Business news 12 August 2024
FSB urges ministers to support businesses hit by riots. Foreign investors not deterred. Inflation expected to increase. Analysts predict GDP growth. Family Business to be hit by CGT, Business rates, minimum wage, pay rises, climate, markets, insolvencies & more business news that we thought would interest our members.
James Salmon, Operations Director.
FSB urges ministers to support businesses hit by riots
The Federation of Small Businesses (FSB) has urged Home Secretary Yvette Cooper to support SMEs affected by rioting across a number of town and city centres. The small business group wants ministers to ensure SMEs are treated fairly by insurers and is calling for co-ordinated effort from the Government, police and crime commissioners to communicate how uninsured firms can claim for lost earnings under the Riot Compensation Act. In a letter to Ms Cooper, FSB national chair Martin McTague said: “We will be looking for government support to ensure insurance companies treat small business claims with care and attention, and process them swiftly.” He added: “Local authorities, insurance companies and politicians of all stripes … need to be ready to support their small businesses to rebuild, recover and get back on their feet.”
Foreign investors not deterred by riots
Business and Trade Secretary Jonathan Reynolds does not believe that the recent riots will deter foreign investors, saying he is “not worried” as “the big investors that I talk to, they’re more motivated by the political stability of the Government, by the certainty of the tax regime, by the changes to planning policy and a whole range of other pro-business measures that we’re putting in place.” Mr Reynolds also said the unrest has had a “very significant” impact on small businesses, noting that firms might be able to access support under the Riot Compensation Act if they are not covered by insurance.
Inflation expected to increase
Experts expect data out this week to show that inflation increased in July, having fallen to the Bank of England’s target rate of 2% in May and June. A Bloomberg survey of 54 economic forecasters suggests that consumer prices index inflation could climb to 2.6% by the end of this year and not return to the Bank’s target until 2026. Steve Clayton, head of equity funds at investment firm Hargreaves Lansdown, says markets expect an increase and as long as July’s reading is no higher than 2.3% “we doubt investors will be too spooked by an edging up.” Analysts note than an increase in inflation may mean the Bank will hold back from cutting interest rates further, having recently cut the base rate from 5.25% to 5%.
Analysts predict GDP growth
The economy is expected to have grown in June, with experts predicting that the Euros football tournament and a series of Taylor Swift concerts will have boosted the key services sector. Analysts at Investec forecast that GDP increased 0.2% in June and grew by 0.7% in the second quarter. It is noted that BDO’s output index accelerated at the quickest pace in two years in July, with this driven in part by the manufacturing sector.
IHT increase could harm family businesses
Experts have warned that increasing inheritance tax in the Budget could have negative consequences for family businesses and savers. Chancellor Rachel Reeves has refused to rule out raising IHT, leading to concerns that more families will face a hefty bill. Shadow Chief Secretary to the Treasury Laura Trott believes that Ms Reeves is preparing to increase inheritance tax and capital gains tax to fund her spending plans, but this move could stifle growth and aspiration for hard-working people. Dan Goss of the think-tank Demos said: “Given only a few of the most valuable estates are charged any IHT, reforms could give a big boost to the public purse and bear no cost to the vast majority of people.” However, Maxwell Marlow of the Adam Smith Institute warns of potential knock-on effects, saying family-owned firms may “go to the wall.” Daniel Herring, of the Centre for Policy Studies, says IHT “punishes aspiration and remains deeply unpopular with a majority of the public,” while Tom Clougherty of the Institute of Economic Affairs said the tax should “preferably be abolished altogether.”
Tax incentives can drive business investment
The Association of Practising Accountants says business owners are reluctant to invest and warns that this could be further entrenched if tax incentives are withdrawn. In a poll of 500 owner-managers, 65% said they were unlikely or very unlikely to make significant capital investments this year, with this up from 52% in 2022. Martin Clapson, chairman of the association and managing director of Price Bailey, comments: “The purpose of doing an investment is that you make money on it, you get a return … It takes a year, two, three years to get that return. And what will the tax situation be under this government? We keep hearing that taxes need to go up.” Urging ministers to incentivise the private sector, Mr Clapson said: “You are only going to invest if you believe that you are going to get a fair return on that investment. That fair return can either be that there are [tax] reliefs on the investment or that the profit you are going to make from it is not going to be taxed so much that why take the risk with your own money?” Institute for Public Policy Research data shows that the UK has recorded the lowest rate of total investment across G7 economies for 24 of the past 30 years.
