Business news 13 March 2024
Economy nearly a third smaller amid productivity slowdown. Bosses must stop ‘moaning, groaning and whinging’. Banks voice concern over new rules on SME lending. Small firms see wage bills jump. And more business news that we thought would interest our members.
James Salmon, Operations Director.
Breaking News update on GDP – more to follow tomorrow
The UK Economy showed some encouraging signs of growth at the start of 2024, after falling into a slight recession in the second half of last year. British gross domestic product grew 0.2% in January compared to the previous month, figures from the Office for National Statistics showed, in line with forecasts. But economic growth was down 0.1% for the three months to the end of January compared to the preceding period, which represented an easing from the previous 0.3% decline. Year-on-year, three-month GDP was down 0.3%.
Economy nearly a third smaller amid productivity slowdown
Office for Budget Responsibility (OBR) economist David Miles says a slowdown in productivity growth since the financial crisis has been “catastrophically bad” for the economy. He said: “15 years ago, people thought the level of GDP would be 30% higher than it is today,” going on to describe this as “absolutely transformational.” Mr Miles, a member of the OBR’s Budget Responsibility Committee, suggests that the slowdown has put the Government into a tight fiscal position, saying: “Perhaps the expectations of people for what government can do in terms of public services have not fallen in line with the reality of how much less well-off we all are.” Despite this, the OBR expects the economy to grow 0.8% this year and 1.9% in 2025. This exceeds Bank of England forecasts that predict growth of 0.2% this year and 0.6% next year.
Bosses must stop ‘moaning, groaning and whinging’
Sir Nigel Wilson, the former boss of Legal & General, says corporate leaders need to stop “moaning and groaning and whinging” and start talking up Britain as a place to do business. Speaking at the London Stock Exchange, he said a negative stance taken by chief executives and other “major people” means “the narrative is doom and gloom.” He also said people in the top tier of businesses are “not outspoken enough and not engaged enough in politics.” Sir Nigel was in conversation with the deputy chief of the London Stock Exchange, Charlie Walker, who warned that the press is guilty of talking down the City and focusing on negatives, saying: “The LSE last year had more capital raised on it than the next two European exchanges combined, which is a stat we keep giving to the press conference but they don’t seem to publish it.”
Banks voice concern over new rules on SME lending
The Treasury has been warned that new rules being introduced by the Prudential Regulation Authority will inhibit challenger banks’ ability to lend into the real economy and could create significant barriers to growth. Bim Afolami, the Economic Secretary to the Treasury, has met with executives including Monzo chief executive TS Anil; Andy Golding, CEO of OneSavings Bank; Daniel Frumkin, the chief executive of Metro Bank; and TSB’s chief financial officer, Declan Hourican. Sources say one issue raised was concern over the potential removal of the ‘SME support factor’ which allows banks to hold less capital against loans to SMEs. The meeting, which also included representatives from Atom Bank, Arbuthnot Latham, Investec, Oaknorth and Paragon Bank, covered the PRA’s proposals for implementing the Basel 3.1 banking framework.
Postmasters to be cleared
A new law is due to be introduced today to clear the names of the hundreds of sub-postmasters who were wrongly convicted in the Post Office scandal due to failures by the Fujitsu Horizon system. The legislation is then expected to exonerate victims of the miscarriage of justice in England and Wales by the end of July. Prime Minister Rishi Sunak said it is “an important step forward in finally clearing” hundreds of sub-postmasters.
Those wrongly convicted will get an option to settle for £600,000, without the need to bring a formal claim. However, there will also be “enhanced” financial redress for sub-postmasters who, while not convicted or part of legal action against the Post Office, made good the apparent losses caused by the Horizon system from their own pockets.
BOE
Bank of England Governor Andrew Bailey said that the UK is “near or at full employment” but also signaled he’s now less concerned about a wage price spiral developing.
Markets
The FTSE 100 traded up strongly yesterday trading through 7750. The Nasdaq drove Wall Street higher, as traders held on to bets of interest-rate cuts by the Federal Reserve in the coming months, even as consumer prices data came in slightly hotter than expected. A Labor Department report showed U.S. consumer prices increased in February amid higher gasoline and shelter costs. The Consumer Price Index (CPI) rose 0.4% last month after climbing 0.3% in January. Excluding volatile food and energy components, consumer prices increased 0.4% in February after rising by the same margin in January.
Small firms see wage bills jump 14%
The latest Sage small business tracker found that nominal wages increased by 13.8% in the final three months of 2023. The analysis, which highlights the ongoing wage cost pressures faced by small firms as they battle to attract and retain workers, shows smaller businesses are experiencing more wage growth variability than the wider UK economy. The report said: “Following the pandemic, wage growth within small businesses – as all businesses – has picked up markedly,” adding: “This reflects the ongoing tightness of the UK labour market, where workers have gained increased bargaining power, as well as the increased cost of living.” The study also reveals that small business revenues rose 0.9% in Q4 2023, while average real underlying earnings surged 23.2%, year-on-year.
