Business news 14 May 2024
Economy at a turning point as output rises. City revises growth forecasts after strong Q1. And more business news that we thought would interest our members.
James Salmon, Operations Director.
Economy at a turning point as output rises
The UK economy has shown signs of recovery as output rose to its highest level in almost two years, according to BDO. The upturn in output, driven by the services sector, has pushed BDO’s output index to its highest level since May 2022. However, the employment index fell for the 10th consecutive month, indicating a cooling jobs market. Business confidence has been boosted by hopes of a cut to UK interest rates and the easing of inflation pressures. Kaley Crossthwaite, partner at BDO, said: “Cautious optimism is the order of the day for UK businesses hoping for an interest rate cut this summer.” She added that “businesses across the board need more certainty from the Government and we urge them to provide a clear, stable and long-term tax roadmap as soon as they’re able to.”
Unemployment
The UK Unemployment Rate edged up slightly in the three months to March, official data showed, while wage growth came in hotter than expected. According to the Office for National Statistics, the nation’s unemployment rate in three months to March ticked up to 4.3% from 4.2% in the three months to February. The reading landed in line with FXStreet-cited market consensus. The ONS said average earnings excluding bonuses rose 6.0% on-year in the period, matching the pace of growth in the three months to February.
City revises growth forecasts after strong Q1
Several investment banks and consultancies have increased their forecasts for GDP growth in response to Office for National Statistics data showing that the economy expanded by 0.6% in Q1. Deutsche Bank has lifted its annual growth projection to 0.8% from 0.5%, while consultancies Pantheon Macroeconomics and Capital Economics raised their forecasts to 0.8% from 0.6%. Tomasz Wieladek, chief European economist at asset manager T Rowe Price, believes the economy can grow by between 0.8% and 1% this year. Sanjay Raja, senior economist at Deutsche Bank, said UK GDP registered a “resounding rebound to start the year,” adding that economy “shrugged off the short and shallow technical recession it fell into late last year.”
Rees-Mogg accuses BoE of ‘miserable incompetence’ over inflation
Former Business Secretary Jacob Rees-Mogg has accused the Bank of England of “miserable incompetence” over its interest rate decisions and failure to reduce inflation more quickly. He said the Bank’s “miserable incompetence allowed inflation to peak at almost six times its target rate,” adding that it is now “demanding higher taxes because of its hopeless bond trading strategy.”
Funding boost will improve HMRC services
HMRC has received £51m in additional funding to improve service levels for taxpayers. The Treasury announced the increased funding after the tax office reversed its plans to close its self-assessment phonelines between April and September and offer a digital service only. The additional funding aims to improve the helpline service, particularly for vulnerable and digitally excluded individuals. Nigel Huddleston, Financial Secretary to the Treasury, said he is fully committed to providing HMRC with the resources to meet customer needs. He added that while many tasks “can quickly and easily be completed online or via the HMRC app,” the extra funding “means that everyone can rest assured there will be someone at the end of the phone, ready to speak.” HMRC’s chief executive, Jim Harra, said that while the tax office remains committed to expanding online services “as we strive to deliver good services as cost-effectively as possible,” it recognises that “this must happen at a pace the public is comfortable with.”
Heathrow calls for return of VAT-free shopping
Heathrow has hit out at ministers’ refusal to reinstate VAT-free shopping for foreign visitors, saying current government policy is “curtailing the UK’s global connectivity.” The Treasury has claimed that scrapping the tax would cost the exchequer £2bn but research published by the Centre for Economics and Business Research suggests it may be costing the Treasury almost £11bn annually as it deters 2m tourists from visiting.
Long-term sickness pushing more women out of work
A study by the Trades Union Congress (TUC) shows that long-term sickness is the leading reason for women to leave the labour market, overtaking caring responsibilities. The union attributed the increases to “overstretched” public services and surging NHS waiting lists, as well as warning that low-paid work is damaging women’s physical and mental health. Researchers found that the number of women out of work due to long-term sickness climbed by 48% to hit 1.54m between the end of 2018 and the end of 2023. The number of men out of work due to long-term sickness rose by 37% during the same period. Calling for a “proper plan for dealing with the sharp rise in long-term sickness,” Paul Nowak, general secretary of the TUC, hit out at “cynical gimmicks” from ministers. Prime Minister Rishi Sunak recently pledged to eradicate what he branded a “sicknote culture,” setting out proposals which could strip GPs of the right to write fit notes.
New home registrations fall by a fifth
National House Building Council (NHBC) data shows that the number of new homes being registered for construction fell 20% year-on-year in Q1. While the 21,967 new homes earmarked for building in the first quarter of the year marked a dip on Q1 2023, it was up on the 19,084 new home registrations seen in the closing quarter of last year. The NHBC report also shows that 26,240 new homes were completed in the first quarter of 2024. This was down 13% compared with the first quarter of 2023. NHBC chief executive Steve Wood said the Q1 figures “reflect prevailing market conditions,” noting that rises in the base rate have driven mortgage rates higher, “leading to a drop in new home purchases and a slowdown in house price growth.”
Sharp increase in interest rates reduces DB scheme deficits
Ian King writes in the Times that the sharp increase in interest rates, both in the UK and the US, has led to the elimination of deficits in defined-benefit (DB) pension schemes. During the period of low rates and quantitative easing, DB scheme deficits grew due to plunging gilt yields. However, the rise in interest rates has reduced scheme deficits, resulting in many companies reporting surpluses in their DB schemes. The UK’s Pensions Regulator revealed that out of the 5,050 remaining private sector DB schemes, only 497 were in deficit. This positive development has prompted more financial officers to consider scheme buyouts.
Specialist lender reports record revenue
Specialist lender Simply Asset Finance has reported a record annual revenue of £52.3m for fiscal 2023, up 37% from the previous year. The London-based firm, which helps finance SMEs, has remained profitable for the third consecutive year, with a pre-tax profit of £5.5m. Simply’s loan book has grown by 15% to £480m, and it has helped finance around 7,500 SMEs across Britain since its establishment in 2017. The company’s growth is attributed to the increasing demand for better access to business funding in the UK. High street banks have faced criticism for reducing small business lending, leading SMEs to turn to specialist lenders.
Insurance battles over UK Covid lockdowns rage on in courts
Despite a test case over insurance payouts linked to pandemic-related losses being brought by the Financial Conduct Authority three years ago, many firms are still in dispute with their insurers.
Shein
Shein is advancing plans for a London IPO and is expected to file with the London Stock Exchange this month – reports have suggested the business could be valued at about £53bn.
Heathrow
Heathrow airport handled 6.7m passengers in April 2024 up 4.8% on the year.
Vodafone
Vodafone reported a 75% decline in profits for the past year, as expected, but kept its dividend flat on the previous year. Chief executive Margherita Della Valle, a year after setting out turnaround plans that left City analysts cold, said the telecoms colossus was “now delivering growth in all of our markets across Europe and Africa”, with better organic service revenue than expected.
Greggs
Greggs said its expectations for its full year remain unchanged after seeing good progress in 2024. In the first 19 weeks of the year, Greggs said like-for-like sales in company-managed shops were up 7.4% on the prior year, seeing growth across all channels. Sales totalled £693 million, up from £609 million a year before.
Currys
Currys reported a return to growth in like-for-like sales in the final 16 weeks of its financial year ending 27 April. Sales edged up 2% in this ‘post-peak’ period after experiencing a decline in revenues earlier in the year
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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!
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.