Business news 15 April 2024
Inflation and unemployment data due. Economy grew in February. BoE finds ‘serious deficiencies’ in economic forecasts. Hunt ready to ‘cut taxes and bet on growth’. And more business news that we thought would interest our members.
James Salmon, Operations Director.
Inflation and unemployment data due
Economic data due to be published this week will offer insight into the state of the economy and could point toward when the Bank of England might start to cut interest rates. Analysts at Investec have forecast that Office for National Statistics data will show that headline inflation eased to 3.2% from 3.4%, with the core measure expected to fall from 4.5% to 4.3%. Separately, the analysts believe labour market figures will show that unemployment rose to 4% in the three months to February.
Economy grew in February
Office for National Statistics (ONS) data shows that GDP grew by 0.1% in February, increasing hopes that the UK economy is moving out of recession. Output from the production industry led the economy’s growth, rising by 1.1%, compared to a fall of 0.3% in January. Chancellor Jeremy Hunt said the new figures were a “welcome sign that the economy is turning a corner,” adding: “We can build on this progress if we stick to our plan.” Meanwhile, the ONS also revised its figures for January, saying GDP increased by 0.3% rather than the previously estimated 0.2%. Reflecting on the ONS data for January and February, Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, said: “It’s a racing certainty that the UK exited recession in the first quarter with output likely to have picked up further in March.”
Bank of England review finds ‘serious deficiencies’ in economic forecasts
The Bank of England’s economic forecasting system has “serious deficiencies” that need to be modernised, according to an independent report by former Federal Reserve chairman Dr Ben Bernanke. The review said a “material degree” of under-investment had led to staff using a “complicated and unwieldy system.” Dr Bernanke said updating and modernising how its system handles economic data should be a “high priority” for the Bank. He also suggested that the Bank should create more in-role promotion opportunities and should base some remuneration decisions on in-role performance. Bank of England governor Andrew Bailey welcomed the review, saying: “This is a once in a generation opportunity to update our approach to forecasting and ensure it is fit for our more uncertain world.” He added: “Substantial investment is being made to develop our infrastructure and to update our system,” insisting: “It’s a high priority.”
Hunt ready to ‘cut taxes and bet on growth’
Jeremy Hunt has declared he is ready to cut taxes after the economy grew by 0.1% in February and January’s GDP increase was revised up from 0.2% to 0.3%. The Chancellor says the economy is “bouncing back” and that recent positive economic data shows that “Britain is back in business.” Mr Hunt declared: “Britain has done the hard yards on inflation, now we are ready to cut taxes and bet on growth.” The Chancellor highlighted that he has cut National Insurance by a third, from 12% to 8%, saying: “That means £900 in the pocket of someone on the average salary,” before insisting: “But I plan to go further, cutting taxes that hold back growth.” “Advanced economies with lower taxes have generally seen higher growth over the last decade or so,” he added. Meanwhile, Rob Wood, chief UK economist at Pantheon Macroeconomics, has said analysts are “optimistic about the near-term outlook for GDP.”
Hundreds of directors banned for abusing Covid loans
The number of company directors disqualified for abusing pandemic support schemes rose by 80% last year, Insolvency Service data shows. In total, 831 directors were banned in 2023, compared with 459 in 2022 and 140 in 2021. Those banned last year were disqualified for nine and a half years on average. More than 97% of the disqualifications handed out in 2023 related to misconduct surrounding bounce back loans, rather than other Covid support schemes. Chief executive Dean Beale said tackling misconduct related to the £47bn Bounce Back Loan Scheme remained a “key priority” for the Insolvency Service. A report from the British Business Bank in 2022 estimated that about 7.5% of the loans given out had been fraudulent, while lenders have flagged £1.1bn of the £46.6bn of loans issued as suspected fraud. The Insolvency Service has successfully applied to have 1,430 directors banned for abusing Covid support schemes since it started investigating the issue in 2021.
Markets
Global markets showed some signs of stability despite Iran’s retaliatory attack on Israel over the weekend. Oil only fell modestly on Monday with Brent crude trading around $90 a barrel. US equity futures actually rebounded after Friday’s selloff where the S&P 500 fell 1.46% and the Nasdaq 1.62%. The Iranian mission to the United Nations said the issue “can be deemed concluded,” reducing for now the risks of a wider conflict.
The UK market was down 0.5% in early trading but the Eurostoxx 50 climbed as hopes remained that diplomacy would hold back escalation.
Markets remain only about 2% off all time highs.
Meanwhile metal prices surged after the US & UK sanctioned Russian metal supplies.
