Business news 9 January 2025
The pound falls, tax hikes, economy falters, borrowing costs surge, price rises ahead, traffic, hotels, personal finances, farmers, landlords, markets, insolvencies & more business news that we thought would interest our members.
James Salmon, Operations Director.
UK headlines
UK bonds are falling with yields rising and the pound falls on the fiscal outlook. Over the past few days, long term UK borrowing costs have jumped and at the same time the pound has fallen. Normally rising yields would support the currency but this rare combination can signal that investors have lost faith in the UK government’s ability to keep a hold on the national debt and control inflation.
Rachel Reeves reportedly would favor fresh cuts to public spending over tax hikes if UK borrowing costs wipe out her fiscal headroom.
UK hiring fell in December at its fastest pace in 16 months as firms brace for Labour’s tax hikes, according to an REC and KPMG report closely watched by the BOE.
Foreign chief David Lammy will announce a sanctions regime plan today targeting people smugglers.
Reeves scanning for new tax hikes as economy falters
Chancellor Rachel Reeves is preparing for further tax increases following a record £41.5bn tax rise aimed at addressing a £22bn deficit in public finances. Despite her assurance to business leaders that she would not resort to more borrowing or taxes, experts warn that additional tax hikes are “highly likely” in the upcoming Spring Statement on March 26. Sanjay Raja, Deutsche Bank’s chief UK economist, said an extension to the freeze in income tax thresholds was likely while an increase in income tax would probably only come if the country falls into recession. Jason Hollands, managing director of Evelyn Partners, suggests income tax thresholds could be lowered – a view echoed by Nimesh Shah, chief executive of Blick Rothenberg, who said the additional rate threshold could be a target. Tim Stovold, partner and head of tax at Moore Kingston Smith, said reversing the Tories’ cut to employee NICs from 10% to 8% could be another point of attack, as could reforming pension tax relief.
Treasury forced to calm markets as borrowing costs surge
The Chancellor is at risk of breaking her fiscal rules as 10-year government borrowing costs surge to their highest level since the 2008 financial crisis, reaching 4.825% on the back of concerns about Labour’s tax and spending plans, and anaemic economic growth. The Treasury issued a rare public statement for the second successive day on Wednesday, insisting the Government has an “iron grip” on the public finances. However, analysts warn that rising borrowing costs could eliminate the £9.9bn headroom she had set in her October Budget. The pound has also fallen to its lowest level against the dollar since April 2024, reflecting market anxiety. Brad Bechtel from Jefferies said the UK is experiencing a “micro version” of the bond market meltdown seen after Liz Truss’s mini-budget in 2022. Paul Johnson from the Institute for Fiscal Studies warned that without tax increases, spending cuts may be necessary to meet fiscal targets.
Businesses set to hike prices post-NICs raid
According to a recent survey by Grant Thornton, 54% of businesses plan to increase prices in 2025 due to the Government’s national insurance hike. Schellion Horn, head of economic consulting at Grant Thornton, warned that this would “put pressure on inflation” and compel the Bank of England to maintain higher interest rates for an extended period. The survey, which included 800 UK firms, also revealed that 52% of businesses intend to reduce hiring, cut jobs, or lower employee pay. Horn remarked: “Just when there is light at the end of the tunnel, the market is now faced with further cost increases.”
Budget tax hikes stall hiring
Recruiters have reported a significant slowdown in hiring during December, as companies aim to reduce staffing costs amid tax increases, new employment rights, and a deteriorating economic environment. The KPMG and Recruitment & Employment Confederation (REC) monthly survey indicated the sharpest decline in permanent staff placements since August 2023, with the index falling from 40.7 in November to 39.5 in December. Neil Carberry, chief executive of REC, said the report reflects “a weak mood in some businesses as they built their budgets for this year.” Despite the decline in hiring, wage growth remains robust, with employers still willing to raise starting salaries to attract top talent, even as job openings decreased across all sectors for the second consecutive month.
Slow decline in base rate expected
Experts from the EY ITEM Club predict that the Bank of England’s Monetary Policy Committee (MPC) will reduce the base rate, currently at 4.75%, “relatively slowly” throughout the year. This caution follows a Halifax survey indicating a slight decline in average house sale prices by 0.2% in December, marking the first drop in nine months. Despite this, there was a modest annual increase of 3.3% in house prices. Concerns about rising inflation, driven by wage, energy, and food price increases, have tempered calls for rapid rate cuts. Matt Swannell, Chief Economic Advisor to the EY ITEM Club, noted that financial markets now anticipate fewer interest rate cuts, influenced by the UK Autumn Budget and the US presidential election.
Traffic
London has the fifth-worst traffic globally, with drivers taking 33 minutes and 17 seconds to travel 10 km in the city center. The worst city is Barranquilla in Colombia. NYC has the slowest car travel among US cities, according to TomTom’s traffic index.
