Business news 10 July 2024
Rise in business confidence. Wrong to claim AI is going to save UK economy. Hiring slump continues. Markets, Insolvencies & more business news that we thought would interest our members.
James Salmon, Operations Director.
Rise in business confidence
Business confidence climbed to its highest point in two years, reaching a score of 16.7 in the second quarter of this year, according to a survey by the Institute of Chartered Accountants in England and Wales. The increase in confidence was driven by falling inflation and forecasts for better sales. Strong wage growth and a decrease in businesses’ costs also contributed to the positive outlook. Financial services firms and utilities companies were the most confident, while retail and property businesses experienced increased pessimism. The survey also revealed that salary growth remained unchanged at 3.7% in the second quarter. Suren Thiru, economics director at the ICAEW, said: “These figures suggest that businesses shrugged off any distraction caused by the general election, as lower inflation and stronger expected sales growth drove an encouraging uptick in confidence in the second quarter.”
GS: Blair wrong to claim AI is going to save UK economy
Goldman Sachs has challenged the notion that artificial intelligence (AI) will provide significant productivity boosts to the economy. The bank’s paper states that AI’s productivity benefits will be more limited than anticipated, while its power demands will require utility companies to spend almost 40% more in the next three years. MIT economist Daron Acemoglu, who was interviewed for the study, believes that truly transformative changes won’t happen quickly and may not occur within the next 10 years. Jim Covello, head of global equity research at Goldman Sachs, believes that AI technology is exceptionally expensive and not designed to solve complex problems. If important use cases for AI don’t become more apparent in the next 12-18 months, investor enthusiasm may fade. Meanwhile, the Tony Blair Institute’s report on AI’s potential in the public sector has already been criticised for basing its argument on answers from Chat GPT.
Hiring slump continues, Page Group warns
One of Britain’s biggest recruiters, Page Group, has warned that the hiring market is not improving and may even be getting worse. The company experienced a slower June than expected, with weak confidence among employers and candidates worldwide. Page Group had anticipated an upturn in the market before summer, but now believes hiring may not pick up until next year. As a result, the company expects its annual operating profits to be around £60m, a third less than previously guided.
National Wealth Fund launched
The Chancellor, Rachel Reeves, has revealed plans for a new National Wealth Fund aimed at attracting billions in private sector investment to support UK growth. The Labour Government has allocated £7.3bn in additional state funding for the investment plan, which will also include reforms to the state-owned British Business Bank. The funding will be used to target green and high-growth industries in the UK. Former Bank of England governor Mark Carney, Barclays CEO CS Venkatakrishnan, and Aviva CEO Amanda Blanc are part of the National Wealth Fund Taskforce. Carney stated that the National Wealth Fund can kick-start economic growth and attract private capital to vital sectors.
Labour mulls means testing state pension
Labour is considering means testing the state pension, reports Harvey Jones in the Express. Sir Edward Troup, a former head of HMRC and an advisor to Labour, told LBC that pensioners must “contribute possibly more” than Britons of working age in some circumstances. “If the public finances are in a bit of a state, perhaps wealthy pensioners should be giving up their full state pension,” he argued.
Defence
UK Prime Minister Kier Starmer has said he is committed to spending 2.5% of GDP on defence, but that he could not set a timeline to reach the target before carrying out a review.
Markets
Yesterday, the FTSE 100 closed down 0.66% yesterday at 8139.81 and the Euro Stoxx 50 closed down 1.33% at 4903.62. Overnight in the US the S&P 500 rose .07% to 5576.98 and the NASDAQ rose 0.14% to 18429.29.
The UK market retreated on the poor weather related retail sales figures for June while the US climbed on Powell’s comments (see below).
This morning on currencies, the pound is currently worth $1.2793 and €1.1832. On Commodities, Oil (Brent) is at $84.50 & Gold is at $23373. With stock markets, the FTSE 100 is up 0.26% at 8161 and the Eurostoxx 50 is up 0.25% at 4916.
US FED
US Federal Reserve Chair Jerome Powell expressed concern that holding interest rates too high for too long could jeopardize economic growth. Setting the stage for a two-day appearance on Capitol Hill this week, the central bank leader said the economy remains strong as does the labor market, despite some recent cooling. Powell cited some easing in inflation, which he said policymakers stay resolute in bringing down to their 2% goal.