Gold Prices firmed, hovering near record-high levels, as traders kept a close eye on developments surrounding the Middle East conflict, prompting safe-haven buying of assets such as bullion
M&S chair voices concern over Labour’s plans to reform workers’ rights
Marks & Spencer chairman Archie Norman has voiced concern over Labour’s plans to reform workers’ rights. With Labour saying it would grant staff rights from day one in new jobs and crack down on zero-hours contracts, former Conservative MP Mr Norman said: “Any incoming government should consider carefully whether a package that reduces flexibility, makes it more costly to hire people and seeks to bring unions back into the workplace will help attract new investment.”
Homeowners extend mortgage terms
More homeowners are extending their mortgage terms to reduce the pain of higher rates when their cheap deal ends. According to UK Finance, 24% of remortgages in December had terms of 30 years or more, up from 11% in December 2021.
Half of City leaders use AI for financial advice
Half of leaders in the City of London are using AI for financial advice, according to new research by KPMG. The study found that 36% of senior leaders in the financial services sector also use AI. CEOs are the most frequent users, with 30% utilising it. CEOs use AI up to three times a day, primarily for brainstorming and help with speech writing and presentations. Almost half (44%) of leaders said financial planning is where generative AI is being used in their businesses, followed by customer data analytics (38%) and fraud detection (35%). Despite the high usage, 31% of leaders are not confident that their businesses are fully harnessing the potential of AI. Karim Haji, global and UK head of financial services at KPMG, warned that there are knowledge gaps in how generative AI can be used, saying this could be impacting confidence and trust in the technology. He said: “For the potential of generative AI to be fully realised, organisations need to ensure that the skills required for creating value with AI are built via training, including among leadership.”
Tax havens must open public registers
Dame Margaret Hodge, chairwoman of the All-Party Parliamentary Group on Anti-Corruption and Responsible Tax, says Britain has “long presided” over a network of offshore tax havens that have become “hubs for economic crime, tax evasion and illicit wealth.” Dame Margaret, a former chair of the Public Accounts Committee, says parliamentarians have “worked together to call time on these secrecy jurisdictions” by introducing public registers of beneficial ownership and, in 2018, forced the Government to change the law to compel Britain’s overseas territories to introduce this “basic transparency measure.” However, a report from the UK Anti-Corruption Coalition shows that progress has been “glacially slow and in some places non-existent,” with Gibraltar the only jurisdiction to have delivered a public register. Dame Margaret says that while ministers have been working to establish public registers through consensus, “six years is too long and the Government should now consider using its legislative powers to compel the tax havens to act.” Britain, she warns, “has become the jurisdiction of choice for dirty money.” “If we want to stamp out money laundering, fraud and tax evasion, we must close down the use of UK tax havens,” she argues, adding: “Public registers will help us to do this because sunlight is the best disinfectant.”
Weather-related home insurance claims reach record high
Weather-related home insurance claims in the UK rose by over a third to a record £573m last year, driven by storms and heavy rainfall. The Association of British Insurers reported a 10% increase in residential property claims settled in 2023. The trend is expected to continue in 2024 and Storm Henk in the first week of January triggered almost £150m in claims alone, according to PwC estimates. As well as storms, high temperatures have prompted other insurance claims, with a summer heatwave reportedly contributing to a 45% rise in subsidence cases in 2022.
Lloyd’s of London chair: Getting staff into the office on Fridays is a ‘lost cause’
Lloyd’s of London chairman Bruce Carnegie-Brown says trying to persuade staff to work in the office on Fridays is a “lost cause.” While Lloyd’s says it has seen progress in efforts to “get Monday back,” Mr Carnegie-Brown said: “I’d love to recover a bit more of Friday but I think it’s a lost cause.” He added that while he did not “mind too much” if attendance rates do not entirely return to pre-pandemic levels as some work can be done digitally and remotely, “there’s also a complex aspect to insurance” and some elements require bespoke solutions that are better handled in person. Transport for London data analysed by the Centre for Cities think-tank shows that there are notably fewer journeys through stations in the Square Mile on Fridays.
New import checks could cause food shortages
Post-Brexit import checks which impose new handling fees will lead to shortages of some foods, industry leaders have warned. Some small retailers say a number of EU exporters have already had enough of British red tape and are either pausing supply operations or have given up completely. Nigel Jenney, chief executive of the Fresh Produce Consortium, said several major exporters have suggested that the UK is too complicated to trade with. While ministers say a ‘common user charge’ of up to £145 per consignment is only intended to cover the costs of new facilities and not generate a profit, the Cold Chain Federation trade body estimates the Government will reap a dividend of £60m and the process will add £1bn to the cost of importing certain items.
Smartphone wars
Samsung took back top spot from Apple as the world’s biggest smartphone seller in the first quarter of 2024. The South Korean conglomerate, which had only lost the lead to its US rival in the previous quarter, sold more than 60m smartphones while Apple’s ales fell 10% year on year to 50m. Global smartphone shipments were up 8% overall.
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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!
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.