Business news 10 June 2024
Small Businesses want a clamp down on poor payment practices. Labour to unveil entrepreneur-friendly policies for small businesses. Politics, markets, insolvencies and more business news that we thought would interest our members.
James Salmon, Operations Director.
Small Businesses want a clamp down on poor payment practices
The Federation of Small Businesses (FSB) has urged the next government to focus on a better trading relationship with the EU, reform business rates, and clamp down on poor payment practices towards smaller suppliers.
It also wants to see an improvement in small businesses’ access to finance and a 33% statutory public procurement target for SMEs.
A poll by the FSB shows that while 96% of small business owners intend to vote, 20% have yet to decide who they will vote for and 33% have a good idea but could still change their mind. The FSB’s policy chair, Tina McKenzie, said small business owners and the self-employed are “looking for which of the parties has the most compelling pro-small business offer.”
The poll found that 90% of small business owners are concerned business taxes could rise under the next government, while 92% fear that a future government could increase the costs and risks associated with employing people. FSB members surveyed say they want a commitment to a series of tax measures to support the sector. These include fundamental reform of business rates; no increases in tax on dividends for directors of limited companies and National Insurance for the self-employed; and a restoration of the small profits threshold for corporation tax.
The FSB have said more than half of small businesses it surveyed recently had experienced late payments in the previous three months. It has said thousands of small businesses are being held back by a “systemic poor payment culture” and a lack of adequate legislative protection. If late payments were clamped down on, 50,000 business closures could be avoided each year, according to previous FSB research.
Labour to unveil entrepreneur-friendly policies for small businesses
Labour is set to promise to “pull up the shutters” for small businesses as it unveils a series of entrepreneur-friendly policies. The plans include an overhaul of the business rates system, guaranteeing access to high street banking services, and cracking down on antisocial behaviour.
Labour aims to stamp out late payment of invoices by forcing large businesses to report on their payment practices. Sir Keir Starmer, leader of the Labour Party, accuses the Conservatives of holding back small businesses. The Federation of Small Businesses approves of Labour’s proposed overhaul of the business rates system. However, it remains unclear what Labour would replace business rates with. Business minister Kevin Hollinrake criticises Labour’s policies, claiming they would harm small businesses and reduce flexible working.
CPA has long argued that requiring large businesses to report payment practices has little effect on late payments. To tackle late payments, you have to discourage late payments by making the late payment of invoices one of the most expensive forms of cash flow management rather than what it is now – the cheapest!
The only way to do that is to increase the late payment compensation levels that haven’t moved in almost two decades and to tighten up regulations on late payment so small suppliers are compensated properly when they have been paid late.
Permanent appointments fall again
Analysis by KPMG and the Recruitment and Employment Confederation (REC) reveals that the number of people taking up permanent jobs has fallen for the 20th consecutive month. The decline is attributed to a shortage of vacancies and slow decision-making from companies. However, the decrease in permanent job appointments is the smallest in over a year. Temporary job appointments have also slightly declined. Staff availability is at its highest level since December 2020 due to reduced demand, redundancies, and increased unemployment. Pay continues to rise as a result of a competitive labour market and the impact of minimum and living wage increases.
Neil Carberry, chief executive of the REC, said: “The jobs market looks like it’s on its way back, with clear improvements over last month on most key measures.” He added: “There is potential energy stored in the economy, as employers are feeling more confident.” Jon Holt, chief executive of KPMG in the UK, said: “Unemployment is historically low, with the ease of filling vacancies back to pre-pandemic levels.” “Over the summer, we will hopefully move towards a better economic outlook for the second half of 2024,” he added.
Education in need of reform
Rachel Sylvester, who chaired The Times Education Commission, warns that a “one-size-fits-all education system is failing to draw out the individual talents of every child.” She cites a new poll which shows that only a fifth of voters think schools prepare young people well for work, only a tenth believe they give children the life skills they need for the future, and fewer than a fifth think the education system caters to the needs of the economy.
Ms Sylvester also highlights a recent survey of 1,200 companies by PwC which saw more than half rank education as one of the three most important drivers of growth in their sector, with more than a quarter ranking it as the most important. PwC chairman Kevin Ellis comments: “The world is changing so fast. If you think about the disruption that’s going on, the education system was not built for technology, let alone AI, so you’ve got to make it more engaging, more about soft skills and lifelong learning.”
Think-tank: Growth since 2010 has been ‘unspectacular’
A study from the Resolution Foundation says growth in the UK economy since 2010 has been “unspectacular” and driven by an increase in the population stemming mainly from high levels of immigration. The report – Life in the Slow Lane – says UK population growth has averaged 0.7% a year since 2010, with three-quarters of this the result of immigration. The increase, it adds, has been the prime driver of GDP growth. The report says: “GDP per capita has grown by a mere 4.3% over the past 16 years, compared to 46% in the years prior.” It also highlights the UK’s “atrocious” record on productivity – output per worker – which grew by just 0.6% a year in the 2010s. Conservative peer David Willetts, president of the Resolution Foundation, said: “The growth of GDP per head is far too low,” adding that there is a need to “boost investment to get the economy growing.”
