Business news 11 October 2024
GDP, Workers rights, CGT, mortgages, households dtill struggling, markets, insolvencies & more business news that we thought would interest our members.
James Salmon, Operations Director.
GDP
The UK’s GDP grew 0.2% in August, marking a return for the economy to growth after two months of stagnation and leaving it on track to expand in the third quarter. Services, production and construction all grew. Welcome news, and a relief for the government. Let’s see what effect the doom mongering of the budget has had in October.
Britain’s economic growth was up 0.2% in the three months to August, compared with the 0.5% recorded in the three months to July. The UK’s dominant services sector showed slight growth of 0.1% in the month to August, while production and construction output rose by 0.5% and 0.4%, respectively.
Workers set for rights overhaul
An overhaul of workers’ rights set out in the Employment Rights Bill will mean millions of people will be able to get sick pay from the first day they are ill and claim unpaid parental leave as soon as they start a job. Employers will also be expected to consider any flexible working requests made from day one – and accept the request unless they can prove it is unreasonable. A two-year qualifying period for protections from unfair dismissal will be removed in a move the Government says will benefit about 9m workers. However, there will be a nine-month probation period where workers can still be sacked without a full process. Ministers say the Bill marks the “biggest upgrade to rights at work for a generation.” It is noted that most of the planned changes will not take effect for two years following a consultation period.
Directors mull sales amid tax fears
Analysis suggests that concern over potential tax increases has led many directors to consider selling their businesses. A survey by Evelyn Partners, involving 500 business owners with turnovers exceeding £5m, found that nearly 29% have expedited their selling plans in the past year, with 23% citing concerns over rising capital gains tax. Laura Hayward, tax partner at Evelyn Partners, noted that business owners are “on edge” ahead of the upcoming budget, with confidence among business leaders and consumers declining. The Institute of Directors’ economic confidence index fell sharply from -12 in August to -38 in September, reflecting growing unease about the economic outlook and tax burdens.
Small firms concerned over AIM tax raid
Over 140 firms listed on London’s AIM market have voiced concerns over the future of a crucial inheritance tax relief. This relief currently exempts most AIM-quoted shares held for over two years from inheritance tax, fostering investment in growth stocks. The companies, which collectively employ over 120,000 people and generate £1.5bn in profits, argue that the uncertainty surrounding this tax break is damaging investor confidence.
Chancellor warned over cost of CGT hike
With Rachel Reeves reportedly considering a capital gains tax raid in the Budget, the Chancellor has been warned that hiking the levy could cost the country billions and drive investors abroad. While HMRC calculates that a one percentage point increase in the higher rate of CGT would raise just £100m, it says a 10 percentage point increase could see revenue fall by around £2bn as many investors would leave Britain. Economists at the Institute for Fiscal Studies have warned that increasing CGT would incentivise people to leave the UK before realising gains. Meanwhile, some reports suggest that officials are testing a CGT range of 33% to 39% from the current 28%. However, a Treasury spokesman said: “This reporting is not based on government modelling – we do not recognise it. This is pure speculation.” Stephen Millard, deputy director of the National Institute of Economic and Social Research, comments: “CGT is a tax on savings, something that UK households do not do enough. By increasing CGT, the Government would discourage saving, which could have a knock-on effect on investment.” Currently, CGT accounts for £15bn a year to the Treasury, less than 2% of revenue, and is raised from around 350,000 people. Two-thirds of CGT revenue comes from just 12,000 people who have average gains of £4m.
Mortgage rates could be set to rise
Brokers have warned that a period where competition between lenders has seen mortgage rates falling may be coming to an end. With Coventry Building Society announcing that it is putting up mortgage rates, rival lenders are expected to follow suit. David Hollingworth, associate director at broker L&C Mortgages, said: “The mortgage market has seen rates falling in recent months but that may be coming to an abrupt halt.” Data from financial information service Moneyfacts shows that in the last year the average interest rate on a two-year fixed deal with a 40% deposit has fallen from 6.16% to 4.84%. However, the average could start climbing again, with experts predicting that some lenders may now start putting up mortgage rates amid an increase in swap rates, which influence the price of fixed-rate mortgage deals.
UK households ‘still struggling’
Recent data from the Bank of England’s Credit Conditions Survey indicates that mortgage default rates among households have risen and are anticipated to increase further as Christmas approaches. In contrast, defaults on non-mortgage lending, such as credit cards, have decreased and are expected to remain stable. Karim Haji, global and UK head of financial services at KPMG, says: “These figures suggest that many households are still struggling.” Meanwhile, default rates on loans to companies have remained unchanged across all business sizes, with no expected changes in the near future.
IFS: Chancellor needs extra £16bn to honour commitments
The Institute for Fiscal Studies (IFS) says Rachel Reeves will need to come up with billions of pounds more to meet Labour’s pre-election promises. The think-tank said the Government will need to “grasp the nettle” and come up with £16bn more on top of tax rises set out in its manifesto if it is to honour a pledge that there will not be a return to austerity. The IFS, working with economists at investment bank Citi, said the £9bn in tax rises already planned by the Chancellor might be enough to maintain spending at current levels, including taking inflation into account, but warned that the forecast was so tight it was “on a knife edge.” The IFS said real-term spending would need to rise in line with the size of the economy, or around 2.8%, requiring an extra £16bn in funding. It added that some additional investment may need to be financed through higher taxes.
