Business news 12 November 2024
Businesses face tax turmoil as insolvencies rise. Tax raid threatens high street survival. Unemployment rises. Trump tariffs worry Labour. NICs hike will hit working people. Climate, markets, insolvencies & more business news that we thought would interest our members.
James Salmon, Operations Director.
Businesses face tax turmoil as insolvencies rise
The number of British businesses facing insolvency has surged, with 1,022 companies filing for insolvency last week, marking a 64% increase compared to the same period last year. This rise follows the Chancellor’s recent decision to reduce tax breaks, specifically the business asset disposal relief, which previously allowed entrepreneurs to benefit from a lower capital gains tax rate of 10% on gains up to £1m. Starting from April 6, 2025, this rate will increase to 14%, and further to 18% from April 6, 2026. As a result, many entrepreneurs are feeling the pressure, with the Chancellor’s changes prompting significant concern within the business community.
Tax raid threatens high street survival
Rachel Reeves’s tax increase on employers’ National Insurance contributions is causing significant concern among retail and hospitality leaders, who warn it could lead to high streets becoming “ghost towns.” Luke Johnson, chairman of Gail’s bakery, stated that the tax hike “adds to the decline of town and city centres.” The Night Time Industries Association reported that 40% of its members face closure within six months, with CEO Michael Kill declaring the Budget a “death sentence” for many businesses. Andrew Goodacre from the British Independent Retailers Association noted that members will likely reduce staff hours and trading times, making revitalising high streets even more challenging.
Unemployment rises
The UK Unemployment Rate rose to 4.3% in the three months to the end of September, from 4.0% in the reading a month ago, and higher than the 4.1% that economists expected. Employment levels rose by 220K over the three months, the Office for National Statistics also revealed, less than expected. Average weekly earnings grew 4.3%, which was higher than a month ago, where pay growth was revised up to 3.9% from 3.8%, and higher than the 3.9% average forecast.
Trump tariffs worry Labour
Liam Byrne, Labour chair of the Commons business committee, has warned that Donald Trump’s proposed tariffs on imports could lead to a “doomsday scenario” for the UK economy. He predicts that these tariffs, which could reach 60% on goods from China, would significantly impact growth, inflation, and interest rates. The National Institute of Economic and Social Research has cautioned that such changes could halve UK economic growth. Byrne stated: “If that does go ahead that is going to have a really significant impact on growth, inflation and interest rates on the UK.”
Public sector pay awards surpass private
According to the Chartered Institute of Personnel and Development (CIPD), public sector pay awards in Britain are set to surpass those in the private sector for the first time in four years. This shift follows the Government’s recent Budget, which confirmed above-inflation pay rises for public sector workers and increased taxes on employment. James Cockett, a senior labour market economist at the CIPD, noted that businesses are facing rising costs that could hinder growth and lead to lower pay rises in the private sector. The report highlights that public sector pay expectations have surged, with anticipated increases of 4% to 5% in the coming months, while private sector pay is expected to remain stagnant at around 3%.
Hybrid workers more likely to have a degree
Official figures from the Office for National Statistics (ONS) reveal significant disparities in hybrid working arrangements across age, job type, and education. Workers with degree-level education are ten times more likely to have hybrid arrangements compared to those without qualifications. The ONS noted: “While the trend in working only from home has fallen since 2021, a hybrid-working model… has become the ‘new normal’ for around a quarter of workers.” In autumn 2024, 28% of working adults in Great Britain had hybrid arrangements, with senior managers being the most likely to work from home.
Barclays: Labour’s NICs hike will hit working people
Economists at Barclays have warned that Labour’s increase in NICs for employers, and a reduction in the threshold at which employers start paying the tax, will reduce living standards for workers. In a note to clients, analysts said: “We expect the additional costs implied by changes to employer NICs to lead to lower real incomes, through a combination of higher inflation and lower wages.” The alert comes as business leaders across the economy protest the hike – John Longworth, chairman of the Independent Business Network, said Sir Keir Starmer has “betrayed himself and the nation with his first Budget” while Alex Veitch, director of policy at the British Chambers of Commerce added that businesses were now reassessing their plans around investment and recruitment in the short-term.
National Insurance hike hits part-timers
Labour’s increase in National Insurance contributions has raised costs for businesses employing part-time workers by as much as 73%. The threshold at which they have to start paying was also lowered from £9,100 to £5,000. Stephen Burns, CEO of Hollywood Bowl, said: “We were very disappointed, and that’s putting it mildly.” His company employs 2,600 mostly part-time workers at more than 60 sites across the UK. Neil Carberry, the chief executive of the Recruitment and Employment Confederation, warns that reducing the NICs threshold will make solving Britain’s worklessness crisis harder. “The threshold change is especially challenging as it raises NI on the wages of lower salaried workers much more – not just lower paid workers but also many part-time workers who will become far more expensive to engage,” he says.
NICs rise will cause ‘life-changing’ cuts to charity services
Charities are sounding the alarm over “life-changing consequences” for 1m vulnerable individuals due to cuts in state-funded disability services, exacerbated by recent tax changes and wage increases. The Voluntary Organisations Disability Group (VODG), representing 100 charities, says Rachel Reeves’s decision to raise national insurance contributions (NICs) threatens local charity services. Reports indicate that hospice charities could face £30m in annual costs, risking essential end-of-life services. The charity sector, employing 1m people and delivering £17bn in services annually, estimates an additional £1.4bn burden from these changes. Over 100 homelessness charities have also warned that NICs increases could strip £60m from frontline services.
