Business news 9 January 2024
James Salmon, Operations Director.
Economy expected to return to growth in November. Mid-sized businesses concerned over consumer spending. Retailers see weak sales growth in December. And more business news that we thought would interest our members.
Economy expected to return to growth in November
With GDP figures for November set to be released on Friday, economists expect the data to show that the economy grew by 0.2%. This would mark an improvement on the 0.3% contraction recorded in October. Despite forecasts that November will have seen a return to growth, a recession remains possibility. With the economy shrinking by 0.1% in Q3, analysts at Capital Economics have warned: “November’s rebound won’t prevent a contraction in Q4,” while Investec economist Sandra Horsfield has warned that November’s “partial recovery … would be too small to prevent a technical recession.”
Mid-sized businesses concerned over consumer spending
Research from BDO shows that mid-sized businesses remain cautious over a possible fall in customer numbers and spending, with those in the hospitality and leisure sector particularly concerned. Meanwhile, BDO’s survey also found that growth and expansion remain a top priority for 20% of small businesses. BDO partner Richard Austin said: “It’s heartening to see businesses remain optimistic about some expansion and growth on UK soil.” A quarter of the small businesses polled said better access to finance would be helpful, while 28% raised concerns over higher monthly repayment costs and “depleting” cash reserves. Mr Austin said: “A clear focus is needed to improve access to capital, manage high-interest rates and reduce borrowing costs over the months ahead.”
Retailers see weak sales growth in December
Retailers saw sluggish sales growth as 2023 came to an end, with a retail monitor from the British Retail Consortium (BRC) and KMPG showing that total UK retail sales were up by just 1.7% in December against growth of 6.9% a year earlier. December’s figures also marked a slowdown from November’s sales growth of 2.7%. Retail sales over the year overall were up by 3.6% on 2022. Paul Martin, UK head of retail at KPMG, said: “The festive feelgood factor was lacking this year as many retailers faced a disappointing December,” adding: “Despite falls in inflation, an upcoming cut in National Insurance rates, and some consumers having more money in their pockets this Christmas than last, the constant drip of economic challenges they’ve faced over the last two years has finally come home to roost.” Looking ahead, BRC chief executive Helen Dickinson said: “2024 looks to be another challenging year for retailers and their customers, and spending will continue to be constrained by high living costs.”
Start-up funding increasingly a family affair
Research suggests that entrepreneurs are increasingly turning to the Bank of Mum and Dad for help. Analysis by wealth manager Charles Stanley shows that a fifth of UK start-ups are initially funded by an inheritance, with a further 19% supported by cash from parents. While 14% have turned to a family trust to help get a business off the ground, one in ten asked other family members for support. A further 10%, meanwhile, relied on cash from their grandparents. The survey also shows that a number of small business owners have turned to their families to fund growth once the enterprise is established, with 15% using an inheritance to help further grow their business and 13% relying on their parents.
Income tax hits £264bn under the Tories
Analysis of HMRC data shows that income tax revenues have increased by more than 70% under successive Conservative administrations, hitting £264bn. Then-Chancellor Rishi Sunak froze a number of tax bands in 2021 and since the policy was enacted, income tax receipts have jumped by £49bn. Since 2010, when the Tories took power via a coalition with the Liberal Democrats, income tax receipts have risen by £113bn, or 76%. The Times’ Jack Barnett says that while the rise has been driven by a combination of the accumulative effect of inflation, a natural increase in the size of the economy and population growth, “it is also a function of the Conservatives’ fiscal policy choices.” Philip Shaw, chief economist at Investec, comments: “The income tax take has risen materially since 2009/10. However, it is important to put the figures into context. For example, GDP in cash terms has risen by 64% over the same period.”
HMRC sends nudge letters to crypto investors
HMRC has stepped up pressure on cryptocurrency investors it suspects have underpaid tax on their assets, sending 8,329 ‘nudge’ letters to individuals it suspects owe tax on their crypto assets, according to UHY Hacker Young. Neela Chauhan, a partner at UHY Hacker Young, said: “HMRC is only going to become more determined to intensify its tax crackdown on crypto investors in the next few years,” adding: “As HMRC gains access to more data, crypto traders will no longer be able to evade the tax authority’s attention.”
Activist investor activity expected to increase
Activist investors are expected to call for greater changes among European companies in the year ahead, with a record number of campaigns in 2023. Analysis by Lazard shows that a record 69 new campaigns were launched at European targets last year, with this representing a 15% increase from 2022. Long-only investors were involved in 14% of last year’s campaigns, up from 12% between 2018 and 2022, while individuals, founders of companies and family offices accounted for 16%, compared with 11% between 2018 and 2022. Darren Novak of JPMorgan said: “More funds are being formed that are being focused on mid-cap European companies,” adding: “We are also seeing more institutional investors use tools of traditional activists to make changes at companies such as proposing strategic reviews and even board nominations.” A survey from law firm Skadden Arps shows that 60% of companies expect shareholder activism in Europe to increase over the coming 12 months.
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.