Next government will inherit an improving economy
Jeremy Warner in the Sunday Telegraph said that while Shadow Chancellor Rachel Reeves has warned that a Labour government will face the worst economic inheritance since the war, “it is not the case for the economy as a whole.” He suggests that “far from being on the brink of another recession, the UK economy is about midway through the current cycle with a good few years of sustained growth to go.” Mr Warner highlights that Q1 growth was considerably higher than expected; business investment has picked up sharply over the last year; and inflation has “come right back down again.” He adds: “Interest rates will soon be following suit; and real wages are once more rising,” while a “long hiatus” in business investment “may finally have run its course” and years of underinvestment “may be about to come to an end in a dam-burst of pent-up spending.” Mr Warner says: “There is no reason to believe the change in government is going to dramatically change the big picture on the economy. Luckily for them, the trend is one of improvement.”
Ministers urged to prioritise economic growth in regulators’ mandates
City Minister Bim Afolami has called on the next government to prioritise economic growth in the mandates of independent regulators. Mr Afolami, the Economic Secretary to the Treasury, believes that regulators should consider economic growth alongside market safety and soundness. This comes amid tension between watchdogs and ministers. The government has criticised the Financial Conduct Authority’s proposal to name companies under investigation, warning that it could deter businesses from investing in Britain, with Mr Afolami suggesting that businesses find the regulator “overbearing and interfering”. The Conservatives have also clashed with the Bank of England over financial regulations. A recent report by BDO found that “regulatory risk” is now the biggest threat cited by companies.
You now need to earn £214,000 to be considered wealthy
In order to be considered wealthy in the UK you need to earn £214,000 per year, according to income tax analysis. This marks a significant increase from the previous threshold of £102,000 in 2000. The top 1% of earners now contribute 28.5% of the national income tax burden, while the top 10% contribute 60.3%. But tax bills are expected to rise regardless of the election outcome. Nimesh Shah, of accountancy firm Blick Rothenberg, said: “Top earners have in no way been immune to an increased tax burden during the time of Conservative government,” adding: “Whoever is elected to government are likely to continue raising taxes from higher earners.”
Markets
On Friday, the FTSE 100 closed down 0.48% at 8245.37 and the Euro Stoxx 50 closed down 0.35% at 5051.31. Over in the US the S&P 500 fell 0.11% to 5346.99 & the Nasdaq fell 0.23% to 17133.13.
London equities dropped as investors considered the fiscal implications of a Labour win, and possible immediate tax rises that the incoming Labour government may have to implement, including hikes to CGT. While in the US, expectations for a FED rate cut have been pushed back after US payrolls for May showed surprising strength.
In the US the big news was the Non Farm payrolls report showing the US added 272k jobs beating all estimates and trouncing the average forecast at 180k and last months figure of 165k.
The pound is currently worth $1.2697 and €1.1825. Brent is at $79.76, Gold is at $2299. The FTSE 100 is down 0.33% at 8218 and the Eurostoxx 50 is down 1.16% at 4993 as European stocks were hit by Macron’s calling of a snap election in France. The Euro was also down sharply on poor EU Parliament results for incumbent parties and heightened political uncertainty.
In a bad dad for the UK market, Ashtead Group, one of the largest American focused companies on the LSE, is reportedly in early stages of exploring a move of its listing to New York. And Walgreens has reportedly shelved plans for a Boots IPO in London.
Asda
Zuber Issa has sold his 22.5% stake in ASDA to TDR Capital for an undisclosed sum leaving the private equity group with 67.5% of the grocer. The terms were kept private. The deal leaves Mohsin Issa with 22.5% and Walmart with 10%. The ASDA acquisition for £6.8bn in 2021 has struggled under the weight of significant debt.
Unite refuses to endorse Labour’s manifesto
Labour’s largest union donor, Unite, has refused to endorse the party’s manifesto, dealing a blow to Keir Starmer’s election campaign. The decision came as a shock to members of the shadow cabinet, including David Lammy, who expressed his surprise. The party’s stance on practices like fire-and-rehire is believed to be the reason behind Unite’s refusal. Unite general secretary Sharon Graham, who has previously called for stronger employment rights, cancelled planned talks with reporters after the meeting. The union donated £3m to Labour’s campaign in 2019 and warned last year that there were “no blank cheques” for the party. Momentum, a left-wing group, also expressed disappointment with the party’s commitments. The SNP described the fallout as “damning”. The manifesto, based on the party’s five missions for government, is expected to be officially launched on June 13
Politicians ‘tie themselves in knots’ with tax pledges
Paul Johnson, director of the Institute for Fiscal Studies think-tank, has warned the Conservatives and Labour that they should stop ruling out tax increases as it could lead to more complicated and economically damaging taxes. With both Labour and the Conservatives having promised not to raise income tax, National Insurance, or VAT, Mr Johnson told Sky News: “What worries me, I suppose, is that we will then end up – because they’ve ruled out the sort of simple taxes – we’ll end up with complicated and actually quite economically damaging taxes,” adding: “Whether it’s on companies or on investment or what have you, which people can’t see.” He added: “I just wish they would stop saying what they’re not going to do because they tie themselves in knots.” In a piece for the Times, Mr Johnson writes that whoever forms the next government, “it will need to cut spending or raise taxes or it will miss its own fiscal targets.”
