Business news 10 July 2023
James Salmon, Operations Director.
UK economy expected to have shrunk in May. Hiring slows amid economic uncertainty. British companies optimistic about trading prospects. Climate, retail, hospitality, tax the 4-day-week, banking, insurance and more business news that we thought would interest our members.
UK economy expected to have shrunk in May
The UK economy shrank in May due to a combination of industrial action and the Coronation of King Charles, data from the Office for National Statistics is expected to show on Thursday. Economists believe UK GDP fell by 0.4% in May, versus a 0.2% gain it made the previous month. The decline in output in May will send the three-month rolling GDP figure down to -0.1%. Martin Beck, chief economic adviser to the EY ITEM Club, said a fall in GDP in May was “all but certain”, due to the extra bank holiday. Although economists believe the economy will make it back up in June, they warn rising interest rates may tip an already flat economy into recession in the second half of the year.
Hiring slows amid economic uncertainty
Pay pressures in Britain’s labour market cooled further in June amid uncertainty over the economic outlook, according to a survey by the Recruitment and Employment Confederation and KPMG. Starting salaries for permanent and temporary staff were the weakest since April 2021 while the availability of staff rose for the fourth month in a row. “This is likely driven by people reacting to high inflation by stepping up their job search, and by some firms reshaping their businesses in a period of low growth,” Neil Carberry, REC’s chief executive, said. While the figures can be seen as positive for curbing inflation, Claire Warnes, a partner at KPMG UK, said that the sharp upturn in candidate availability was a big concern for the economy. “Employers are also tending towards temporary hires, given lingering economic uncertainty,” she said, “and yet the labour market remains reasonably resilient, with notable demand for skilled workers, both permanent and temporary, across a multitude of sectors this month.”
British companies optimistic about trading prospects
Trade body Make UK and accountants BDO reported that British companies were the most optimistic about their trading prospects in 10 months in June. The survey also showed an increase in hiring plans. However, rising interest rates may lead to a decrease in consumer spending. The survey’s gauge of inflation pressure dropped to its lowest level in nearly two years. The employment index saw its fifth consecutive monthly increase, with more self-employed and part-time workers. Output growth slowed down, with manufacturers experiencing the worst output reading since May 2020.
Climate
Last week we saw the world record on temperature smashed not once, not twice but three times. Monday and Tuesday set consecutive records before they were surpassed on Thursday with the global average temperature hitting 17.23C.
Separately, president of World Athletics, Lord Coe, said that poor air quality and temperature rises mean London is now unlikely to be chosen to host future international athletics events like the Olympics he was responsible for bringing to London in 2012.
Retailers struggle as consumers scale back spending
Retailers continued to show signs of struggling in June, as sales growth remained well below inflation due to customers scaling back their shopping habits. Total like-for-like sales in June grew 1.9% from last year’s base of 8.4%, according to figures from BDO, but the growth remained below inflation, which has sat at 8.7% since April. Reports of insolvencies in the retail sector have increased significantly recently, with the number of retailers entering insolvency jumping by 56% in the past year, reaching the highest level in nearly a decade.
Hospitality sector concerned over summer staffing
The UK’s hospitality sector is still short-staffed and businesses fear they will struggle to cope over the busy summer holiday season. That’s according to trade body UKHospitality, whose CEO Kate Nicholls said: “The workforce shortage is creating a serious crisis as we head deeper into the peak summer season. Nearly half of businesses are reducing trading hours per day, and a third are having to close on some days each week.” Figures from the Office for National Statistics show there are 132,000 unfilled roles in the sector – 48% above pre-pandemic levels.
Chancellor rules out big UK tax cuts and admits inflation goal ‘challenging’
Jeremy Hunt has said the Government will “not countenance tax cuts” this autumn if they will make the battle to bring inflation under control harder. In an interview with the FT, Mr Hunt said achieving Rishi Sunak’s promise of halving inflation by the end of the year was “going to be more challenging than we thought.” He added: “If we were to pump billions of pounds of additional demand into the economy when inflation is already too high, that would mean fiscal policy working against monetary policy.”
