Business news 10 February 2025
Business confidence hits two-year low. Job openings decline as costs climb. UK faces £18bn hit from Trump’s tax cuts. Closer EU ties could boost the economy. Markets, insolvencies & more business news that we thought would interest our members.
James Salmon, Operations Director.
Business confidence hits two-year low
Business optimism in the UK reached a two-year low in January, according to analysis by BDO. The firm’s index measuring confidence across British manufacturing fell to 92.20 from 93.41 in December, marking the fourth consecutive month of decline and the lowest level since January 2023. BDO partner Kaley Crossthwaite said: “Our report shows that supporting growth and addressing workforce challenges need to be a key priority for the year ahead.” The decline in confidence is attributed to Government plans to increase both employer National Insurance contributions and the minimum wage.
Job openings decline as costs climb
Job openings in the UK have seen their steepest decline since the pandemic, with permanent vacancies dropping for the 15th consecutive month, according to KPMG and the Recruitment and Employment Confederation (REC). The KPMG/REC vacancy index fell from 42.9 in December to 41.6 in January on an index where a reading below 50 means more recruiters believe the market is weakening than improving. Tax increases set out in the Budget have contributed to this downturn, with businesses facing a combined hit of around £25bn from a hike in employers’ National Insurance contributions. Jon Holt, chief executive of KPMG, noted that recruitment is unlikely to improve soon, warning: “It is unlikely that we will see any significant improvements in the survey data over the near term, as hiring stays muted and staff availability continues to rise.”
UK faces £18bn hit from Trump’s tax cuts
Economic modelling suggests that Donald Trump’s tax plans could hit the UK economy to the tune of £18bn, with the President vowing to cut corporation tax rates in the US and reject the OECD’s minimum tax deal. While corporation tax in the UK stands at 25%, Mr Trump has pledged to cut the US’ corporate tax rate from 21% to at least 15%. Analysis suggests that if Mr Trump were to cut business taxes so heavily, it would hit American investment in the UK. The Prosperity Institute said that if the US government cuts corporate tax to 14% – a point below the OECD’s minimum threshold of 15% – foreign direct investment from the US to the British economy would fall by up to £18.2bn between now and 2030/31. This, it added, would negatively impact the UK’s GDP by 0.1% over the same period, representing a hit of around £3.4bn. A Treasury spokesman said: “The UK has been recently recognised as the second most attractive investment destination in the world,” adding: “Our competitive tax system is just one way we are going further and faster to kick-start that economic growth.”
Closer EU ties could boost the economy
A report by Frontier Economics suggests that the economy could be boosted by 2.2% if the UK was more closely aligned to the EU. The study, which was commissioned by Best for Britain, found that the UK Government could see growth of around 1.7% to 2.2% by aligning policy on both goods and services with the EU, while alignment on goods alone could drive growth by between 1% and 1.5%. The report says deep alignment would see mutual acknowledgement of each other’s standards, rather than adopting identical rules. Such alignment, the study estimates, could boost the UK economy by £26.52bn and the EU by £23.9bn. Marco Forgione, director general of the Chartered Institute of Export and International Trade, said that while there is “a huge opportunity to be grasped” by removing barriers to trading goods, “it depends if there is a will to do it.”
Reeves in growth talks with bank bosses
Chancellor Rachel Reeves will this week meet with the bosses of Britain’s biggest high street lenders, with talks set to focus on the Government’s plans for economic growth. Attendees including HSBC chief executive Georges Elhedery, Nationwide CEO Debbie Crosbie, Lloyds chief Charlie Nunn, and NatWest boss Paul Thwaite – as well as senior representatives of Barclays and Santander UK – will discuss Labour’s financial services growth strategy, with sources saying the Chancellor will ask for insight on ways ministers can boost the economy. Ms Reeves has already urged economic regulators to remove barriers to growth.
Welfare overhaul will get people back to work
Ministers are planning an overhaul of the welfare system in a bid to address the “greatest unemployment challenge of a generation,” with an increasing number of people deemed unfit to work. A Government source has told the Observer that Labour “will fix the broken benefits system because getting more people into good jobs is crucial to improving their living standards and life chances and getting the welfare bill on a more sustainable footing.” Ministers will look to deliver reform amid concern that some people who want to work are worried that efforts to enter the workforce will see their benefits withdrawn. A Government poll found that 200,000 people claiming health and disability benefits said they would be ready to work if the right job or support were available.
