Business news 9 May 2024
Small business confidence climbs. Number of available workers rises as demand declines. Interest rate watch, working on holiday, SME debanking, fiscal targets, markets, housing & more business news that we thought would interest our members.
James Salmon, Operations Director.
Small business confidence climbs
Confidence among small businesses climbed in the first three months of the year, according to an index from the Federation of Small Businesses (FSB). The index returned to positive territory for the first time in two years after business confidence increased by 20 points between January and March. The increase took the balance of firms feeling confident to 5.5 points, with manufacturing the most confident sector at 19.1 points.
On challenges they face, 83.7% of small businesses said that their operating costs had increased compared with the first three months of last year, driven by rising utility and labour costs.
Tina McKenzie, policy chair at the FSB, said that seeing small business confidence back in positive territory “is a relief, after two years of it being underwater, and following on from a particularly difficult end to last year.” She added: “The rebound in confidence levels in most sectors is a good indicator that the shallow recession recorded at the end of 2023 is firmly in the past, and small businesses are keen to look ahead to expansion and better trading conditions.”
Number of available workers rises as demand declines
The number of workers available to take up new roles has increased sharply over the last month, while businesses have scaled back demand for staff. KPMG and the Recruitment and Employment Confederation’s (REC) candidate availability index rose to 60.4 in April from 60.2 in the previous month, well above the 50-point threshold that separates growth from contraction. The analysis also shows that vacancies contracted last month, with the labour market continuing to cool amid high interest rates and sluggish economic growth.
There were, however, signs that the labour market gathered momentum in April. The permanent appointment index jumped to 46.4 from 43.3, while the temporary appointment index climbed to 46.9 from 45.7. Neil Carberry, chief executive of the REC, said: “Firms have told us all year that they will be willing to hire and invest in their business when confidence returns to the wider economy – and there is a glimmer of lower inflation and the prospect of lower interest rates starting to drive that now.” He added: “Pay continues to rise, with a slight bump-up this month likely to have been driven by the April peak in employer pay rises and the recent minimum wage rise.”
Interest rate watch
The Bank of England is due to announce its latest interest rate decision today. Although no cut is expected from 5.25%, the look out will be for the language used to signal their future intentions.
Entrepreneurs admit to working from holiday
Nine out of 10 British entrepreneurs now admit to working while on holiday, prioritising work over leisure. Analysis from RSM shows that a third of businesses allow employees to log in from anywhere in the world.
Lenders should be more transparent on SME debanking, say MPs
MPs on the Treasury Committee have urged the Financial Conduct Authority (FCA) to ensure banks are more transparent on why they “debank” businesses. In a report on its inquiry into the barriers SMEs face to accessing finance, the committee called on the City watchdog to force lenders to detail the number of business accounts they close each quarter, as well as the reason.
The FCA said it will “carefully consider” the recommendations, adding that it has “been clear to banks they must be fair to people, including businesses, when considering closing accounts.” Banking trade body UK Finance said closures affect a small proportion of business accounts and are mainly due to a lack of information sharing, dormant accounts and financial crime concerns.
Nuclear fuel
The government will provide £196 million to Urenco Ltd, a British-Dutch-German consortium, the second biggest uranium enricher to build a fabrication line for high-assay, low-enriched uranium, known as HALEU, here in the UK, to help it compete with the Russian giant Rosatom, who are currently the worlds only commercial supplier .
“Backing Urenco to build a uranium enrichment plant here in the UK will mean we are the first European nation outside Russia to produce advanced nuclear fuel,” said Claire Coutinho, secretary of energy-security and net zero.
Government will have to raise taxes to meet its fiscal targets
The National Institute of Economic and Social Research (NIESR) has warned that the next government will have no spending room for tax giveaways and will have to find ways of generating revenues amid “sluggish” growth. It said that ministers will have to implement tax rises and delay net zero investment unless the government is willing to revise the Treasury’s fiscal rules, saying that weak growth and lower inflation would make it difficult to adhere to the current policy. The think-tank argued that the current fiscal rules would prevent any pre-election tax cuts and that debt would continue to rise as a percentage of national income. Analysis suggests that weak growth will cause the debt-to-GDP ratio, which is approaching 100%, to rise over the next five years, breaching the Chancellor’s current fiscal rules.
