Business news 14 March 2024
Economy returns to growth in January. Lending to SMEs falls again. And more business news that we thought would interest our members.
James Salmon, Operations Director.
Economy returns to growth in January
Office for National Statistics (ONS) data shows that the economy grew by 0.2% in January, rebounding after a 0.1% decline in December. While the economy fell into a technical recession in the second half of 2023, with two consecutive quarters of negative growth, January’s figures raise hopes that this may already be over.
Liz McKeown, director of economic statistics at the ONS, said strong growth in retail and wholesaling had helped boost the economy in the opening month of 2023, with construction also performing well.
Chancellor Jeremy Hunt said that although the last few years “have been tough,” the latest ONS figures “show we are making progress in growing the economy.” Despite the month-on-month increase, the ONS report also shows that GDP fell 0.1% in the three months to January.
Looking ahead, KPMG’s chief economist, Yael Selfin, said forward looking indicators, such as recent business surveys, suggest there will be “a further strengthening of momentum” in February.
However, Barret Kupelian of PwC said that with the economy growing one month then shrinking the next, “it is too soon to say whether we have broken away from this doom loop.” Rob Wood, chief UK economist for Pantheon Macroeconomics, commented: “Last year’s minor recession is already rapidly receding in the rear-view mirror.”
Lending to SMEs falls again
Figures from banking trade body UK Finance show that lending to SMEs fell for a third consecutive year in 2023. Gross lending to SMEs fell 22% to £14.3bn in 2023 from £18.4bn in 2022. UK Finance attributed the decline to “demand uncertainty, higher interest rates and the impact of lending taken out during the pandemic.” The report shows that small businesses have increasingly relied on alternative lenders, with 59% of lending to smaller firms coming from outside the UK’s bigger banks. While lending across the full year was down, Q4 was the first three month period to record an increase since Q2 2022.
Will higher VAT threshold help small businesses?
The Chancellor has promised to help small businesses by raising the VAT threshold from £85,000 to £90,000 per year. While this move is expected to cut administrative costs for businesses and make prices more competitive, Sam Fowles in City AM says it will only benefit the smallest of small businesses and not make up for the effects of fiscal drag for many businesses. While the Government claims that the rise will keep 3.2m small businesses out of VAT, Mr Fowles says this figure is misleading as around 3m businesses were already below the £85,000 threshold. He argues that the impact of increasing the threshold is likely to be minimal, benefiting only a small percentage of small businesses.
Almost 5,000 chain stores empty in 2023
Almost 5,000 chain stores were left empty in 2023, with analysis by the Local Data Company for PwC showing a 33% increase in net closures compared to the previous year. While 9,138 new chain outlets opened, the highest level since before the pandemic, the number of closures rose at a faster pace, hitting 14,081. While retail parks saw a net increase in outlets, high streets experienced a decline of 3.3% in the number of trading sites. Banks closed a net 583 branches, with Barclays, Halifax and Lloyds among those focusing more on online services.
Lisa Hooker, leader of industry for consumer markets at PwC, said: “A combination of the lagged impact of the pandemic together with inflation across the cost base has seen an acceleration in chain stores exiting the market in 2023 at 14 stores a day and some disappointing results across the independents sector.” Kien Tan, a senior retail adviser at PwC, expects to see the number of chain outlets continue to fall by about 2% but noted that a “shift to experiences and the decline in independents will continue to favour chain hospitality growth.”
Hunt: Scrapping NI is a ‘long term ambition’
Jeremy Hunt says an ambition to scrap National Insurance contributions “is going to be the work of many parliaments.” The Chancellor, who reduced NI by 2p in the Budget before suggesting that scrapping it altogether could help deliver a simpler tax system, has told the Treasury Committee that this “won’t happen in one Parliament,” adding that it is “a long-term ambition.” He went on to say that if ministers were to abolish NI it would be “the biggest tax simplification of our lifetimes.” The ambition is shared by the Prime Minister, who recently said he is committed to ending the “unnecessarily complex” system of having both income tax and NI contributions. Labour leader Sir Keir Starmer has accused Rishi Sunak of offering voters an “unfunded £46bn promise to scrap National Insurance”, and asked if it would be paid for by cuts to state pensions or to the NHS. Mr Hunt has accused Labour of scaremongering, saying the money raised by National Insurance did not determine how much went into the state pension or the health service.
Brexit makes investing in UK harder, says ICE chief
Jeffrey Sprecher, the founder and chief executive of Intercontinental Exchange, says Brexit has made it difficult to invest in the UK, warning that the City has lost value as a trading centre.
Recharge hit with winding up petition
Recharge Industries UK, the company that promised to buy collapsed UK gigafactory Britishvolt, has been issued with a winding up petition over unpaid wages and other monies owed. The winding up demand was made by Tom Cowling, a former board member at Britishvolt and its chief governance officer. Recharge Industries UK has faced multiple legal actions and has struggled to follow through on its promise to buy the assets of Britishvolt. The prospective buyer remains in default of the business sale agreement and has yet to pay the full £8.75m owed under the deal, according to administrators EY. Britishvolt had planned to build a £3.8bn battery plant but collapsed into administration last year.
TikTok
The US house of representatives passed a measure 352-65 requiring Tiktok to be divested from Chinese ownership or be banned. It now goes to the Senate.
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Why should you become a CPA member!
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.
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.
Unlike other credit management companies, we offer our members a fixed annual subscription regardless of how high the debt value maybe!
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 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!
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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.