Business rates put 17k retailers at risk
Ministers have been warned that more than 17,000 shops are at risk of closure over the next decade unless the Government overhauls the business rates regime. In a piece for the Times, Paddy Lillis, general secretary of the Union of Shop, Distributive and Allied Workers, and Sainsbury’s CEO Simon Roberts write: “The No 1 barrier to growth in our industry is the outmoded business rates system.” Warning that successive governments have “promised reform but have only ever tinkered around the edges,” they say this has seen shops close, jobs lost and “economic growth stunted.” Research by Development Economics suggests that a 20% reduction in headline business rates would save retailers £1bn in the first year and safeguard or create more than 17,000 jobs. The analysis suggests that if policymakers do not reform the rates regime, 17,300 stores could close by 2033/34 in a worst-case scenario. This could mean the loss of around 42,000 jobs. Office for Budget Responsibility analysis shows that the Government is set to collect £32.1bn in business rates revenues this year, with this rising to £37.4bn in 2028/29.
Minimum wage set to climb by almost 4%
Chancellor Rachel Reeves is set to sign off on an above inflation rise in the minimum wage at her first Budget. The living wage is expected to go up by just under 4% next year, taking it to just under £12 per hour. Increases to the minimum wage are calculated by the Low Pay Commission, which has projected a 3.9% rise. Ms Reeves will also have to set out her intentions when it comes to increases to benefits and the state pension. Certain handouts must be increased by at least the level of inflation based on September’s figure, projected to be around 1.6%. The Government is expected to announce a large increase to the state pension, having committed to the triple lock in its manifesto.
Pay rises are set to get smaller
Employers expect to hand out the smallest pay rises in two years, according to a survey of 2,000 employers by the Chartered Institute of Personnel and Development (CIPD). The poll shows that private sector pay deals are set to fall from 4% to 3% over the next year, with this the lowest level since 2022. Public sector pay deals, meanwhile, are expected to fall from 3% to 2.5%. Data shows that pay excluding bonuses rose by 5.7% in the three months to May. James Cockett, senior labour market economist at the CIPD, said many workers “feel worse off than they did a couple of years ago.” He added: “So other benefits, like providing flexible working, offering benefits that help to boost take-home pay and taking steps to improve job quality, are in employers’ interest to help support and retain staff.”
Climate crisis drives up insurance payouts
Britain’s largest insurance firms have reported a sharp rise in insurance payouts due to the climate crisis. The Association of British Insurers (ABI) revealed that payouts reached £1.4bn in Q2, marking the highest total in seven years. The increase in the second quarter was driven by weather-related claims, with damage to UK homes from storms, rain, and frozen pipes costing £144m. The ABI says total payouts are on track to exceed £4.9bn this year.
Migrant visa applications fall after rule changes
Provisional figures from the Home Office suggest that the number of overseas workers, students and their families applying for visas to come to the UK has fallen by a third over the last 12 months. The number of migrants and their family members applying for the visas fell to 91,000 in July from around 141,000 in July 2023. The data shows that the number of people applying for health and care worker visas which dropped by 80% to 2,900. The declines follow rule changes introduced by the previous government which banned most international students and health and social care workers bringing family to the UK. Ministers also increased the minimum salary for skilled overseas workers wanting to come to the UK from £26,200 to £38,700.
Markets
UK stocks clawed back their losses as the week came to a close, with the City having faced turbulence amid fears of a recession in the US. The FTSE 100 managed to recoup its losses. Over the Monday to Friday trading week, London’s leading index was up 1.75%.
On Friday the FTSE 100 closed up 0.28% at 8168.10 and the Euro Stoxx 50 closed up 0.14% at 4675.28. And in the US the S&P 500 rose 0.47% to 5344.16 and the NASDAQ rose 0.51% to 16745.30.
This morning on currencies, the pound is currently worth $1.2757 and €1.1678. On Commodities, Oil (Brent) is at $80.16 & Gold is at $2442. With stock markets, the FTSE 100 is up 0.33% at 8194.85 and the Eurostoxx 50 is down 0.03% at 4673.
Investors turn to gold amid market turmoil
Amid concerns that stock prices were slumping, retail investors have turned to gold, with the metal considered a safe haven asset. At the start of the week, bullion trading on the Royal Mint’s website surged by 336% compared to the average throughout the year and the numbers of investors transacting was up by 53%. The increase meant the rate of buying precious metals outpaced sales by a ratio of 5 to 1. The move toward bullion went beyond UK markets, with worldwide Google searches for ‘buy gold’ up 64% at the start of August.
