Business news 9 September 2024
Small businesses bounce back with confidence. Better information would boost lending to SMEs. Tax evasion, Trillion needed, workers rights, WFH, recruitment, house prices, markets, insolvencies & more business news that we thought would interest our members.
James Salmon, Operations Director.
Small businesses bounce back with confidence
Recent research from Novuna Business Finance indicates a resurgence in small business confidence following the new Government’s installation. The study, which surveyed 1,000 small business owners, found that 68% are considering new projects for growth, up from 66% earlier this year. Joanna Morris, head of insight at Novuna Business Finance, stated: “After a period of suppressed and muted confidence, signs indicate that the tide is turning.” The report highlights that 35% of UK small businesses anticipate growth in the next quarter, with significant increases in sectors like manufacturing (81%) and IT and telecoms (77%). Additionally, 23% plan to invest in new equipment, marking a four-year high. This renewed optimism is reflected in hiring plans, with 22% looking to expand their workforce.
Better information would boost lending to SMEs
High street banks are eager to increase lending to small businesses but face significant challenges due to inadequate data sharing, according to Charlotte Crosswell, chair of the Centre for Finance, Innovation and Technology (CFIT). She stated: “Data unlocking and sharing is probably going to drive the next phase of financial innovation.”
The lending to UK SMEs has decreased by 20% over the past decade, resulting in a funding gap exceeding £22bn. Crosswell stressed the importance of open finance technology, which allows banks to access better information for lending decisions.
The SME finance taskforce, led by CFIT, has proposed measures to enhance data sharing and improve access to credit for SMEs, highlighting the potential role of artificial intelligence in transforming lending practices.
Labour urged to listen to small firms on Brexit rules
Mark Ormiston, head of Ormiston Wire, has attributed the decline of his family-owned business to Brexit, stating that small firms have been “flushed down the toilet” by the decision-makers. The London-based company has seen its exports to the EU halve since the UK’s departure, with revenues of £1.5m and limited growth prospects domestically. According to Make UK, the manufacturers’ trade body, exports to the EU have decreased by 80%, severely impacting small and medium-sized enterprises. Ormiston urged Sir Keir Starmer to consider the needs of smaller firms, stressing their role in innovation and design. A government spokesperson stated, “We are working to reset the relationship with our European friends to tackle barriers to trade.”
Small firms responsible for 80% of tax evasion
Analysis by the National Audit Office (NAO) shows that small firms are responsible for more than 80% of tax evasion. The report cites HMRC estimates that £5.5bn was lost to deliberate tax evasion in the 2022/23 financial year, with small businesses responsible for 81% of the total. Despite a reduction in the overall tax gap from 7.4% in 2006 to 4.8% last year, the share attributed to small businesses has risen from 44% to 60% over the past five years.
The report criticises HMRC for lacking a specific strategy to address widespread tax evasion, particularly in retail, where practices like electronic sales suppression and misuse of the insolvency process are prevalent. Gareth Davies, head of the NAO, said HMRC lacked an “effective strategic response” to growing forms of tax evasion. He added: “Tackling tax evasion is not a straightforward task. But real opportunities exist for HMRC to work more systematically across government to reduce it.”
The NAO report also warns that there are “significant gaps” in checks and that overseas companies are still falsely presenting themselves as British-based to evade VAT. A spokesman for HMRC said: “We generated a record £843.4bn in tax revenues last year. The UK has one of the lowest tax gaps in the world, but the Government is committed to reducing it further.”
£1 Trillion needed
The UK economy requires £1trn of extra investment over the next decade to achieve growth rates of around 3%, according to a report from the Capital Markets of Tomorrow.
The report, whose lead author was former Legal and General boss Sir Nigel Wilson, highlights the urgent need for £100m in annual investment, particularly in housing (£20-30bn), energy (£50bn), and water (£8bn). It also stresses the importance of £20-30bn in venture capital to support growth companies.
Sir Nigel stated: “We’ve underinvested in the UK for such a long time, there’s a massive gap between the other G7 countries and ourselves.”
The report was produced for the UK Capital Markets Industry Taskforce (CMIT), an influential body headed by the London Stock Exchange chief executive, Dame Julia Hoggett
We need about £1 trillion of investment over the next decade in order to boost growth in the country, according to London business executives. That is an extra £100 billion of fresh investment every year to put the country on track to achieve 3% annual growth in real wages and real gross domestic product per capita, according to a report from the Capital Markets Industry Taskforce.