Women and people in their 50s less optimistic about finances
Research by Aegon reveals a growing optimism regarding personal finances for 2025, with 60% of respondents feeling positive, up from 52% in 2024. However, women (54%) and individuals aged 50 to 59 (47%) are less optimistic compared to the overall population. The survey highlights that enjoying life, building emergency savings, and covering living costs are the top financial priorities. Steven Cameron, director of pensions at Aegon, said: “As we enter 2025, it’s encouraging that positivity on personal finances has jumped.” Despite this optimism, he cautioned about underlying challenges, particularly for women and those in their 50s, who may face difficulties in saving for retirement. The survey included 2,000 participants across the UK, conducted by Opinium in December 2024.
Markets
Yesterday, the FTSE 100 closed up 0.07% at 8251.03 and the Euro Stoxx 50 closed down 0.21% at 4996.39.
European shares opened cautiously yesterday and oscillated near the flatline, closing without significant movement. The mood was influenced by a mixed bag from Wall Street on Tuesday, where U.S. stocks relinquished initial gains amid rising bond yields and a stronger dollar, driven by data indicating robust U.S. economic performance. This could further temper expectations for early Fed rate cuts, keeping investors on edge.
US Unemployment Claims fell by 10,000 in the week to 4 January, to 201,000. Economists had expected a small rise, to 214,000. Meanwhile, payrolls operator ADP reported that American firms added 122,000 new workers in December, below the 140,000 which Wall Street economists predicted. Services companies added 112,000 jobs, half in education and health services, and goods producers added 10,000 employees. The overall figure marked a slight slowdown on November, when payrolls rose by 146,000.
Overnight in the US the S&P 500 rose 0.16% to 5918.25 and the NASDAQ dropped 0.06% to 19478.88.
This morning on currencies, the pound is currently worth $1.229 and €1.1925. The pound fell to the weakest level against the dollar since November 2023 on investor concerns over the UK fiscal and inflation outlook.
On Commodities, Oil (Brent) is at $75.95 & Gold is at $2666. On the stock markets, the FTSE 100 is currently up 0.47% at 8290 (on the pounds slump) and the Eurostoxx 50 is down 0.22% at 4985.
Energy
Energy prices surged after the UK’s grid operator issued a market warning as declining wind output hit supply just as plunging temperatures boosted demand. The three-hour notice period began at 4 p.m. yesterday when there was an insufficient buffer between predicted supply and demand, the National Energy System Operator said. The warning was issued by the grid operator “using operational and engineering judgments” and gives the market more time to adjust than an automatic alert four hours in advance. It’s one of several issued this winter and highlights the risk of building out wind turbines without sufficient back up for days when it’s dark, cold and windless.
Apprenticeships: Degree holders dominate
Research indicates that one in six apprenticeships are now taken by individuals with degrees, indicating a misuse of apprenticeship funding. Government data reveals that nearly 10% of the £2.5bn apprenticeship budget is allocated to advanced courses, including MBAs, which are often pursued by senior executives. In the last academic year, around 56,000 degree holders began apprenticeships, costing the Government £400m. Tom Richmond, author of the report from the Social Market Foundation, said it is “simply not tolerable” for the Government to spend such sums on graduates when the aim is to “break down barriers to opportunity.” The foundation has urged the Government to implement a rule preventing degree holders from accessing apprenticeship funding.
Farmers to stage protests at supermarkets
Farmers will take coordinated action next Friday by taking up position at supermarkets across the country in protest at the Government’s inheritance tax raid. Under Labour’s changes, farming estates worth more than £1m would be liable for 20% inheritance tax from April 2026. Clive Bailye, who is helping to coordinate the action, said that although supermarkets were not the direct target, they shared some responsibility for the difficult circumstances the farming industry faces. “Part of the issues we are currently facing is the result of a 20-30 year race to the bottom on food prices, which supermarkets have been a big part of,” he said. Bailye added that many farmers were frustrated with the National Farmers’ Union which they thought had not been aggressive enough in securing concessions from the Government. This has led some farmers to call for more direct action, including blockading ports and threatening supermarket supply chains.
Landlords face massive tax bills after forming LLPs
Mick Roberts, a 57-year-old landlord, is among approximately 400 buy-to-let investors facing potential tax bills of up to £1m after restructuring their businesses with Less Tax for Landlords. The firm, which charged clients substantial fees, promised to help landlords save on HMRC bills by forming limited liability partnerships. However, HMRC has warned that such schemes “do not work” and may lead to larger tax liabilities. Tax experts suggest that the restructuring could inadvertently trigger significant stamp duty charges, potentially pushing many landlords into insolvency. Roberts said: “We are 100% victims in this. I didn’t even want my houses. I kept them for my tenants, and now I’ll be homeless alongside them. It’s horrendous.” Commenting on the situation, Dan Neidle, founder of Tax Policy Associates, told the Telegraph: “I’d like to see HMRC being more sympathetic to the clients, and much more aggressive dealing with the firms that sell doomed tax schemes.”
