Business news 11 December 2023
James Salmon, Operations Director.
Study finds lockdown had a “catastrophic effect” on the nation. SMEs expect sales boost. Banking, Manufacturing, interest rates, inflation, employment figures, holiday rights change, tax levels & more business news that we thought would interest our members.
Study finds lockdown had a “catastrophic effect” on the nation
A report from the Centre for Social Justice (CSJ) reveals that pandemic lockdowns drove a wedge deeper into the divide between the general population and the most disadvantaged in the country. The think tank warned that the UK is in danger of sliding back into the Victorian era with some 13.4m people leading lives marred by family fragility, stagnant wages, poor housing, chronic ill-health, and crime. Domestic abuse and mental ill health soared during lockdowns and 1.2m more people went on working-age benefits. “There is a growing gap between those who can get by and those stuck at the bottom,” the report stated, demonstrating a need to form a “strategy to go after the root causes of poverty – education, work, debt, addiction and family.”
SMEs expect sales boost despite cost of living pressures
Many small and medium-sized enterprises (SMEs) are expecting a sales boost this year, despite cost of living pressures on consumers. According to a survey conducted by London-based fintech SumUp, 23% of SMEs expect a higher turnover compared to last year. The survey of 1,000 small business owners also revealed that 49% reported an improved financial situation compared to the same period in 2022. Rising costs and high energy prices were the biggest challenges for 66% and 55% of SMEs, respectively. Over half of the SMEs have increased prices to combat rising costs. However, only 4% have had to cut staff to maintain operations. Consumers have shown resilience, with 11m Britons spending £669m in support of Small Business Saturday.
UK small businesses call on regulator to intervene over ‘harsh’ banking practices
The Federation of Small Businesses has urged the Financial Conduct Authority to intervene over “harsh” banking practices that see lenders “excessively” demand personal guarantees for business loans.
Manufacturers see signs of recovery
The UK’s struggling factories are showing signs of recovery, trade body Make UK has said, with a pickup in export orders and an increase in restocking. Make UK reported that factories raised output at three times the pace of growth in orders in the final three months of 2023. The share of firms seeing a rise in export orders rose to a balance of +10%, the first time that export orders have exceeded UK orders since the pandemic. Expectations for export and UK orders in the first quarter of 2024 were positive at +7% and +8% respectively while recruitment expectations for early 2024 hit +19%. It was also found that investment intentions slowed but remain positive. Make UK has increased its forecast for manufacturing growth in 2023 to +0.8% from -0.5%, but growth is expected to slow in 2024. “After the economic and political shocks of the last few years there is some semblance of stability returning for manufacturers,” said Fhaheen Khan, senior economist at Make UK.
MPC expected to hold interest rates
Economists say the Bank of England is likely to hold interest rates steady when the Monetary Policy Committee (MPC) meets on December 15. This would mark the third consecutive meeting where the MPC opted to keep rates at 5.25%. Martin Beck, chief economic advisor to the EY Item Club, notes that little has changed since the previous rate decision, saying: “There’s been nothing in the way of significant economic surprises over the last four weeks and inflation and pay growth have slowed.” December’s MPC meeting, he said, “will almost certainly prove the third in succession to deliver no change in interest rates.” Looking ahead, James Smith, developed markets economist at ING, said: “Markets are pricing three rate cuts in 2024 and we doubt the Bank will be too happy about that.” He added: “Expect policymakers to reiterate that rates need to stay restrictive for some time.”
UK public’s inflation expectations fall to two-year low
A quarterly survey of public attitudes to inflation found expectations for price growth in the year ahead fell to the lowest level in two years last month, dropping from 3.6% in August to 3.3% in November. The data came ahead of the Bank of England’s monetary policy meeting on December 14, when markets expect rates to be kept at a 15-year high of 5.25%.
Employment figure could be out by a million, admits Bailey
Bank of England Governor Andrew Bailey has admitted that Britain’s official employment figure could be out by as much as a million, highlighting discrepancies in data published by the Office for National Statistics (ONS). Bailey’s remarks during a select committee hearing have raised concerns about the accuracy of employment data used by the Monetary Policy Committee (MPC) in making decisions on interest rates. The Bank has signalled that interest rates will have to stay high for a prolonged period. However, there are fears that waiting to cut rates due to misleading labour market data could risk a recession. Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, said: “Any uncertainty over accuracy means policy makers are not seeing a full picture of conditions, which can lead to damaging mistakes.”