“The UK economy and its capital markets have fallen behind the US since the global financial crisis,” said Nigel Wilson “However, there are many potential positives for the UK, and far from subscribing to ‘doom loop’ thinking, we are optimists.”
Tax hikes could drive Britain’s ‘destitution’
Sir Keir Starmer has been warned that tax rises in the Budget could put Britain on the “path to destitution.” With Chancellor Rachel Reeves opting not to rule out the possibility of significant wealth levies, including a mansion tax, as the Government grapples with a £22bn shortfall in public finances, high earners are reportedly preparing to leave the UK. Henley & Partners, which helps wealthy investors to move overseas, estimates that Britain is on track to lose a record 9,500 millionaires in 2024. Treasury officials are said to mulling options including increases in capital gains and inheritance taxes, as well as cuts to pension tax relief for higher earners, with the Prime Minister having suggested the burden could fall on those with “the broadest shoulders.” Robert Jenrick, who is vying to become the next Conservative leader, has warned of a “slow march to Britain’s destitution” under Labour, arguing that the Prime Minister is “determined to hit middle-class people with huge tax rises so he can pay off his union paymasters.”
Mullins to relocate over tax grab
Charlie Mullins, the founder of Pimlico Plumbers, is relocating permanently to Spain amid concerns that Labour could raise capital gains and inheritance tax rates. Mr Mullins, who said he wants to have “no assets in the UK whatsoever” and intends to be out of the UK tax system next year, has been critical of the potential reforms, saying: “You should incentivise successful people, not penalise them.” This Government, he argues, are “driving people with money away from the country.”
Parents act amid IHT fears
Amid speculation over changes in inheritance tax, parents are hastily transferring wealth to their children. With Chancellor Rachel Reeves suggesting that taxes will need to increase to address a £22bn deficit in public finances, inheritance tax is believed to be an area which could be targeted. Lizzie Murray from Saffery says clients who intend to give money to their children are now accelerating those gifts, “taking a risk on the child rather than taking a risk on the Government.” Sean McCann, of insurer NFU Mutual, says middle-class families are using up allowances in case Ms Reeves scraps them, while business owners are handing down ownership to their children early amid concern that Labour will cap business property relief.
Managers support improved workers’ rights
Most employers support Government plans to strengthen workers’ rights, according to research from Institute for Public Policy Research (IPPR) think-tank, the Trades Union Congress (TUC) and Persuasion UK. A survey of 1,000 managers suggests that more than two thirds believe the rights of workers should be improved. The poll suggests that stronger employment rights could boost productivity and improve profitability, while also having a positive impact on employee health and staff retention. TUC general secretary Paul Nowak said: “This polling shows there is large-scale support for boosting workers’ rights among company managers and decision-makers,” while Dr George Dibb, associate director for economic policy at IPPR, said: “We know that having a happy, healthy, motivated and productive workforce is good for employees, but it’s also fundamental for the bottom line of a business.”
Hiring slowed in August
Recent economic uncertainty has led to a significant slowdown in hiring, according to a permanent placings index from the Recruitment and Employment Confederation (REC) and KPMG, which fell to 44.6 in August from 47.7 in July. The index has been below the 50-point mark that separates growth from contraction since October 2022. Temporary hiring also contracted in August, with the index down to 49.5 from 49.8 the previous month. Jon Holt, chief executive and senior partner of KPMG in the UK, said: “Recent government warnings that the UK’s economy may weaken further before improving add to the overall sense of uncertainty, affecting recruitment plans.” Neil Carberry, chief executive of the REC, said that while there was “underlying momentum” in the jobs market, “employers are still cautious.”
Recruitment at decade low
The jobs market in the UK has experienced its worst month in over a decade, according to a report by BDO, which revealed a decline for the 14th consecutive month with a reading of 95.89 on a scale where a score above 95 signals growth. This indicates that while recruitment is still expanding, it is at its lowest level since January 2013. The report highlights a decrease in job vacancies as businesses slow or freeze hiring amid challenging economic conditions. Meanwhile, output across the services sector rose to a two-year high in August, with a reading of 99.03. Kaley Crossthwaite, a partner at BDO, said the services sector has continued to be the “cornerstone of economic growth.”
WFH good for the economy
Business Secretary Jonathan Reynolds says remote working is good for the economy because people are more productive when they are happy. He said: “You do your best work when you’re happy at home and when you’re happy at work, you’re happy at home.” Saying that he is happy for staff in his Department for Business and Trade to work remotely and live in any part of the UK, Mr Reynolds said: “Sometimes, I’ve got people in the room, sometimes I’ve got people at home. Sometimes I’ve got people in many of the different offices that we have … I think being open to that kind of talent makes the organisation I lead far more effective. I think a lot of business leaders recognise that.”