Lawyers warn over employment claims
Analysis by law firm Birketts revealed that English and Welsh businesses have spent an average of 4.8 weeks in the last 24 months handling Employment Tribunal claims. The most common claims were found to be those related to unfair dismissal (23.9%), with disability discrimination (22%) a close second. Catherine Johnson, a partner in Birketts’ employment team, says employment claims “have become a costly burden for businesses.” Noting that “new and strengthened” workplace rights are a central element of the Government’s policy agenda, she suggested that “staying ahead of the rapidly changing employment law landscape has never been so important for businesses and their HR leaders.”
Caution needed on rate cuts
The Bank of England’s chief economist says there remains “reason for caution” on cutting interest rates, pointing to underlying price pressures and highlighting a “surprising” surge in wage growth at the end of 2024. With private sector wage growth climbing 6% in the three months to November, Huw Pill said: “I think that is a reason for caution, for carefulness in the way we proceed with removing monetary policy restriction and cutting bank rate.” Urging caution on “rushing” to cut rates while inflationary pressures persist in the economy, he added: “We’re not in a situation where we can declare job done.”
US should support World Bank and IMF
Andrew Bailey, governor of the Bank of England, has urged continued US support for the International Monetary Fund and the World Bank amid reports that the economic institutions were caught by a White House executive order for a review of international organisations including the UN. Stressing that it is “very important that we don’t have a fragmentation of the world economy,” Mr Bailey said: “A big part of that is that we have support and engagement in the multilateral institutions … that support the operation of the world economy.”
Markets
London markets were gently lower on Friday as investors focused on economic data ahead of a US jobs report. The FTSE 100 closed down 0.31% at 8700.53 and the Euro Stoxx 50 closed down 0.58% at 5325.40.
In UK news, the average house price rose 0.7% month on month in January, lender Halifax said on Friday, bringing it to £299,138, a new record high. On an annual basis, average house prices were up 3%, according to Halifax’s House Price Index. The January move followed a monthly price decline of 0.2% in December. Property prices in London rose 2.8% year on year to reach an average £548,288 in January.
Data showed US non-farm payrolls rose by 143,000 in January, down from 307,000 in December and below the 169,000 forecast. While the figures were weaker than expected, the US unemployment rate dipped to 4.0% from 4.1%. In response Wall Street saw the S&P 500 fall 0.95% to 6025.99 and the NASDAQ fell 1.36% to 19523.40.
Tesla said sales of its car to China declined in January, as competition from domestic rivals continued to heat up. Tesla sold 63,238 units of its electric cars in January, down 11.5% from the 71,447 cars sold in the same month last year.
This morning on currencies, the pound is currently worth $1.241 and €1.202. On Commodities, Oil (Brent) is at $75.4 & Gold is at $2903. On the stock markets, the FTSE 100 is currently up 0.34% at 8730 and the Eurostoxx 50 is up 0.23% at 5338.
Tariffs
The United States will move to impose 25% tariffs on steel and aluminium imports from today, Donald Trump said on Sunday, the latest in a slew of trade levies the US leader has announced. Canada, China and Mexico are the country’s biggest suppliers of the metals. Trump made the announcement on board Air Force One en route to attend the Super Bowl American football championship game in New Orleans, according to a White House pool report. Trump on Friday said that he would announce further “reciprocal” tariffs.
UK IPOs set to rebound
Analysts at broker Peel Hunt say that the UK IPO market is set to “spring back to life” this year, saying that a number of issuers “are currently monitoring windows” in Q2, “which we expect to be the first real test of the UK IPO market in 2025.” The UK fell to 35th among all stock exchanges for IPOs last year, with only five companies worth more than £30m debuting on the London Stock Exchange.
House prices hit record high
Data from Halifax shows that UK house prices hit a record high in January, climbing 0.7% month-on-month and 3% year-on-year to hit an average of £299,138. Amanda Bryden, head of mortgages at Halifax, commented: “Affordability is still a challenge for many would-be buyers, but the market’s resilience is noteworthy.” She noted that the “strong demand for new mortgages and growth in lending” may be driven by first-time buyers trying to complete deals before an increase in stamp duty in April. The reform will mean buyers will start paying stamp duty on properties over £125,000, instead of the current threshold of £250,000. While first-time buyers currently pay no stamp duty on homes up to £425,000, this will drop to £300,000 in April.
Higher earners work around tax traps
Recent figures indicate that higher earners are increasingly opting to reduce their take-home pay to navigate punitive tax rates. When income exceeds £100,000, individuals begin to lose their £12,570 tax-free personal allowance, leading to effective tax rates that can soar to nearly 600% on additional earnings. Myron Jobson from Interactive Investor, says: “Some, where possible, are opting for salary sacrifice schemes where you can ask your employer to pay more into your pension instead of increasing your taxable income.” This strategy not only lowers taxable income but also enhances pension contributions.