Families unfairly penalised by UK tax system, report warns
The UK tax system must be reformed to eliminate unfair penalties on families, according to a report by the Centre for Policy Studies (CPS) and the Conservative Growth Group. The research found that couples with two children and a single earner of £60,000 pay over £7,000 more in tax compared to if both parents earned £30,000 each. The CPS is urging ministers to prioritize turning the marriage allowance into a transferable parental personal allowance, which would cost £3.6bn but help reduce poverty.
Conflict over four-day week in the public sector
The Guardian details how the TaxPayers’ Alliance (TPA) has been lobbying against the adoption of the four-day week at English councils, claiming the day off amounts to a free holiday and says that is “simply unacceptable” in the public sector. South Cambridgeshire district council is trialling the scheme and claims the four-day week has boosted recruitment and retention while improving performance. However, local government minister Lee Rowley last week told the council to end the experiment immediately after research by TPA revealed a four-day week in the public sector could cost £30bn a year in lost time. Several other English councils are said to be considering testing the approach in what the Guardian describes as a “town hall fightback” against TPA’s opposition to the working pattern.
New law would stop banks shutting accounts over political views
The former business secretary Sir Jacob Rees-Mogg is to table an anti-discrimination law that would prevent banks from blocking accounts over customers’ political views. The new law would come in the form of an amendment to the Digital Markets Bill and would require banks to provide customers with a written statement of their reasons for closing an account within 30 days of their decision. The move comes after multiple political figures and defence contractors have complained of being denied banking services.
Labour will back global anti-corruption court
The shadow foreign secretary will today pledge that Labour will support the creation of a global anti-corruption court to hold international criminals to account. In a speech to the Bingham Centre, David Lammy will accuse the Conservative government of treating international law with “cavalier disrespect” and promise “to clean up the London laundromat at home and defeat kleptocracy around the world.” The Guardian notes that the idea of the court has wide international support, according to a survey conducted by the Stimson Centre. The highest level of support is found among the Brics group of countries, where corruption is a huge issue: 87% in China, 81% in South Africa, 80% in Brazil, and 74% in India. In the European members of the G7, the percentage is also 70% or more.
US payrolls
On Friday US employment growth eased in June, taking some steam out of what had been a stunningly strong labor market. Nonfarm payrolls increased 209,000 in June and the unemployment rate was 3.6%, the Labor Department reported Friday. That compared with the consensus estimates for growth of 240,000 and a jobless level of 3.6%. The total, while still solid from a historical perspective, marked a considerable drop from May’s downwardly revised total of 306,000 and was the slowest month for job creation since payrolls fell by 268,000 in December 2020. The unemployment rate declined 0.1 percentage point.
UK house prices fall 2.6% in biggest annual drop since 2011
House prices fell last month at the fastest annual pace since 2011, according to the Halifax, with the average UK property price down 2.6% in June compared with the same month last year. The drop was more than double the fall of 1.1% in May, marking the largest such fall for twelve years. Prices for June fell for the third month in a row, dipping 0.1%, Halifax said, taking the average to £285,932. Martin Beck, chief economic adviser to the EY Item Club, said that “given the scale of previous price gains and the headwinds facing the housing market from rising mortgage rates and other financial pressures, house prices continue to display a surprising degree of resilience.”
Car insurance costs rise by 34% in a year
Research carried out by Consumer Intelligence reveals that the cost of car insurance has risen by 34% in a year as the average policy topped £1,000 for the first time in six years. The average policy is now £1,082, while those under 25 could face paying £2,145 as they are deemed higher risk. EY predicts that costs will rise again by 11% per policy next year. The average excess drivers have to pay if they make a claim has also risen 10.9% in a year to £204 while levels of protection are being reduced. Richard Reed, from EY, said: “Premiums have remained far below the level needed to keep pace with inflation and the return to more regular motor activity post-pandemic. The need for the sector to address this and rebalance its books unfortunately means that consumers will face a sharp rise in their premiums.”
