Business news 15 July 2024
Economic outlook upgraded. Companies boost mental health provision. Euros boost economy. England sees manufacturing jobs decline. WFH, Tax, insolvencies, markets, & more business news that we thought would interest our members.
James Salmon, Operations Director.
Economic outlook upgraded after figures show growth
Forecasters have upgraded expectations for the UK economy after data showed higher-than-predicted growth, with GDP up 0.4% in May compared to a flat reading in April. On a year-by-year basis, GDP is up 0.7% on June 2023. Sanjay Raja, UK economist at Deutsche Bank, predicts growth of 0.6% in the second quarter, having previously forecast growth of 0.3%. While Barclays also expects a 0.6% increase, Goldman Sachs and Capital Economics believe that the UK could see Q2 match the 0.7% increase recorded in Q1. However, Rob Wood, chief UK economist at Pantheon Macroeconomics, believes quarterly growth will slow, saying: “Recent growth feels too good to be true.” Over the whole of 2024, Goldman and Barclays think that the UK economy could grow by 1.1%, while Deutsche expects it to expand by 1.2%. Seven in ten financial services leaders said they were more positive about the sector’s growth under the new government, according to the latest quarterly sentiment survey by KPMG.
Companies boost mental health provision amid wellness concerns
Perhaps appropriately after the Euros final, The Times’ Naomi Ackerman looks at a mental health crisis among workers and the impact on UK businesses. She cites analysis from Axa which shows that poor mental health is the leading cause of workplace absence. The insurer calculates that mental health-related productivity losses cost organisations about £57bn last year. Meanwhile, an annual survey by HR and employment law consultancy Peninsula found a 140% year-on-year increase in SMEs reporting a detrimental impact of mental health on their businesses. Ms Ackerman notes that experts have put the recent decline in employee wellbeing down to factors including the long-term impact of the pandemic, as well as an inability to gain access to NHS psychological support, with waiting lists growing longer. A number of firms are investing in mental health provision, with this driven by employees’ demands but also by data on the success on intervention. Research from Deloitte suggests that businesses see an increased productivity return of £4.70 for every £1 spent on supporting the mental health and wellbeing of their workforce.
Euros boost economy by £3bn
Euro 24 has given the British economy a £3.1bn boost, according to research for the website VoucherCodes, with fans splashing out over the last four weeks. More than 17m football fans are expected to have watched the England v Spain final in a local pub, bar or restaurant, with it predicted that £70.5m will have been spent on drinks and £54.3m on food. Retailers, meanwhile, are expected to have received a £280.1m boost, with much of this being spent in supermarkets as fans stocked up on snacks and drinks.
England sees manufacturing jobs decline
The devolved nations of Wales, Scotland, and Northern Ireland have experienced significant growth in manufacturing jobs over the past year, in contrast to the decline seen in English regions. According to research by industry group Make UK and BDO, manufacturing jobs increased by 13,000 in Wales, 10,000 in Scotland, and 2,000 in Northern Ireland. However, England saw a decrease of 34,000 manufacturing jobs – with all regions bar the East of England posting a decline. The report highlights the ongoing challenge of finding skilled workers and calculates that there are 64,000 vacancies in the sector. Richard Austin, head of manufacturing at BDO, said:“There is now an exciting opportunity for the sector to work with the new Government on the development of a new long-term industrial strategy.” This, he said, “could help address longstanding skills shortages, boost infrastructure, improve productivity and unlock vital investment.”
Just 7% of bosses go into the office full-time
Despite many firms pushing staff to return to their desks, a poll of CEOs shows that just 7% of corporate leaders go into the office full time. A survey of over 500 UK chief executives by workspace provider IWG revealed that a quarter of them believe a full-time return to the office is a priority but two-thirds said they would lose talented people if they insisted on their employees being present in a central office every day, as nine in 10 work flexibly themselves. Three-quarters of the business leaders quizzed noted improvements in employee engagement and collaboration between teams as a result of flexible working.