Labour makes climate promises
The Labour Government is set to publish a radical pledge to cut emissions by 81% compared with 1990 levels by 2035. The Guardian reports that the goal, expected to be unveiled at the COP29 climate summit today, would be achieved by decarbonising the power sector and through a huge expansion of offshore wind, as well as through investments in carbon capture and storage and nuclear energy. Meanwhile, the FT reports that a deal to launch multibillion-dollar carbon markets governed by UN rules on emissions has been agreed at COP29. Some viewed this as a “rare bright spot of co-operation and progress emerging from COP29” but others suggested the agreement had bypassed proper scrutiny. Elsewhere, the Times reports that UK Prime Minister Sir Keir Starmer has called on the private sector rather than taxpayers to contribute to a pool of more than $1trn a year in climate relief for developing countries.
Markets
Yesterday, the FTSE 100 closed up 0.65% at 8125.19 and the Euro Stoxx 50 closed up 1.07% at 4854.03. Overnight in the US the S&P 500 rose 0.1% to 6001.35, breaking 6000 and setting the 51st high of 2024. The NASDAQ rose 0.06% to 19298.77.
Tesla was once again the top S&P 500 mover on a points basis, even as most tech megacaps fell, led by a decline for Nvidia.
Bitcoin nears US$90,000 on optimism over US crypto adoption, beating pre-pandemic highs. The value of crypto market has hit an all-time high of $3.1 trillion.
This morning on currencies, the pound is currently worth $1.2825 and €1.1207. On Commodities, Oil (Brent) is at $72.20 & Gold is at $2595. On the stock markets, the FTSE 100 is currently down 0.64% at 8073 and the Eurostoxx 50 is down 0.6% at 4825.
Post office & Fujitsu
Fujitsu Europe’s boss has admitted he “does not know” if the Post Office Horizon IT system at the heart of hundreds of sub-postmasters’ wrongful convictions is reliable. Paul Patterson told the inquiry into the scandal there “have been bugs errors and defects” in the accountancy system and it is clear “that there is a level of unreliability”. In his second appearance in front of the inquiry, Patterson also admitted that he did not know whether Fujitsu had done an independent report into the software system.
Gas boilers face ban by 2027
The UK Government plans to ban gas boilers in most new homes by 2027. Under the so-called Future Homes Standard, Labour hopes to reduce carbon emissions across all new homes by up to 80%. The legislation, expected to be announced by May 2024, will require developers to install electric heat pumps or non-gas alternatives. Steve Turner, executive director of the Home Builders Federation, stressed the need for a robust heat pump supply chain, stating: “At the minute, we’re only installing about 35,000 a year.” The Government is also promoting solar panel use but will not mandate their installation. The goal is to make all new homes boiler-free by 2030, while ensuring the National Grid can handle the increased electricity demand.
Sanjeev Gupta to submit restructuring plan
Sanjeev Gupta’s Liberty Steel is set to launch a restructuring plan for its Speciality Steel UK division, aiming to significantly reduce its debts while ensuring no job losses for its 1,500 employees. The plan, overseen by Begbies Traynor, requires the approval of 75% of creditors and is expected to be controversial due to previous restructuring efforts within Gupta’s empire. Jeffrey Kabel, Liberty Steel’s group chief transformation officer, stated: “After making significant progress to stabilise the business and refocus it on high value specialist products, we’re now addressing the debt position of the company to create a stronger speciality business going forward.”
Anglo American cuts jobs at Scarborough
Anglo American has announced the closure of its Scarborough office at Resolution House as part of a broader cost-cutting strategy, resulting in significant job losses. The company anticipates an additional 450 job cuts at the Woodsmith Mine by mid-next year, following over 100 job losses earlier this summer. The capital investment for the Woodsmith project will be slashed from £800m to £160m next year.
AstraZeneca
AstraZeneca has nudged up its guidance and said it will invest $3.5 billion in R&D and manufacturing in the US. The company reported core earnings of $2.08, up 20% on a year ago, and slightly above the average analyst estimate of $2.06. This was on revenue that jumped 18% to $13.57 billion, above the $13.08 billion consensus estimate. The drugmaker raised its full-year revenue and core EPS outlook at constant exchange rates to “high teens percentage growth”.
BAE Systems
BAE Systems has doubled down on previously upgraded full-year guidance as demand for defence goods globally remains supportive. Sales growth of 12% to 14% continued to be expected since a hike at the half-year stage, alongside a 12% to 14% uptick in underlying pre-tax earnings, BAE said on Tuesday. This reflected trading on a constant currency basis, BAE added, flagging a five-cent movement in the dollar against the pound to an average of US$1.29 so far in 2024.
Vodafone
Vodafone has kept its full-year outlook unchanged but halved its interim dividend as the approval processes for major transactions in the UK and Italy near a conclusion. The telecoms giant grew service revenue 1.7% to €15.1 billion, or 4.8% on an organic basis in the first half of the year. Service revenue in the second quarter of €7.64 billion was in line with expectations.
Metro Bank fined
Metro Bank has been fined £16.7 million by the UK financial watchdog over its failure to manage money laundering risks. The Financial Conduct Authority issued the fine over the inadequacies of the challenger bank’s systems and controls over four years to December 2020 to monitor more than 60 million transactions, with a value of over £51 billion, that took place in that time.
Heathrow
Heathrow Airport has reported 7.2m passengers in October, its busiest in history. The board said it had spent £1bn this year in making internal improvements.
Latest Insolvencies
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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.