Business news 8 November 2024
Bank of England cuts interest rates. Budget uncertainty froze hiring. Sainsbury’s boss warns of food crisis. Trump, house prices, markets, insolvencies & more business news that we thought would interest our members.
James Salmon, Operations Director.
Bank of England cuts interest rates
The Bank of England’s Monetary Policy Committee (MPC) has reduced interest rates from 5% to 4.75%, marking the second cut this year. Governor Andrew Bailey noted that the drop is due to UK inflation falling below the 2% target, allowing for a gradual reduction in borrowing costs. He stated: “We need to make sure inflation stays close to target, so we can’t cut interest rates too quickly or by too much.” The recent autumn Budget, which includes tax increases for businesses, is expected to boost economic growth by 0.75% at its peak in a year. However, the MPC highlighted “significant uncertainty” regarding the jobs market and inflation, particularly with upcoming national insurance tax increases and a higher minimum wage.
Budget uncertainty froze hiring
The latest jobs survey from KPMG and the Recruitment and Employment Confederation (REC) reveals a significant decline in hiring due to Budget uncertainties. The survey indicates that the number of job vacancies has fallen for the 12th consecutive month, with the permanent placement index dropping to 44.1 and the temporary billings index to 47.2. Jon Holt, chief executive of KPMG UK, stated: “Uncertainty over the autumn Budget saw businesses continue to put hiring plans on hold during October.” The Government’s announcement of £40bn in new taxes, including a £25bn increase in employers’ national insurance contributions, is expected to “further dampen hiring” as companies seek to cut costs.
Sainsbury’s boss warns of food crisis
Simon Roberts, the CEO of Sainsbury’s, has expressed strong support for farmers, warning that the Chancellor’s recent inheritance tax changes could jeopardise the UK’s food security. He stated: “British farmers work incredibly hard to make sure that they can provide the foods that everyone wants to buy, that are British produced.” The new tax, set at 20% for farms valued over £1m, has sparked outrage within the agricultural community, with unions indicating that many farms could face collapse. George Weston, CEO of Associated British Foods, echoed these concerns, stating that the changes threaten the viability of the farming community and, consequently, the nation’s food security.
Markets
The Bank of England cut interest rates by 25 basis points to 4.75% as expected. The Bank’s Monetary Policy Committee voted eight to one in favour of cutting rates following a drop in the rate of inflation to 1.7% in September, a press release said.
Yesterday, the UK market was slightly negative as shares on Wall Street scaled record highs again, the FTSE 100 closed down 0.32% at 8140.74 and the Euro Stoxx 50 closed up 1.07% at 4851.96. Overnight in the US the S&P 500 rose 0.74% to 5973.10 and the NASDAQ rose 1.51% to 19269.46.
This morning on currencies, the pound is currently worth $1.296 and €1.202. On Commodities, Oil (Brent) is at $74.9 & Gold is at $2691. On the stock markets, the FTSE 100 is currently down 0.89% at 8068 and the Eurostoxx 50 is down 0.77% at 4815.
The not-so special relationship
Markets are digesting how the poor relationship between the UK Government and Trump are likely to affect the potential future trading relationship between the countries and the possible imposition of tariffs. Europe & the UK are woefully unprepared for a second Trump term. Labour have previously made it quite clear how little love is lost between them. With the UK isolated from the USA and the EU following Brexit, the nation is left in a very isolated position.
Trump & EU
European Central Bank Governing Council member Yannis Stournaras says an implementation of Donald Trump’s campaign promises on tariffs, fiscal policy and migration would have “certain implications” for the economy. He said “It will perhaps increase inflation in the US, at least temporarily. So the Federal Reserve will react to that,” Stournaras told a panel discussion in Athens
“It’ll have a negative impact on the European economy, but also there will be some implications in the exchange rate. All in all, perhaps the European economy will become weaker, at least in the short term. So this has certain implications for our monetary policy”
US Interest rates
The US Federal Reserve cut its benchmark interest rate by a quarter point on Thursday evening, to a range of 4.5%-4.75%, its second rate reduction in seven weeks. While the action aims to support the Fed’s dual mandate of stable prices and maximum employment, the Fed expressed less confidence in inflation moving toward its 2% target, as language reflecting optimism on inflation was softened from prior statements.