Firms look to enhance etiquette
The demand for etiquette coaching has grown significantly in the UK, with experts increasingly helping people improve their posture, greetings, and introductions. Amid this increase in etiquette coaching, companies have started to offer soft skills, networking and manners coaching. These include KPMG, which last year introduce extra training for its Generation Z staff as managers felt this band of workers had lost out on vital social experience during the pandemic. The firm has offered classes on presentation and working in teams, alongside other key elements of office life.
Markets
Friday in the US the S&P 500 rose 0.55% to 5615.35 and the NASDAQ rose 0.63% to 18398.45. This morning on currencies, the pound is currently worth $1.2987 and €1.190. On Commodities, Oil (Brent) is at $85.20 & Gold is at $2409. With stock markets, the FTSE 100 is down 0.1% at 8246 and the Eurostoxx 50 is down 0.2% at 5033.
London was lower on weak Burberry results. Burberry Group said Q1 store sales fell 21% at group level to £458m with Asia down 23%. The CEO Jonathan Axeroyd is to depart ‘by mutual agreement’ and is to be replaced by Joshua Schulman. Burberry has said it was loss making at Q1 and has suspended its dividend to preserve capital.
FTSE 250 hits two-year high
The FTSE 250 hit its highest level since April 2022, having been boosted by the improving outlook for the UK economy. The index has hit 21,202.89 in a week that saw figures released showing that the economy grew by 0.4% in May. The better-than-expected GDP figures also lifted the pound to its highest level in a year against the dollar
Staff look to score post-final WFH
Employers have been warned that England making the final of Euro 24 could have an impact on Monday’s working arrangements, with firms told that it is “unlikely to be business as usual.” HR body The Chartered Institute of Personnel Development has urged companies to be flexible with staff .
UK home to millions of millionaires
The latest Global Wealth Report from the UBS shows that there are more than 3m dollar millionaires in the UK, with only the US and China home to more. However, UBS also predicts that the UK’s total number will fall by 500,000 over the next five years, with a decline coming as wealthy people leave the country or lose their wealth. The threshold to become a dollar millionaire is to have assets of £770,000. It is noted that those in this category face steep tax bills. The top 1% of earners pay around 30% of the income tax bill. This is the highest proportion of revenue in at least 30 years.
Labour urged to embrace tax and spend
George Monbiot in the Guardian argues that Labour must embrace the concept of “tax and spend” to meet the country’s needs. Taxing the rich, he argues, is crucial for generating revenue but also for preventing the concentration of economic and political power. Mr Monbiot says ministers should consider measures such as replacing inheritance tax, raising capital gains taxes, and implementing wealth and luxury goods taxes.
Tax laws look to lure the rich to Italy
The Sunday Times says Italy’s new tax laws aggressively aim to get rich people to relocate and invest there, adding that Milan hopes to attract more wealthy expats as the UK accelerates the end of the “non-dom” tax status for rich foreign people. Italy’s tax perks include an effective tax rate of just 15% on earnings and a flat fee of €100,000 a year for tax-free non-Italian income.
Government urged to reform tax system as millions face higher charges
The new Government has been urged to reform the entire tax system, with experts warning that fiscal drag means millions more people will be required to pay income tax. AJ Bell warns that 4.4m more people will be required to pay income tax this year as their earnings exceed the frozen personal allowance of £12,570. Additionally, nearly 1.9m more people are expected to fall into the 40% tax bracket. In the run up to the election, Chancellor Rachel Reeves said Labour would maintain Conservative plans for income tax thresholds to remain frozen, while Business Secretary Jonathan Reynolds said he needed to be “candid” that Labour would continue with the plans, adding that they amounted to a “tax rise.”
Half a million caught in 60% tax bracket
More than half a million people in the UK are paying income tax rates of up to 60% on the top slice of their earnings. This tax trap affects individuals earning between £100,000 and £125,000 per year, and the number of people caught in it is higher than ever. The official top rate of income tax is 45%, but due to a quirk in the system, individuals in this income bracket can end up paying a marginal tax rate of 60%. This is because for every £2 earned above £100,000, £1 of the personal allowance is lost. The number of higher earners affected by this 60% marginal rate has increased by 23% in the past year. Bowmore Financial Planning is calling for urgent action to address this inequality in the income tax system, saying that it risks discouraging people from earning more than £100,000 a year.