Britcoin ‘could be used to check ages and nationalities’
The developer working on the UK’s central bank digital currency has said the so-called “Britcoin” could be used by shoppers to prove their age or nationality. Alastair Johnson, founder of Nuggets, went on to say that a decentralised system could be more private than holding a bank account, with no access to data for the Bank of England or the system’s developers. But privacy campaigners are unconvinced. Susannah Copson at Big Brother Watch said: “The proposal to use a CBDC to verify personal details, such as age or citizenship, raises serious privacy concerns.” Danny Kruger, a Conservative MP and member of the Treasury Select Committee, added: “Any move towards a digital pound should explicitly address the need for people’s data to be protected – and there must be no opportunity for the state to monitor or control people’s spending.”
Thames Water races to secure backing, Ofwat under fire
Thames Water has been lobbying shareholders for more cash as it prepares to publish delayed annual accounts, Sky News reports. The letter to investors seeking £1bn in equity support is understood to have been seen as a condition of Thames Water’s auditor, PwC, signing off the company’s accounts on a going concern basis. The news comes after it was revealed last month that the Government was drawing up contingency plans for Thames Water’s collapse amid growing doubts about its ability to service a £14bn debt-pile. Meanwhile, the FT reports on how anger at water companies over sewage discharges is now being turned towards the industry regulator, Ofwat, which is being accused of failing to deliver financial or management discipline. There are also accusations of regulatory capture, which is further detailed in the Mail on Sunday, which reports that ten former key managers and experts at water watchdog Ofwat have joined water firms in the past three years. Former Ofwat head Cathryn Ross recently became interim chief executive of Thames Water.
UPDATE: Thames Water shareholders have agreed to provide a further £750m in funds as the company attempts to fight the threat of nationalisation. The agreement is less than the £1bn that Thames Water had been hoping to secure from its shareholders.
La Perla faces creditors over unpaid debts
Struggling lingerie brand La Perla, owned by Lars Windhorst, is facing creditors over unpaid debts. The London-based company has been served with four winding-up petitions and is being sued for £701,129 by consultancy firm HSO Enterprise Solutions. La Perla, known for its luxury lingerie sold in high-end department stores, was acquired by Windhorst’s investment firm, Tennor, in 2018. The brand currently has a net debt of €331.9m. Despite the legal battles, a spokesman for La Perla stated that a new business plan has been agreed upon and outstanding payments will be settled soon. Winding-up petitions served by Purple PR, Mazars and design agency Edge Retail have all been withdrawn. Windhorst, who was once a successful entrepreneur, is now struggling to repay over €1bn owed by Tennor to H20 Asset Management.
Wilko hunts for cash ahead of CVA
The discount retailer Wilko is working with advisers to raise tens of millions of pounds of new equity as the chain finalises a company voluntary arrangement (CVA). The company and PwC, which is overseeing the proposed restructuring, are in talks with a range of turnaround investors, Sky News reports. The proposed CVA would trigger steep rent cuts at hundreds of stores but Wilko says it is not planning to close any of its roughly 400 stores.
Empire Cinema enters administration
The Empire Cinema chain has entered administration, with the financial impacts of the COVID-19 pandemic, inflation and the cost of living crisis blamed for the closure of six of the 14 cinemas in the group and the loss of 150 jobs. A restructuring partner at BDO, assigned as an administrator, said: “The well-publicised challenges for the leisure sector from the impact of COVID-19, rising inflation and the cost of living crisis have significantly affected the company’s business.”
Majestic Bingo fails to recover from pandemic
Majestic Bingo, an independent operator of retail bingo, has been unable to recover from the impact of the pandemic. The company, which operates eight sites across the country, including the Hippodrome in Bishop Auckland, has been placed into administration, with Interpath Advisory appointed to run the process
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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 one will be particularly deadly for suppliers for some time to come.
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!
No face-to-face meeting required – 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!
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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.