Holiday rights changed for irregular and part-time workers
Ministers in the UK are making changes to holiday rights, cutting allocations and pay for irregular and part-time workers. This alteration is considered one of the most significant erosions of employment protections since the UK left the EU. Instead of receiving full holiday rights at the beginning of the year, 5m British workers on temporary or irregular contracts will have to gradually gain them throughout the year. The change is aimed at simplifying overtime, holiday pay, and entitlement legislation for employers. However, critics argue that the Government has broken its promise to level up rights at work. The change is estimated to save employers between £50m and £248m annually.
UK tax level reaches record high
The UK’s tax level has reached its highest rate on record, according to new data from the Organisation for Economic Co-operation and Development (OECD). The total tax-to-GDP ratio hit 35.3% for the 2022/23 financial year, representing a 0.9 percentage point increase from the previous year. The UK has the 16th highest rate of 38 OECD countries and is 1.3 percentage points above the group’s average of 34% in regard to tax competitiveness. Separately, analysis from commercial real estate firm Altus Group shows that the UK has the joint-highest rate of property taxes across the 38 OECD countries, with a ratio equivalent of 4% of property taxes to GDP. This compares with an average of 1.5% across the EU and a 2.9% average against countries in the G7 group of advanced economies. Alex Probyn, president of property tax at Altus Group, said: “Our clients already tell us that the level of the business rates tax is a disincentive to invest and an effective tax rate of 54.6% next year for commercial property will do nothing to dispel that.” The Office for Budget Responsibility has forecast a further increase in UK property taxes, with business rates set to increase by £3.2bn from April 1 because of an inflation-linked rise.
US multinationals underpaid £5.6bn in UK tax
HMRC believes US multinationals underpaid £5.6bn in tax in the UK last year, according to UHY Hacker Young analysis, with the suspected deficit up 14% on the previous year. The report show that US companies now make up nearly half of underpaid tax. The tax office believes that a total of £11.5bn in tax is missing from foreign companies for 2022/23, with analysis suggesting that Swiss companies may have underpaid £1.2bn, while underpaid tax from firms based in Germany, France, and Ireland combined reached an estimated £1.8bn. Some companies are accused of diverting earnings from the UK to lower-tax jurisdictions to reduce their tax bills. Campaign group TaxWatch says that seven big US companies paid £2bn less in tax in 2021 than might have been due had their profits not been routed elsewhere, paying just £750m rather than an estimated £2.8bn. Andrew Snowdon, head of tax at UHY Hacker Young, said: “Efforts are being made globally to ensure that companies pay an appropriate amount of tax in the countries where their sales are made. Several likely rule changes in the imminent future would make it even harder to divert earnings overseas and subsequently more difficult to underpay tax.”
HMRC issues warnings to incorporated landlords
HMRC is sending letters to buy-to-let landlords who may have underpaid capital gains tax after incorporating their businesses. The tax office warns that too much incorporation relief may have been applied, resulting in insufficient tax payments. Moving to an incorporated business model allows landlords to offset mortgage interest against income tax and pay lower tax on gains. However, there are specific requirements for qualifying for relief, such as spending at least 20 hours a week managing the business. A report by Savills found that landlord profitability has fallen to less than 4% of gross rent. This spurred many landlords to find ways to cut their tax exposure and some may have been misled by “cowboy” tax advisers offering schemes that were too good to be true, says Christopher Springett, partner at Evelyn Partners. “It got to a point for a lot of people that they had to take action but, sadly, were poorly advised.”
Just 2% of Covid fraud calls are being investigated
Figures released by Cabinet Office Minister Alex Burghart show that just 2% of calls made to the official Covid Fraud Hotline are being investigated. The data shows that only 103 investigations are ongoing from the 5,124 calls made since the scheme was launched three years ago. In response to a written parliamentary question, Mr Burghart said that only 20 operations arising from referrals are still being pursued by the National Investigation Service, while a further 83 reports are being investigated by the Insolvency Service.
US Nonfarm Payrolls
US Nonfarm Payrolls rose by a seasonally adjusted 199,000 for the month, slightly better than the 190,000 estimate and ahead of the unrevised October gain of 150,000, the Labor Department reported Friday. The unemployment rate declined to 3.7%, compared with the forecast for 3.9%, as the labor force participation rate edged higher to 62.8%. A more encompassing unemployment rate that includes discouraged workers and those holding part-time positions for economic reasons fell to 7%, a decline of 0.2 percentage point.