Jerome Powell, the Fed chair, said he would not resign if Mr Trump asked him to, because such meddling was “not permitted under the law”.
House prices soar to record high
House prices in the UK have reached a record high average price of £293,999 in October, surpassing the previous high of £293,507 recorded in June 2022, according to Halifax. This 0.2% increase marks the fourth consecutive month of growth, driven by a combination of falling mortgage rates and a persistent shortage of housing supply. RBC housing analyst Anthony Codling noted: “The increase points to a shortage of available homes and the fact that housing affordability is a constraint for all homebuyers.” Despite concerns regarding the impact of Rachel Reeves’ autumn Budget on the housing market, analysts believe that the market will stabilise, with Codling suggesting that “this is a minor irritation rather than the end of the world.”
Elsewhere Rightmove expressed cautious optimism about the property market’s near-term prospects, but new homes development remains a stress point. Rightmove, in a trading update, said property transaction flow is improving, although the property portal tightened its full-year membership growth forecast to 1% (from “up to” 2% previously) due to “a slower-than-expected recovery in new homes developments”.
Trump’s tax cuts: A bold gamble
Donald Trump aims to swiftly implement tax cuts and protect US businesses from foreign competition within his first 100 days in office. His advisers are formulating plans to renew the extensive 2017 tax cuts, incentivising companies to relocate their supply chains back to the US. This strategy may involve imposing tariffs on nearly all participants in the $3trn US import market, which Trump believes will generate thousands of jobs domestically. However, Andrew Bailey, the governor of the Bank of England, cautioned about the potential “fragmentation of the world economy” that could arise from such tariffs. The non-partisan Committee for a Responsible Federal Budget warns that Trump’s tax cuts could increase US debt by $9.15trn over the next decade.
SFO gets £9.3m boost to fight fraud
City AM picks up on news that the Serious Fraud Office (SFO) is set to receive an additional £9.3m in funding to enhance its capabilities in combating fraud. Attorney General Lord Hermer KC stated: “This Government is committed to cracking down on fraud and this additional funding will modernise SFO’s services.” The funds will support a new asset confiscation enforcement team and improve the SFO’s disclosure capabilities and case management system. A report by HM Crown Prosecution Service Inspectorate highlighted the need for more funding to address ongoing disclosure issues. The SFO’s budget for 2024/25 is £83.8m, increasing to £88.9m for 2025/26. Additionally, the Crown Prosecution Service (CPS) will receive £49m to bolster support for victims of crime, particularly in Rape and Serious Sexual Offence units.
BT warns of price hikes
BT is poised to increase prices following a £100m NICs hike imposed by the Government, according to CEO Allison Kirkby. She indicated that the company would implement “harder and faster” cost-cutting measures, including a review of customer pricing and enhanced use of artificial intelligence to boost productivity. The telecoms giant has already cut its annual sales outlook and reduced its workforce by over 2,000 jobs, aiming to streamline operations from 130,000 to between 75,000 and 90,000 by 2030. BT reported a 10% drop in pre-tax profits to £967m for the six months ending 30 September, with revenues down 3% to £10.1bn.
Car loan review could cost FCA £20m
The Financial Conduct Authority (FCA) is set to allocate £20m for the initial phase of its investigation into car loan commissions, a move that may lead to lenders compensating consumers up to £23bn. The FCA has already spent over £14m since January on examining discretionary commission arrangements (DCAs) in the motor finance sector. The review’s total costs are projected to reach £19.7m by May 2025, but this could change due to a recent Court of Appeal ruling that requires brokers to obtain informed consent from customers before receiving commissions. Adrian Dally, director of motor finance at the Finance and Leasing Association, warned that the ruling could cause “severe disruption” to the industry and the UK economy. The FCA is also assessing records from 2007 to 2021, indicating the extensive nature of the investigation.