Non-doms contribute £9bn in tax and NICs, highest amount since 2017
Non-doms contributed nearly £9bn to the exchequer through tax and national insurance contributions (NICs) in the 2022/23 tax year, the highest amount since new rules around the regime were brought in in 2017. The average non-dom paid over £120,000 in tax. The total non-dom tax take in the year was enough to fund spending on the public health service for 18 days. The number of non-dom taxpayers increased by 7%. Both the Conservatives and Labour have pledged to clamp down on the 200-year-old regime. Nicholas Hyett, investment manager at Wealth Club, said: “Non-doms will soon be extinct in the UK… and these numbers are a glimpse into the past. £8.9bn of tax revenue is not to be sniffed at.” But Rachael Henry of Tax Justice UK said: “It is only fair and right that those choosing to make their lives in the UK, benefiting from shared services, infrastructure and opportunity, pay their fair share.”
PE execs “bag ready” to leave the UK, and France
Private equity executives in the UK are considering leaving the country to avoid Labour’s carried interest policy, which would tax the tool as income rather than a capital gain. The move has raised concerns in the industry, with lawyers receiving more calls than ever about a potential move away. Some executives have already spent money to be “bag ready” to leave. While Labour has clarified that the policy would not apply to managers and investors putting their own capital at risk, industry figures claim that more advice is being sought now than when Corbyn was leader. It’s unlikely they’ll be heading for France, however, as an extreme left alliance threatens a 90% income tax on high earners. The Mail reports that lawyers in Paris are inundated with calls from high-end clientele worried about a wealth tax. This comes as finance minister Bruno Le Maire warned of an “immediate financial crisis” after the New Popular Front scored its narrow victory over Emmanuel Macron’s centrists and the right wing National Rally. Moody’s has warned it could downgrade its credit score for France’s more than €3trn debt pile over the NFP’s plans.
Begbies Traynor reports another successful year of growth
Begbies Traynor has reported another successful year of growth, with revenue increasing from £121.8m to £136.7m in the year ending 30 April 2024. Adjusted EBITDA climbed from £26.6m to £28.5m, and adjusted profit before tax was up from £20.7m to £22m. It said this was led by 13% growth in its business recovery division as the troubled financial backdrop and high borrowing prices put pressure on businesses. The company completed four acquisitions, contributing £5m to reported revenue, and renewed and enlarged its debt facility. Begbies Traynor also proposed a 5% increase in total dividend, marking its seventh year of growth.
Barratt Developments
Barratt Developments said annual home completions landed at the top end of forecasts, and profit is to be ahead of expectations as the housebuilder looks ahead to its tie-up with Redrow. Adjusted pretax profit in the year ended June 30 is “anticipated to be slightly ahead of our previous expectations”, it said. Total home completions landed at the upper end of guidance at 14,004, for the year, down from 17,206 the year prior. Total forward sales at the end of the financial year amounted to 7,239 homes at a value of £1.91 billion, in line with expectations, but down from £2.22 billion on-year.
JD Wetherspoon
JD Wetherspoon said a post-pandemic rise in sales has continued, and the pub firm has looked to “widen the moat” by investing in its estate. In the 10 weeks to July 7, like-for-like sales increased 5.8% on-year. Year-to-date, they are up 7.7%. The firm’s financial year ends on July 28 and results are released on October 4. It expects annual profit to be in line with market expectations.
Thames Water facing new liquidity crisis
Thames Water, London’s largest water supplier, could run out of money by May next year if it doesn’t receive significant cash injections from investors. Thames Water has requested permission to increase average bills by 59% by 2030, but awaits a determination from regulator Ofwat. The company’s funding crisis began in March when shareholders refused to provide £500m due to concerns about the regulator’s plans. The group has just £1.8bn of cash left to tide it over until next May and £15bn of debts. Susannah Streeter, head of money and markets, at Hargreaves Lansdown, said: “Thames Water is keeping afloat, but its emergency life buoy is deflating as efforts to raise funds from shareholders proves elusive.” Meanwhile, boss Chris Weston is under fire for taking a £195,000 bonus for his first three months at the same time as asking Ofwat to raise customer bills by nearly 60%.
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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.