Simplified tax system could boost UK finances
Experts have suggested that the Government could provide a long-term boost to Britain’s public finances by simplifying the tax regime. Labour, which has vowed not to raise the rates of income tax, National Insurance or VAT, has said it could raise about £6bn by narrowing the difference between what HMRC actually collects and what it is owed. Experts say ministers could achieve this by simplifying the tax system, with such a move reducing the risk of businesses and individuals mistakenly underpaying tax. Colin Graham, head of tax policy at PwC, said: “Signposting real intent to simplify the system for all businesses would be strongly welcomed. Not only would it help to increase the attractiveness of the UK as a place for investment and to do business, it might also be a platform to closing the tax gap if the system becomes easier to navigate.” Helen Miller, deputy director of the Institute for Fiscal Studies, argues: “Simplification in and of itself shouldn’t be the goal,” saying: “We have to have some complexity in order to achieve other aims such as redistribution. But right now we have too much complexity in order to achieve those aims.” Joe Neal, tax manager at Blick Rothenberg, has described the UK’s tax legislation as the longest and most complex in the world.
Labour adviser suggests means-tested state pensions
A chief Labour adviser, Sir Edward Troup, has suggested means-testing the state pension for wealthy retirees. He believes that if the public finances are in a poor state, wealthy pensioners should give up their full state pension. However, critics argue that means-testing the state pension would be a massive and costly exercise, and many elderly individuals may struggle to provide the necessary details. It would also create uncertainty and deter people from saving for retirement. While means-testing could help reduce the cost of the state pension, it would raise the potential for errors and fraud. The proposal is unlikely to be implemented in the short run, but circumstances could change if public finances deteriorate.
More staff look to work from holiday
With remote and flexible working far more common since the pandemic, some workers are expected to take advantage of the extra freedom in the summer months and work from abroad. However, Remziye Ozcan, principal associate at law firm Mills & Reeve, says that despite “headlines about being able to work anywhere, anytime,” the reality is that it may “cause issues for employees and employers.” Kelly Thomson, a partner at RPC, offers similar advice, noting that “the legal risks in working from the beach vary hugely in practice,” noting that checking emails while overseas “is clearly not the same as setting up an office by the pool for two solid months.” Joseph Lappin, partner and head of employment at Stewarts, advises: “In most cases employees working abroad on a temporary and short-term basis will pose little risk to employers.” However, he highlights some possible issues, including that staff may be subject to foreign tax regimes and that confidential information “cannot be sufficiently protected.
Employees push back against returning to the office
The Guardian’s Jedidajah Otte looked on Saturday at how some workers are resisting their employer’s efforts to have them return to the office, citing the benefits or remote and hybrid working. The backlash against office returns has led to an increase in legal action, with employees seeking to protect their rights. The issue of remote working has also been debated in high-profile cases, with some bosses arguing that in-person interaction is beneficial. However, many workers argue that blanket return-to-office directives are arbitrary and fail to consider the limitations of office attendance. The cost of living is another major concern, as remote working has allowed employees to save on commuting and childcare expenses.
£90bn sat in forgotten accounts
More than £90bn is sitting in 30m forgotten accounts, according to Gretel, with an average of £3,141 in each account. Up to 2.8m pension accounts are unclaimed, holding a combined £65bn. It is also estimated that 14m bank and building society accounts have been forgotten, with £4.5bn sat dormant. Around a million people have money in forgotten accounts with investment and wealth management firms. These are estimated to be holding around £2.8bn. Gretal also calculates that more than £8bn is owed to almost 3.5m people from forgotten life insurance payouts. Meanwhile, the amount of money in forgotten National Savings & Investments products jumped to £4.2bn last year, according to NS&I figures.
UK could raise more inheritance tax by adopting measures used by G7 peers, says think-tank
Think-tank Demos says the UK could increase inheritance tax revenue by adopting measures used in other countries. Data shows that just 3.7% of deaths in the UK in 2020/21 resulted in an IHT charge.
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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 last one was particularly deadly for suppliers fand we are still seeing elevated insolvencies as businesses struggle.
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.
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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
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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?
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.