, the streaming businesses lost $18 million in the quarter, much narrower than the $659 million loss the division reported a year earlier.
Tik Tok
TikTok initiated legal action against the US government over a law demanding that the app be sold to a non-Chinese owner within 12 months or face a ban. TikTok aargue that a ban would violate the free-speech rights of its 170m US users.
JD Wetherspoon
JD Wetherspoon expects profit for the year to be at the top end of expectations after drinks sales continued to recover from the pandemic over the third quarter. Sales climbed by 3.3% over the 13 weeks to April, the pub chain reported on Wednesday, while the figure increased by 5.2% on a like-for-like basis. Chairman Tim Martin said demand for traditional ales gained momentum over the period, having been slow to sell in the aftermath of lockdowns.
Airports
UK Airports in Britain are trying to clear a backlog of passengers, after security e-gates went down for over four hours. The government blamed a “system network” problem, but added there was “no indication of malicious cyber activity”. Long queues formed at airports such asHeathrow and Gatwick. The gates went back online around midnight.
Direct Line Insurance
Direct Line Insurance has published a first-quarter trading update that focused on the numbers rather than the takeover speculation that has engulfed the motor insurance firm this year. Total gross written premiums and associated fees for ongoing operations rose by 15% year on year in the first quarter. Motor saw an 18.3% increase in premiums to £424.3 million, while the smaller home and commercial segments increased 14% and 15% respectively.
Informa
Informa said it increased its share buyback programme for 2024 by 50% to £500 million. In a market update, the business information publisher and events organiser said all business were delivering ahead of or in line with annual targets. It expects 2024 revenue will be at the the upper end of its £3.45 billion to £3.50 billion guidance range, while adjusted operating profit is expected to be at the upper end of £950 million to £970 million guidance range.
Net zero targets will push up petrol car prices, Ford warns
The boss of Ford’s European electric car business has warned that net zero targets could force the car giant to cut back sales of petrol cars in the UK, pushing up prices. Martin Sander urged ministers to make sure the zero emissions vehicle (ZEV) mandate was “in line with consumer demand” amid new figures showing a fall in electric vehicle sales. The Society of Motor Manufacturers and Traders has revised its forecast for EV sales from 24% of all cars registered to 19.8% this year, some distance behind the Government’s 22% target set out in the ZEV mandate. Jamie Hamilton, automotive partner and head of electric vehicles at Deloitte, commented: “Lack of accessible electric vehicle charging infrastructure continues to be the biggest barrier for many looking to make the switch. While the amount of public charging points continues to grow, more needs to be done to accelerate this further and improve accessibility to the pre-existing infrastructure.” Meanwhile, the UK, most US states, Israel and New Zealand are among the jurisdictions to have levied new taxes on electric vehicles as they attempt to fill the whole left by a drop in receipts from fuel duties.
UK house prices predicted to see modest increase in 2024
UK house prices are predicted to see a modest increase over 2024, according to Halifax. The average UK house price saw a slight rise of 0.1% in April month-on-month, following a drop of 0.9% in March. Property values experienced a growth of 1.1% annually, speeding up from a 0.4% increase noted the previous month. Amanda Bryden, head of mortgages at Halifax, said: “While there is always much scrutiny of monthly price changes and a degree of volatility is to be expected given current market conditions the reality is that average house prices have largely plateaued in the early part of 2024. This reflects a housing market finding its feet in an era of higher interest rates. While borrowing costs remain more expensive than a few years ago, homebuyers are gaining confidence from a period of relative stability.”
Response rates improve for crucial labour data, ONS official says
Official statisticians at the Office for National Statistics (ONS) have successfully increased response rates for a key labour market survey, which is crucial for rate-setters at the Bank of England (BOE). Liz McKeown, who oversees economic data production at the ONS, stated that response rates have improved significantly after implementing a recovery plan that included boosting monetary incentives and conducting face-to-face interviews. The BOE has been lacking reliable labour market figures for seven months since the flagship Labour Force Survey was suspended due to quality concerns. The improved data will help inform decisions on interest rate cuts. The ONS plans to introduce a transformed version of the survey in September to gather more accurate labour market data. The BOE has been relying on other indicators in the meantime, but economists and investors believe that the improved response rates may allow for rate cuts later this year. The ONS is also taking measures to ensure that the release of crucial data is not disrupted by potential industrial action at the official data agency.
FTX Bankruptcy
In a fairly unique outcome, the sale of the assets of the bankrupt crypto exchange have amassed billions more than is needed to reimburse customers. The extra cash will be used to pay interest to customers. The company has built a cash pile of over $16 billion after selling investments and crypto currencies held, with it benefiting in a rise in AI company investments such a stake in Anthropic and cryptocurrencies such as Solana and Bitcoin which has quadrupled in value since the collapse (from $16k to $62k). The majority of customers, will likely get paid 118% of what they had on the FTX platform the day the company entered Chapter 11 bankruptcy in November 2022.
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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.