Hotel occupancy rates soar pre-Christmas
Hotel occupancy rates have increased significantly, with average occupancy rising from 76.6% to 79.1% year-on-year in November, and London’s rates climbing from 79.6% to 82.8%. Chris Tate, head of hotels at RSM, remarked that “Christmas came early” for the sector, driven by a rise in airport passenger numbers. Demand is expected to remain strong, as RSM’s Consumer Outlook indicates that 28% of consumers plan a long-stay UK holiday this year, up from 25%. However, rising costs, with average room rates increasing from £143.71 to £148.46, may pose challenges, prompting the sector to “think strategically” about expenses, according to RSM economist Thomas Pugh.
BoE to relax rules for banks and insurers
The Bank of England is set to reduce the regulatory burden on UK banks and allow insurers to make riskier investments without prior approval, responding to government calls for easing post-financial crisis regulations. Sam Woods, deputy governor and head of the Prudential Regulation Authority, stated that some rules may have been “overcooked” and could have negatively impacted the financial sector. He stressed the need to avoid a “race to the bottom” in regulation while acknowledging the necessity for reform. Woods said: “We’ve already cut reporting on the insurance side by a third,” and indicated that further reductions in reporting requirements for banks are forthcoming. The proposed changes include a new mechanism for insurers to invest in riskier assets more swiftly, reflecting a shift towards promoting growth and competitiveness in the financial services sector.
AI may speed up auditing, but fees may not come down
The auditing profession is undergoing a significant transformation due to advancements in artificial intelligence (AI). Paul Stephenson, managing partner at Deloitte, says that the difference between traditional auditing methods to AI-driven processes is “night and day.” KPMG’s Cath Burnet points out that AI allows auditors to focus on higher-risk transactions rather than random sampling, enhancing the quality of audits. While clients hope for reduced fees, Burnet warns that the costs of developing AI technology may prevent rapid fee deflation. The industry remains cautious, with Stephenson pointing to wariness about the reliability of data for effective AI use, a position echoed by the Financial Reporting Council, the industry’s regulator, which is on board, but wants firms to be certain of where they are getting their data from.
Tesco
Tesco said its full-year profit and cashflow targets remained unchanged after a recording its largest ever Christmas. The UK’s largest supermarket group says like-for-like sales swelled 3.8%, as demand grew in the six weeks to January in the UK, Ireland, Central Europe and for its Booker wholesale arm. LFLs for the UK and Ireland rose 3.7% in the festive period, up from 2.8% in the fiscal third quarter, with the UK alone seeing festive LFL sales accelerate to 4.1% from 3.8% in the third quarter.
Isle of Harris
Scotland’s Isle of Harris got its own bit of fame at the Golden Globes as whisky and gin from the distillery of the same name made its way into the goodie bags given to A-listers. Only 100 swag bags were given out and they included luxury items and experiences worth about $1 million.
Marks & Spencer
Marks & Spencer said like-for-like sales growth was even stronger, up 6.4% for the UK and RoI. Food LFL sales were up 8.9% in the 13 weeks to 28 December, while Clothing, Home & Beauty gained 1.9%. CEO Stuart Machin says M&S “sustained trading momentum” and broke its own sales records across the business, with Food recording its biggest day and general merch seeing its biggest online week.
Greggs
Greggs said it achieved double-digit annual sales growth, shaking off “subdued high street footfall” in the final stretch of the year. For the 52 weeks to December 28, total sales rose 11% to £2.01 billion, from £1.81 billion a year prior. Like-for-like sales in company-managed shops rose 5.5%. In the fourth-quarter alone, sales rose 7.7% on-year but like-for-like growth in company-managed shops was at a softer 2.5%, “reflecting the more subdued high street footfall”.
Latest Insolvencies
Petitions to wind up (Companies) – BRISTOL HOTEL OPERATING LTD
Appointment of Liquidators – ZEDONK LIMITED
Appointment of Liquidators – L.A. BROWN LIMITED
Appointment of Liquidators – SOUTH EAST TRACTOR HIRE LIMITED
Appointment of Liquidators – QUOD ORBIS HOLDINGS LIMITED
Appointment of Liquidators – OPTIMA CONSUMER HEALTH LIMITED
Appointment of Liquidators – ZOETICMINDS LTD
Petitions to wind up (Companies) – SIM2FUNDED LIMITED
Appointment of Liquidators – CABIN HILL CONSULTING LIMITED
Petitions to wind up (Companies) – LCF SECURITY LTD
Appointment of Administrator – CRAFTER’S COMPANION LIMITED
Appointment of Liquidators – WATFORD & ESSEX LIMITED
Appointment of Liquidators – 4 SIGHT SYSTEMS LIMITED
Appointment of Liquidators – APPOTEC LIMITED
Appointment of Liquidators – ENTASIS THERAPEUTICS LIMITED
Appointment of Liquidators – DR CANARY LIMITED
Appointment of Liquidators – AARADHYA IT SERVICES LIMITED
Petitions to wind up (Companies) – CAMBRIDGE PARTY SHOP LIMITED
Petitions to wind up (Companies) – BELMONT GROUP LTD
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!
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Check our compensation calculator to see how much your business could be owed!
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.