Campaigners call for tax loophole to be closed
Tax campaigners and retailers are urging the Government to address a significant tax loophole that allows Chinese companies to flood the market with cheap goods. Paul Monaghan, chief executive of the Fair Tax Foundation, warned that the UK could see “a massive influx of even more Shein and Temu products” unless action is taken. Retail leaders, meanwhile, have emphasised the need for a level playing field to ensure fair competition. The current UK import duty threshold stands at £135, while items valued at £39 or less are exempt from VAT. The EU has said it is moving forward with plans to ditch its €150 threshold for import duty, while President Trump has said he will eliminate the current $800 “de minimus” limit under which customs duty is not payable for goods entering the US from China.
Trump may seek DST trade-off over tariffs
British officials anticipate that the White House will push for reduced taxes on major tech companies such as X, Amazon, and Facebook, along with relaxed regulations, in return for avoiding trade tariffs. The UK’s Digital Services Tax, which generates £1bn annually, was implemented due to concerns over the low taxes such firms pay on substantial profits earned in the UK. A Treasury source has indicated that Chancellor Rachel Reeves is planning to engage with the US on its concerns around the tax. The Treasury has no “intention” to repeal the DST, which raises up to £1bn a year, but is expecting President Trump to call for it to be scrapped after he promised retaliation against countries that “have any tax rules in place, or are likely to put tax rules in place, that are extraterritorial or disproportionately affect American companies.”
Complex tax system drives up HMRC’s admin costs
National Audit Office (NAO) analysis shows that the UK’s increasingly complex tax system is imposing significant administrative costs on both the Government and businesses. HMRC’s administration costs for running the tax system rose by 15% – or £563m – in real terms between 2019/20 and 2023/24 to reach £4.3bn, while tax revenue increased at a similar rate, according to the NAO. Looking ahead, administrative expenses are projected to increase by £875m due to new tax rules and fraud detection efforts. The report also notes that “poor customer service performance” created “additional cost” for HMRC and taxpayers. Gareth Davies, head of the NAO, said: “Businesses and individuals deserve a modern, resilient and effective tax system to help them get their tax right first time.” Reflecting on the report’s findings, Sir Geoffrey Clifton-Brown, chair of the Public Accounts Committee, said: “Public trust in HMRC is being eroded as taxpayers find it difficult to deal with HMRC.” Meanwhile, the analysis shows that the number of people paying income tax surged by 4.5m, with this driven by fiscal drag from frozen tax thresholds.
Female-led firms perform better but struggle for funding
Research by the Kauffman Foundation indicates that female-led tech teams yield 35% higher returns than their male counterparts. However, analysis from research firm Beauhurst shows that female-founded teams received only £145m in the first half of 2024, with this representing just 1.8% of the £8bn total UK equity investment, with all-male teams securing £6.92bn. Kauffman also found that just 5% of angel and VC investors in Europe are women, while male investors are half as likely to fund a woman as a female investor would be. Venture capital firm First Round Capital notes that analysis of its 300 investments over ten years shows that the female-founded firms it backed did 63% better than its all-male businesses.
Executive exits increase
The corporate landscape is witnessing an unprecedented wave of CEO departures, with data from the headhunting firm Russell Reynolds Associates showing that 202 CEOs stepped down in 2024, a 9% increase from the previous year. This is partly attributed to the economic climate, with Laura Sanderson of Russell Reynolds saying “increased volatility … has made the role harder, more relentless and higher pressure.” Activist investors are also playing their part, agitating for change in a bid to revive share prices. Meanwhile, analysis from stockbroker AJ Bell shows that nearly a dozen listed CFOs have already stepped down this year. The report also shows that the average tenure of a CFO is down by 20% to just four years. David Anderson, a partner in Deloitte’s finance practice, says: “The CFO’s job would be much easier to manage if it were neatly defined,” adding: “The reality? The CFO’s role is continuing to expand far beyond their traditional responsibilities.”
Banks make £30bn from net interest income
Analysis shows that, between them, Lloyds, NatWest and Barclays last year made £30bn by exploiting the gap between the rates for savers and borrowers. A typical two-year, fixed-rate mortgage costs 5.5% in interest, while an instant access savings account pays just 2.9%, according to financial experts Moneyfacts. As well as profiting from their net interest income, lenders also earn from money they keep at the Bank of England, with up to £40bn a year of interest having been paid on these reserves.
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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.