IPO market set to recover in 2025
Analysts at Peel Hunt say that while the UK IPO market’s prospects are improving, it is not expected to fully recover until 2025. The report says that notable IPOs in recent months point toward a “broader re-opening” next year but warns that experts only expect to see a ”small number” of further UK IPOs in 2024. Peel Hunt’s ‘IPO Speedometer’ – which rates rating the IPO market’s health on a scale of 0-60 – increased from 27 to 29 in August. It is noted that the Financial Conduct Authority’s new listing rules are expected to make it more attractive for companies to list, with Peel Hunt saying it is already having “a number of discussions with potential issuers who are finding these updates helpful.”
UK CEO pay hits record high
Pay for the bosses of the UK’s 100 biggest listed companies has reached a record high, with the average chief executive earning over 100 times the salary of the average full-time worker. Analysis by the High Pay Centre shows that median pay for a FTSE 100 CEO increased from £4.1m in 2022 to £4.19m in 2023, with the 12.2% increase taking the rate to the highest on record. Pascal Soriot, the CEO of AstraZeneca, topped the list with a pay packet of £16.85m, while GSK chief executive Dame Emma Walmsley’s £12.7m remuneration made her the highest-paid woman. Pay awards for female chief executives across FTSE 100 firms averaged £2.69m compared with £4.19m for male bosses. The number of FTSE 100 companies paying their bosses more than £10m rose from four in 2022 to nine in 2023. Luke Hildyard, director of the High Pay Centre, said: “The huge pay gap between executives and the wider UK workforce is a result of factors such as the decline of trade union membership, low levels of worker participation in business decision-making and a business culture that puts the interests of investors before workers, customers, suppliers and other stakeholders.”
More staff are stealing from the office
An increasing number of British workers are regularly stealing from their employers, with analysis by fraud prevention service Cifas revealing a 14% increase last year. The study shows that 38% have taken pens or pencils from their office, while 22% have taken notepads and 18% have taken printer paper. Duncan McLellan, senior fraud intelligence analyst at Cifas, said the increase has been driven by the “uncertain economic climate” and cost-of-living pressures. He added: “Coupled with hybrid working – which can make supervision difficult for employers – these factors provide enticing opportunities for individuals to exploit the companies they work for.”
HMRC: £19bn of unpaid tax will not be recovered
While HMRC is owed more than £40bn in unpaid taxes, analysis suggests that more than £19bn of this will not be paid back. The tax office estimates that 45% of the £43bn owed in unpaid taxes will not be paid back, compared to 32% the previous year. In its annual report, HMRC said the “prevailing economic conditions” with a “significant impact on businesses and individuals” made collecting the same level of taxes more difficult. Sarah Olney, the Liberal Democrat’s Treasury spokeswoman, said the figures reflected “years of Conservative Party economic vandalism” and has called on the Labour government “to properly invest” in HMRC in an effort to “break this cycle of decline.” Analysis also shows that HMRC has lost billions of pounds of taxpayer money to error and fraud in tax schemes to encourage research and development in business during the pandemic. The report shows that around £4.1bn has been wasted on the schemes since 2020, including £1.2bn on a support initiative reserved for smaller businesses.
HMRC issues tax alert over online sales
HMRC has issued a new tax alert targeting those selling goods and services online. The tax office has reminded people buying or making goods to sell at a profit that they might be considered traders and required to pay tax on their earnings. Certain exemptions apply, such as for those making fewer than 30 sales or receiving less than €2,000 from those sales. Online sellers who make significant profits will have to declare them via a self-assessment tax return. The new tax alert follows the UK’s adoption of the OECD Model Reporting Rules for Digital Platforms. Rob Rees, divisional director at Markel Direct, a specialist insurer of freelancers and small businesses, advises online sellers to keep a record of all transactions on online platforms to avoid tax return issues.
Government nears £600m British Steel bailout
The Government is closing in on a £600m bailout of British Steel, with the taxpayer injecting the funds into the struggling company. Talks with British Steel’s Chinese owner, Jingye, have been ongoing for over four years, but a compromise seems to be in sight. Jingye has committed to financially supporting the loss-making operations until at least the second half of 2025. The Government is also in talks with Tata Steel for a similar bailout.
Government faces £47bn compensation claims bill
Rachel Reeves’ efforts to balance Britain’s finances are being hampered by a £47bn bill in outstanding compensation claims. According to a report by the National Audit Office, previous governments have pledged £84bn for 12 compensation schemes related to injustice, cover-ups, and negligence. While a significant portion of this amount has been paid out, there is still an outstanding total of almost £47bn, with this related to high-profile cases such as the infected blood and Post Office Horizon scandals. This outstanding amount is more than double the £22bn black hole in the nation’s finances revealed by the Chancellor in July
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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.