Separately Bloomberg say neither Prime Minister Rishi Sunak nor Labour leader Keir Starmer are fighting the UK election with a credible economic policy, and whoever wins will likely have to break their promises not to raise tax. Tax policy has taken centre stage during the campaign, with Mr Sunak accusing Mr Starmer of plotting to raise levies by £2,000 per household over the next five years. Dan Hanson and Ana Andrade of Bloomberg Economics said: “Promising to not raise income tax, VAT, National Insurance contributions and, in Labour’s case, corporation tax – which together account for about 66% of all tax revenue – might be good politics, particularly during an election campaign … But with material risks currently hanging over the public finances, it isn’t a credible economic policy.”
Labour’s ‘iron-clad commitment’ will rule out tax rises
Shadow Chancellor Rachel Reeves says Labour’s manifesto will contain an “iron-clad commitment” that rules out increases to income tax, National Insurance and VAT for five years. Dismissing Conservative claims that Labour will increase taxes by £2,000, Ms Reeves said: “Everything in our plans is fully funded and fully costed through the tax loopholes we would close. Nothing in our plans requires any new taxes.” Ms Reeves added that while she wanted “taxes to be lower,” she would not promise cuts “without telling you where the money is going to come from or being able to guarantee it will be delivered.” Meanwhile, Labour leader Sir Keir Starmer has told Sky News that there “won’t be surprises on tax,” saying: “All of our plans, fully costed, fully funded. And none of them involving tax rises over and above those that we’ve already set out.”
Voters split on tax pledges
YouGov polling on general election policies shows that while the Conservatives and Labour have committed to not raising income tax, National Insurance or VAT, just 46% of people surveyed supported the idea – with 30% opposing the plan and the rest unsure. It was also shown that 73% of respondents back a Tory plan to raise the amount of income pensioners can receive before having to pay income tax in line with the annual increase in the state pension under the existing triple lock.
UK households face £800 annual tax rise after election, warns think-tank
Tax rises “hiding in plain sight” are projected to generate £23bn annually by the end of the next parliament, regardless of the election outcome. The Resolution Foundation has estimated that a series of stealth increases will result in an additional £800 per year for the average household by 2029. The freeze on income tax thresholds, which have not kept pace with inflation since 2021 and are expected to remain unchanged until 2028, is the largest contributor to the rise. National insurance thresholds will also be frozen, and relief on fuel and stamp duty is set to expire. Adam Corlett, principal economist at the think tank, stated that neither party has committed to reversing these stealth rises, urging politicians to be honest with the public about the impending tax increases.
HMRC to expand tax investigations
Both the Conservatives and Labour are lining up a major expansion of tax investigations, with Labour having pledged to invest £555m to recruit more tax inspectors to reduce evasion and raise more than £5bn a year extra by the end of the next Parliament. Harvey Jones in the Sunday Express says HMRC’s super computer, Connect, means the tax office can “delve deeper into people’s financial affairs than ever before.” The £80m software mines online data and cross-references it with other databases to root out fraudulent or undisclosed activity. HMRC Connect holds more than 55bn items of data on taxpayers that it can compare against its own records to highlight discrepancies.
Meanwhile, research by law firm Pinsent Masons shows that HMRC received 9.5m disclosures of data about UK taxpayers from foreign tax authorities in 2022, with this up 48% in just three years. Steven Porter, head of tax disputes and investigations at Pinsent Masons, notes that HMRC collected an extra £1.6bn worth of tax last year by targeting avoidance schemes, and £83m investigating trusts. It also collected an extra £350m worth of inheritance tax, £570m in capital gains tax and £86m of additional stamp duty.
Developers opt for office refurbs
Developers in London are increasingly choosing to refurbish offices instead of building new ones due to pressure from a slow planning system and occupiers’ demands for environmentally friendly buildings. According to a survey by Deloitte, refurbishment work started on 2.8m sq ft of office space in London between October 2023 and March this year, compared to only 1.4m sq ft of new office schemes. This trend reflects a “flight to quality” among corporate renters and a focus on achieving net-zero emissions. The demand for workspace has increased, but mainly for prime offices, while older, less eco-friendly blocks in secondary locations struggle to find occupiers. The analysis suggests that developers are becoming more optimistic about the leasing market, particularly for best-in-class towers.
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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.
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.
Unlike other credit management companies, we offer our members a fixed annual subscription regardless of how high the debt value maybe!
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 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.