PM defends ‘tough decision’ over winter fuel cut
The Prime Minister has defended his “tough” decision to cut winter fuel payments for most pensioners, saying his Government is “going to have to be unpopular” as it addresses “the things the last government ran away from.” Sir Keir Starmer told the BBC’s Sunday with Laura Kuenssberg that the cut was necessary because of the state of the country’s finances. Meanwhile, Health Secretary Wes Streeting told Sky News that while he is “not remotely happy about” the cut in winter fuel payments, he hopes that the public will “take some reassurance that this isn’t a government that ducks difficult decisions or pretends you can spend money you don’t have.”
Markets
On Friday, the FTSE 100 closed down 0.73% at 818.47 and the Euro Stoxx 50 closed down 1.6% at 4738.06. Later in the US the S&P 500 fell 1.73% to 5408.42 and the NASDAQ fell 2.55% to 16690.83.
The selloff was sparked by negative US data. Non Farm payrolls rose 142k in the US verses expectations of 165k and the unemployment rate was 4.2% compared to 3.8% a year ago. The low number reinforced concerns about the US economy and markets reacted negatively even if this boosts the rate cutting expectations of the FED.
Nvidia once again the leading faller, followed by fellow semiconductor company Broadcom, which dropped after a disappointing sales forecast. Nvidia has lost a fifth of its value over the past two weeks, wiping out more than $400 billion in value this week alone. Tesla, Amazon and Microsoft were also among the tech megacap leading declines.
This morning on currencies, the pound is currently worth $1.309 and €1.185. On Commodities, Oil (Brent) is at $71.8 & Gold is at $2496. On the stock markets, the FTSE 100 is currently up 0.6% at 8232 and the Eurostoxx 50 is up 0.95% at 4783.
Mortgage rates hit two-year low
The UK mortgage market is experiencing a resurgence as major lenders like NatWest and Halifax offer five-year fixed rates below 4%. In July, 61,985 new mortgages were approved, marking a significant increase from previous months. Ross Lacey from Fairview noted: “There’s definitely a much more positive feeling in the mortgage market at the moment,” highlighting the growing demand for these competitive rates. The lowest five-year fixed rate is currently 3.77% from NatWest, while two-year fixes remain above 4%. Experts predict that as rates continue to drop, buyers may rush to secure deals before property prices rise further.
UK housing market rebounds with 4.3% rise
According to Halifax, the average UK home price increased by 4.3% in August, reaching £292,505, the highest since August 2022. Amanda Bryden, head of mortgages at Halifax, commented: “Recent price rises build on a largely positive summer for the UK housing market.” Despite this growth, London saw only a 1.5% increase year-on-year. Monthly growth slowed to 0.3% in August from 0.9% in July. Falling mortgage rates have boosted the market, with many lenders offering five-year fixes below 4%.
Barratt Developments
Barratt Developments said it has entered into a joint-venture deal with lender Lloyds Banking Group and the UK government’s housing and regeneration agency Homes England. The JV will be the master developer for “multiple large scale, residential-led developments”. The developments will include 1,000 to more than 10,000 homes, alongside “a variety of community facilities and employment uses”.
Body Shop stores rescued from administration
The Body Shop has been rescued from administration, with a consortium led by the British tycoon Mike Jatania acquiring the beauty brand’s remaining UK stores. Mr Jatania’s investment firm Auréa Group, which will also gain control of the Body Shop’s assets in Australia and North America, said it has “no immediate plans” to shut the remaining 116 UK stores. Mr Jatania will serve as executive chairman and Charles Denton, former chief executive of Molton Brown, will take over as CEO. Private equity firm Aurelius paid £207m for The Body Shop in 2023 but placed the UK arm into administration in February 2024, owing more than £276m to creditors. FRP Advisory has since closed 85 stores, while almost 500 shop and at least 270 office roles have been axed.
Bank of London Group handed winding-up petition
The Bank of London Group has been handed a winding-up petition by HMRC. This comes just days after its founder, Anthony Watson, stepped down as chief executive. Legal filings show that the tax office issued a winding-up petition against the loss-making fintech firm’s holding company. A Bank of London Group spokesperson said the clearing bank is “fully up to date with all tax payments to HMRC.”
Latest Insolvencies
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Appointment of Liquidators – BIG BUSH LIMITED
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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.