Carney: Fiscal rules must enable greater public investment
Mark Carney, the former governor of the Bank of England, believes it makes “little sense” for the Government’s fiscal rules to exclude the longer term benefits of public investment. He said: “If government money is being spent to build or buy an asset on behalf of the nation, it is only right that its value is captured in the definitions of national debt.” Mr Carney, chair of private equity firm Brookfield, warned that the economy has been “starved” of investment due to a fiscal framework which incentivised cuts to capital spending. Chancellor Rachel Reeves has suggested that she will reform fiscal rules so they “take account of the benefits of investment, not just the costs.”
Markets
The FTSE 100 closed at 8228.73 yesterday. Down 0.18%. The UK Blue Chip Market was broadly flat on the day. Wall Street opened lower today as hotter-than-expected September inflation data reinforced expectations of a 25-basis-point rate hike by the Federal Reserve at its upcoming meeting. The closely watched Consumer Price Index rose 0.2% on a monthly basis and 2.4% on an annual basis, with both figures being slightly higher than estimated by economists Reuters polled. The core figure, which excludes volatile food and energy prices, rose 3.3% year-over-year, versus an estimated 2.3%.
US Jobless Claims data also came out on Thursday, showing the number of people applying for benefits last week jumped. Applications for jobless claims climbed by 33,000 to 258,000 over the week to October 3, Labour Department figures showed. This marked the highest reading for a year and soared past expectations for 229,000.
Oil Prices rose more than 1% on Thursday, underpinned by a spike in fuel demand as a hurricane barrelled into Florida, with Middle East supply risks also in focus.
Investment Minister finally appointed
The Government has appointed Poppy Gustafsson as the new Investment Minister, making her the first woman to hold the position. Ms Gustafsson, the co-founder and former CEO of Darktrace, said: “I am thrilled to have the opportunity to share with the international investment community what I already know to be true – the UK is a great place to do business.” Her role will involve enhancing the Office for Investment and engaging with global investors to boost the UK economy.
FCA extends WFH
The Financial Conduct Authority (FCA) has announced an extension of its hybrid work policy, allowing staff to work from home three days a week until at least 2026. This decision contrasts with the growing trend among other firms in the City, which are pushing for a return to the office. The FCA, which employs around 5,000 people, says it will review this policy next year, considering employee feedback and practices from other companies. A memo highlighted that working from home can “sometimes provide a better environment for more focused work” and improve work-life balance. Senior managers are still required to be in the office for at least half of their working hours, a policy that is also under review. The FCA said: “Companies and organisations across the economy are considering what way of working is best for them and their people.”
Tesla’s cybercab
Elon Musk unveiled Tesla’s “cybercab”, an automated robotaxi, at a much-anticipated company event. The EV-maker’s CEO rode onto stage in the two door cybercab, which comes with no steering wheel or pedals, and declared that the “autonomous future is here”. The vehicle is to cost less than $30,000. Production of the cybercabs is set to begin in 2026. Musk also showcased a futuristic-looking Robovan concept that he said could transport 20 people at a time. Mr Musk suggested the new technology could propel Tesla’s valuation from the current $763 billion to $5 trillion.
Unilever
Unilever has completed the sale of its Russian business after coming under scrutiny for not ditching operations in the country following the invasion of Ukraine in early 2022. The sale to Arnest Group was confirmed to have been completed on Thursday, with this also including Unilever’s four factories in Russia and its business in Belarus.
HSBC
HSBC is reportedly close to axing some of its most highly paid senior bankers to try and cut up to $300 million of costs. After taking over as chief executive last month, Georges Elhedery is working on a merger of the lender’s commercial banking division and its global banking and markets unit, the Financial Times reported yesterday.
Hays
Hays reported a 15% year-on-year drop in net fees, with losses felt across all key regions including Germany, the UK, Ireland, Australia and New Zealand. Consistent with employers’ cautious hiring trends, temporary placements fared comparatively better, posting an 11% decrease, while permanent placements experienced a sharper 21% drop of 21%.
Latest Insolvencies
Petitions to wind up (Companies) – BRIDGE CONTRACT SOLUTIONS (WM) LTD
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Petitions to wind up (Companies) – A S CLOTHING LTD
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Petitions to wind up (Companies) – LEXNIS GROUP UK LTD
Petitions to wind up (Companies) – BJP RESIDENTIAL LIMITED
Petitions to wind up (Companies) – INDEPENDENT BREWERS LTD LTD
Petitions to wind up (Companies) – TRURATING LIMITED
Petitions to wind up (Companies) – JAMES STIRLING LIMITED
Petitions to wind up (Companies) – AREA 51 CAFE LTD
Petitions to wind up (Companies) – THE MIAH SOLICITORS LIMITED
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Appointment of Liquidators – BUSH COTTAGE SOLUTIONS LTD
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Appointment of Liquidators – LINFOOT DEVELOPMENTS LIMITED
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Petitions to wind up (Companies) – TWINNINGBROOK LIMITED
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Appointment of Liquidators – CHESTER QP SERVICES LTD
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Appointment of Liquidators – E2 ENERGY LIMITED
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Petitions to wind up (Companies) – JT BUILDING (NOTTINGHAM) LIMITED
Petitions to wind up (Companies) – PRO BUILD NORFOLK LTD
Petitions to wind up (Companies) – CB BRICKWORK CONTRACTING LIMITED
Petitions to wind up (Companies) – COBUY MANAGEMENT LTD
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Petitions to wind up (Companies) – FRBBC LTD
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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.