How farmers can mitigate Labour’s inheritance tax raid
Rachel Reeves’s recent announcement to cap agricultural property relief at £1m from April 2026 has left farmers reeling. This change means that estates valued above this threshold will incur inheritance tax at an effective rate of 20%. The National Farmers Union has warned that this could impact up to half of all working farms, contrary to the Government’s claim that only a minority will be affected. Aysha Marley from RSM advises farmers to consider succession planning and potentially gift portions of their land to the next generation. However, Toby Tallon from Evelyn Partners cautions that many farmers are “cash poor” and may struggle to give away assets. He stresses the importance of not rushing decisions, as the Government will provide further details in early 2025. “All is not lost,” Marley reassures, highlighting that farmers should carefully evaluate their options with advisers. Meanwhile, it has emerged that the Chancellor has also blocked farmers from being able to transfer their £1m relief to their spouses – adding another layer of complexity to the controversial reforms. The technical detail means a farming couple could miss out on the full tax relief available to them if their wills were not carefully drafted.
Death in service payments may be caught in Labour’s pension raid
New inheritance tax rules found in the small print of the Budget will mean that grieving families could be taxed on death in service payouts – usually a lump sum paid to named beneficiaries of a worker who dies while on the company payroll. If a death in service payment is made as a pension lump sum then it will fall in the scope of Labour’s tax raid on pensions. However, if it is made from a group life insurance policy held in a trust, it will not fall within the scope of inheritance tax. Ros Altmann, a former pensions minister, said public servants doing particularly dangerous jobs may rethink their future if they find out their death in service benefit is worth 40% less then they thought.
John Wood shares slump 60% after announcing review of write-offs
Wood Group’s shares fell by 60% following the announcement of a Deloitte-led review of its operations, which aims to evaluate the firm’s contract accounting and governance. The review comes in light of significant project write-offs and may result in financial restatements. In a trading update for the quarter ending 30 September 2024, Wood Group reported a revenue of $1.48bn, a modest increase of 1% year-on-year, although revenue for the nine months decreased by 3% to $4.33bn. The company’s order book also shrank by 8% to $5.4bn. Chief executive Ken Gilmartin remarked: “Our projects business delivered a disappointing quarter,” highlighting challenges in their chemicals, minerals, and life sciences sectors. This review follows the collapse of a takeover deal with Dubai-based Sidara earlier this year, attributed to rising geopolitical risks and financial uncertainty.
Nissan
Nissan’s share price fell by 10% in early trading on Friday to its lowest point in four years. The Japanese carmaker had announced plans to cut 9,000 jobs and a fifth of its global production, and lowered its annual operating-profit forecast by 70%. Nissan has struggled to compete with Chinese electric vehicles (EVs) and hybrid offerings from Japanese rivals.
Apache pulls out of North Sea
Apache, a US oil firm, has announced it will cease all operations in the North Sea by the end of 2029, citing the impact of the windfall tax. The company stated that the recent increase in the Energy Profits Levy (EPL) to 38% has rendered production uneconomic. An Apache spokesperson remarked: “The onerous financial impact of the EPL… makes production of hydrocarbons beyond 2029 uneconomic.” The EPL was introduced in May 2022 to tax profits from UK oil and gas extraction, initially set at 25% and later raised to 35% and now 38%.
Equal Pay Day to arrive two days early
This year’s Equal Pay Day will fall on November 20 – two days earlier than it did in 2023 indicating a widening of the gender pay gap. the Fawcett Society promotes the Equal Pay Day campaign. The group’s CEO Jemima Olchawski said: “It’s incredibly alarming to see the mean gender pay gap widen in 2024 and shows that, without concerted effort, most women won’t see equal pay in our working lifetime.” The Fawcett Society calculates the date based on the mean, full-time, hourly gender pay gap.
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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.