Stephen Millard, deputy director of NIESR, said: “We are currently [on course] to miss the fiscal targets and if you want to hit them you need to raise taxes. This could be done by slapping a penny or three on the rate of income tax but I don’t think [the Government] should do that. It’s the targets that are forcing the government to put brakes on the economy.” Adrian Pabst, NIESR deputy director for public policy, said: “While real wages are rising, households in the bottom half of the income distribution continue to feel the impact from the cost-of-living crisis.” He added that a freeze on the personal allowance and tax bands is making low and middle-income households worse off, despite the cut to National Insurance contributions.
The think-tank predicts that the economy will grow by 0.4% in Q1 and by 0.8% across 2024 as a whole. It also forecasts that average wage growth will fall back to about 3% in 2025, from the current rate of above 6%.
Markets
A combination of favourable currency movements, interest rate cut expectations, and cheap London equities (when compared to overseas companies) being picked off by foreign raiders, helped the UK Blue-chip index advance to another all-time high. The FTSE 100 closed up 0.49% yesterday at 8354.05. The Euro stoxx 50 closed up 0.44% at 5038.17.
Overnight in the US the S&P 500 was flat at 5187.67, the Nasdaq fell 0.18% to 16302.76. The pound is currently worth $1.2486 and €1.1636. Brent is up at $83.98, Gold is at $2308. The FTSE 100 is flat at 8357 and the Eurostoxx 50 is down 0.48% at 5014.21.
Investors flock to stocks, taking advantage of tax incentives
British investors continued piling into stocks in April, taking advantage of tax incentives on Individual Savings Accounts (ISAs), according to data from fund network Calastone. Inflows into equity funds reached a nine-year high of £5.2bn during the ISA season from mid-February to April 5. However, equity inflows slowed in April compared to the previous three months, with UK-focused equity funds experiencing net selling for the 35th consecutive month. Despite bearish signals from the bond markets, investors are still chasing stock prices. In the first quarter, UK investors put a record £6.97bn into equity funds, led by demand for North American equities. “The 2024 bull run in equity markets flies in the face of the uncomfortably bearish signals coming from the bond markets,” said Edward Glyn, head of global markets at Calastone.
China
Chinese Exports returned to growth last month while imports smashed expectations, data showed Thursday, providing a much-needed boost to the country’s leadership as it tries to steer the economy out of a long-running slump. Overseas shipments expanded 1.5% on-year in April, slightly beating FXStreet-cited market consensus of 1.0% and a strong turnaround after a shock 7.5% plunge in March. Meanwhile, imports surged 8.4%, beating the 5.4% market forecast, providing hopes that demand in the world’s number two economy could be improving.
Nearly 300k self-assessment returns filed in week one
Nearly 300,000 “early bird” taxpayers filed their self-assessment return in the first week of the new tax year, according to HMRC. While 295,250 returns were filed between April 6 and 12, 67,870 returns were received by HMRC on April 6, the first day of the new tax year. Myrtle Lloyd, HMRC’s director general for customer services, said: “Filing your self-assessment early means people can spend more time growing their business and doing the things they love, rather than worrying about their tax return.”
Housing market stutters in April
While a small majority of agents polled by the Royal Institution of Chartered Surveyors (RICS) saw an increase in inquiries from prospective buyers in each of the opening three months of the year, more agents than not saw fewer inquiries from would-be buyers in April. Despite this, the RICS survey shows that agents saw an increase in agreed sales last month as a net 5% sold more houses in April than they did in March. However, optimism about the outlook for sales over the coming three months is at its lowest since October, with most expecting sales to fall as would-be buyers adapt to a rise in mortgage costs. A net 33% of agents expect to be selling more homes in a year’s time than they are now – with this a slightly lower proportion than in March.
John Wood Group
John Wood Group has turned down a takeover offer from its Dubai-based rival Sidara. Sidara’s offer valued the group at over £1.4 billion, or 205p per share, representing more than a 25% premium to Wood’s opening price on Wednesday. In response to the bid, the Scottish company said Sidara had “fundamentally undervalued Wood and its future prospects”.
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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.
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Just call Peter Uwins, CPA’s National Sales Manager, on 020 8846 0000 (business hours) or email nsm@cpa.co.uk today.
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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.
Get compensated for previous late payments
Have you been paid late by business customers in the last six years?
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.