Microsoft & ChatGPT
The Competition and Markets Authority has opened an inquiry into Microsoft Corporation’s partnership with ChatGPT creator OpenAI over fears of consumer protection and competition risk. An invitation for comment asks for input from Microsoft, OpenAI and interested third parties on the two firms’ close partnership to determine the potential impact on competition in the UK artificial intelligence sector.
Tech giants should reimburse fraud victims
The chief executive of Santander UK says social media firms should take more responsibility for reimbursing victims of fraud. Amid a surge in online scams, Mike Reigner warned that the UK’s faster payments systems make customers “a boon to the unscrupulous.” With new rules from the Payment Systems Regulator set to hold sending and receiving firms equally liable for reimbursing victims in most fraud cases, Mr Reigner has criticised the “blanket mandatory reimbursement approach.” He flagged that while 70% of authorised push payment fraud originates via social media and phoner calls, these companies are “not on the hook for reimbursement.” He added: “I would like to see other players in the supply chain of fraud pay the bill.” UK Finance has also criticised the new rules for not holding social media companies responsible for crimes that originate on their platforms.
Average two-year mortgage rate drops below 6%
Figures from Moneyfacts showed on Friday that the average cost of a two-year fixed-rate mortgage in the UK has fallen below 6% for the first time in almost six months. In July, the average cost of a two-year fixed-rate deal went up to 6.86% but on Friday it had fallen to 5.99%. The average cost of a five-year fixed rate has also continued to fall, and stands at 5.6%, according to Moneyfacts. Banks including Nationwide, Santander and Halifax all cut their fixed rates on Friday.
Private healthcare premiums soar as employees turn to workplace schemes
Growing numbers of employees are turning to workplace health schemes, driving up the cost of premiums. Employers are watering down private healthcare perks after premiums rose by 60% due to NHS delays. Firms are removing dependent cover from policies, asking staff to ‘co-pay’ on claims and in some cases restricting cancer support to reduce the cost of delivering the workplace benefit. Insurers paid out a record of nearly £3bn in claims last year, the Association of British Insurers said, as NHS backlogs caused a growing number of employees to use their workplace scheme for the first time. Luke James, of health insurance consultancy Mercer Marsh Benefits, said: “Twenty per cent rises in premiums is on the low end of the cost rises. Our figures show that we are seeing 40% to 60% premium rises in the UK and across Europe. It’s huge, and we don’t expect much to change in 2024.”
Insolvencies
Not all is good for insolvency practitioners, despite the record insolvencies. Begbies Traynor interim revenues rose £7m to £65.9m however profits declined to £3m from £5m, the board are confident of an in line full year performance.
AI
The European Union has reportedly prepared a landmark set of laws to regulate artificial intelligence (AI) following lengthy talks between the European Parliament and the 27 individual member states. Details are yet to be revealed, but the laws will reportedly restrict the use of AI-driven surveillance. The European Parliament will vote on the next year on the bills and if passed they may take effect in 2025.
Latest Insolvencies
Appointment of Liquidators – CLAREMONT PROPERTY SOLUTIONS LTD
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Appointment of Liquidators – R. KENNEDY & CO. (BALLYMENA) LIMITED
Appointment of Liquidators – PORTRESET LIMITED
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Appointment of Administrator – THE CHEMISTRY GROUP (HOLDINGS) LIMITED
Winding up Order (Companies) – OLD CHANNEL PROPERTY LIMITED
Petitions to wind up (Companies) – OYSTER ENTERPRISES LIMITED
Petitions to wind up (Companies) – KORNCHAIN LIMITED
Appointment of Liquidators – TRIO RESEARCH LIMITED
Petitions to wind up (Companies) – HIGHLAND TIMBER CONSTRUCTION LIMITED
Appointment of Liquidators – JRDSQUARE LTD
Appointment of Liquidators – ALIE1420 LIMITED
Petitions to wind up (Companies) – TINGDENE HOMES LIMITED
Winding up Order (Companies) – GM DESIGN AND BUILD LTD
Petitions to wind up (Companies) – WALCOM INTEGRATION LTD
Appointment of Liquidators – HALENA LOUISE INVSTMENTS LIMITED
Petitions to wind up (Companies) – HARTREEL LIMITED
Petitions to wind up (Companies) – SATCHI HOLDINGS PLC
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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.
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.
Get compensated for previous late payments
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.