Wage growth eases to 6.1%
Official figures from the Office for National Statistics (ONS) show that regular wages rose at an annual rate of 6.1% in the November to January quarter. This marks a small decline on the 6.2% annual growth recorded in the previous three months. With bonuses included, the rate of increase was 5.6%. After inflation is taken into account, pay went up by 1.8% in real terms and 1.4% if bonuses are added. The ONS said the rate of unemployment lifted to 3.9% in the three months to January from 3.8% in the previous three months. Vacancies fell by 43,000 quarter on quarter in the three months to February to 908,000. Chancellor Jeremy Hunt commented: “Our plan is working. Even with inflation falling, real wages have risen for the seventh month in a row.” Reflecting on the data, RSM economist Thomas Pugh said that with the unemployment rate low at 3.9% and pay growth sitting at 5.6%, most members of the Bank of England’s Monetary Policy Committee “won’t see a reason to rush towards cutting interest rates.” He added: “That said, wage growth is slowing much more quickly than the headline figure suggests and inflation will soon be back below 2%. That will set the stage for a first rate cut in the summer and for interest rates to end the year at 4.5%.”
One in five UK adults not looking for work
Office for National Statistics (ONS) data shows that more than a fifth of working-age adults in the UK are deemed not to be actively looking for work, with the economic inactivity rate between November and January coming in at 21.8%. This means 9.2m people aged between 16 and 64 in the UK are not in work nor looking for a job. While long-term illness is cited as the main reason for about a third of the total, other groups placed in the bracket include students, those looking after family or a home, people with disabilities, and early retired workers. Warning that many companies are “struggling to access the skills they need,” Alexandra Hall-Chen, principal policy adviser for employment at the Institute of Directors, said ministers “should place tackling skills shortages and increasing labour force participation at the centre of its growth plan.” Work and Pensions Mel Stride Commented: “Employment is up on the year, the number of people on payrolls is at a record high, and inactivity is falling.”
Half of workers would choose WFH over higher pay
A poll by Morgan McKinley shows that 51% of UK workers would choose remote or flexible working over a pay rise. While 40% of companies are urging their staff to return to the office more regularly, 93% of staff said they would prefer to continue working in a hybrid or remote model. The poll shows that one to two days in the office is the favoured weekly working pattern for 52% of UK professionals, while 22% said three to four days and just 3% want to be in the office for a full five-day working week. The survey also found that 56% of staff who work onsite five days a week are looking for a new job in the next six months. This exceeds the rate among hybrid employees (41%) and fully remote employees (44%). KPMG research published in October shows that nearly two-thirds of bosses believe workers will return to the office five days a week within the next three years.
Industrial Production declined
UK Industrial Production declined 0.2% from December. It had been expected to be unchanged, according to FXStreet cited consensus. Production grew 0.6% in December from November. On an annual basis, industrial production was 0.5% higher in January, though that fell short of the FXStreet cited consensus which forecast a 0.7% rise, as well as December’s 0.6% year-on-year climb.
Balfour Beatty
Balfour Beatty reported a decline in annual profit, though its revenue grew and the infrastructure firm upped its payout and announced a buyback. Revenue in 2023, including joint-ventures and associates, climbed 7.4% to £9.60 billion from £8.93 billion in 2022. Statutory revenue, which excludes those items, was 4.8% higher at £7.99 billion from £7.63 billion. Pretax profit was 15% lower at £244 million from £287 million
Share of taxpayers in the highest income bands nearly doubles under the Tories
The share of taxpayers in the highest income bands has nearly doubled under the Conservatives, according to Office for Budget Responsibility (OBR) figures. In 2023/24, 18% of income taxpayers are projected to pay either the higher or additional rate, up from 10.4% in 2010, the year the Tories were elected. There were 3.03m higher rate taxpayers and 236,000 additional rate taxpayers in 2010/11, representing 9.6% and 0.8% of the total number of income tax-payers respectively. These numbers are projected to rise to 5.6m (15.6%) and 862,000 (2.4%) in 2023/24. Income tax thresholds are set to stay frozen until 2027/28, dragging more taxpayers into higher brackets. John O’Connell, chief executive of the TaxPayers’ Alliance, said: “The impact of frozen thresholds has meant that relatively ordinary taxpayers are being hit by tax rates designed for the very wealthy, even if National Insurance cuts have cushioned the blow.” He added that Chancellor Jeremy Hunt must “urgently” unfreeze thresholds to “deliver the low-tax, high-growth economy that ministers claim to aspire to.” The TaxPayers’ Alliance calculates that the number of people paying income tax has risen by 4.5m under the Conservatives, rising from 31m in 2010 to the current 35.5m. In this period, 2.5m people have become taxpayers, with 1.1m paying the basic rate of income tax and a further 1m dragged into the higher rate tax bracket. Chris Etherington of RSM said the analysis “brings into sharp focus the perils of fiscal drag.”
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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
Have you been paid late by business customers in the last six years?
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Claim late payment compensation (LPC) from former business customers who paid you late in the last six years!
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.