Business news 15 October 2024
Businesses pledge £63bn, Unemployment falls, Gov to ease small business reporting rules, Gloomy outlook for household finances, Energy costs still soaring for businesses, Employers NIC, markets, insolvencies & more business news that we thought would interest our members.
James Salmon, Operations Director.
Businesses pledge £63bn investment in UK
The UK Government has celebrated a significant commitment from businesses to invest £63bn at Monday’s International Investment Summit, which is expected to create nearly 38,000 jobs. Notably, DP World announced a £1bn investment in its London Gateway facility, despite prior tensions with the Government over P&O Ferries’ controversial layoffs. Business Secretary Jonathan Reynolds remarked: “When you get some bumps in the road, you get on the phone and you sort it out.” Other major investments include £12bn from Iberdrola for renewable energy projects and £10bn from Blackstone for a data centre in Blyth. CloudHQ will also development a new £1.9bn data centre in Didcot Oxfordshire while ServiceNow plans to invest £1.15bn into its UK business over the next five years, including expanding its data centres and office space. CyrusOne said it intends to invest £2.5bn over the coming years, including to build new data centres, while CoreWeave said it would invest a further £750m in the UK, having announced in May it was spending £1bn to open its European headquarters in London.
Unemployment falls
The UK Unemployment Rate fell to 4.0% in August and pay growth eased to a two-year low, but the Office for National Statistics warned that its data should be used with caution. Unemployment unexpectedly fell from 4.1% the month before, while average earnings including bonuses eased to 3.8% in the three months to August from 4.0% before, and to 4.9% from 5.1% if bonuses are excluded.
Gov to ease small business reporting rules
The UK Government is set to simplify reporting requirements for small companies, aiming to reduce costs and enhance ease of doing business. Business minister Jonathan Reynolds announced that legislation will be introduced by year-end, projected to save companies £240m annually. The reforms will raise the size threshold for small businesses, allowing up to 132,000 firms to benefit from lighter accounting and reporting obligations. Reynolds stated: “My department will lay legislation by the end of the year that will save companies £240m per year by removing redundant reporting requirements and uplifting the monetary size thresholds for micro-entities, small and medium-sized companies, as well as making technical fixes to the UK’s audit framework.”
Gloomy outlook for household finances
The latest YouGov and the Centre for Economics and Business Research (CEBR) report highlights a decline in household financial expectations, with the consumer confidence index dropping to 95.2 in September from 97.4 in August. This score indicates negative sentiment, as a score below 100 reflects a deteriorating situation. Sam Miley, managing economist at CEBR, noted: “Beneath the broadly unchanged confidence index lie some areas of concern.” Job security is a significant worry, with consumers feeling less confident about their future prospects, coinciding with a slowdown in earnings growth and a decrease in job vacancies. Despite some improvement in homeowners’ confidence regarding property values, the outlook for job security over the next year has also weakened.
Energy costs still soaring for businesses
The latest forecast from Cornwall Insight indicates that while industrial energy costs have decreased from nearly £1m in 2022/23, they remain significantly elevated compared to historical averages. The report highlights a 57% increase from pre-crisis levels of around £350,000, with current bills averaging £540,000 annually. Dr Craig Lowrey, principal consultant at Cornwall Insight, stated: “Many businesses, especially in the retail arena, are navigating an increasingly challenging environment.” The forecast predicts that by April 2025, small businesses will face average electricity bills of £13,264, a 70% rise from £7,811 in 2020/21. Without a price cap, businesses are more vulnerable to wholesale market fluctuations, impacting profitability and potentially leading to closures.
Reeves refuses to rule out an increase in NICs paid by employers
The Chancellor has given the clearest signal yet that businesses will face an increase in National Insurance Contributions in the Budget. Speaking at an investment summit in London, Rachel Reeves said Labour’s election pledge not to increase taxes on working people did not include taxes paid by their employers. However, Paul Johnson, director of the Institute for Fiscal Studies, said the move would break Labour’s manifesto commitment as they did not specify whether it would be employee or employer NICs. Laura Trott, shadow chief secretary to the Treasury, commented: “If Labour raise employer NICs it will be a tax on jobs, break their manifesto commitment and mean lower pay for employees according to the OBR. Rachel Reeves herself criticised the move as anti-business in opposition, but now is trying to convince us otherwise.” There is speculation that the Chancellor is also considering introducing NI on employer pension contributions, a move the IFS said could raise about £17bn a year. Reeves later added that Labour would cap corporation tax at its current rate of 25% for the rest of this parliament.
Hike in National Insurance for firms will hammer SMEs
The Federation of Small Businesses has warned that an increase in employers’ National Insurance Contributions would hit small businesses the hardest. Craig Beaumont, an executive director at the FSB, said: “You don’t get to a pro-small business budget without the government honouring its cast-iron manifesto commitment to not increase national insurance contributions, including on small employers.” He added: “At a stroke this will make every job in all our local communities more expensive to maintain, which will see the current fall in job numbers in UK SMEs gather pace. Fewer jobs and lower pay is not the way forward.” Elsewhere, Kate Nicholls, the chief executive of UK Hospitality, added: “This is a tax on jobs. An increase in NICs makes it harder to employ people and to take a risk on recruitment and expansion, because the costs of it will be so much higher.”
Entrepreneurs warn against CGT hike
In an open letter to the Chancellor, a coalition of 500 British entrepreneurs, including founders from Signal AI, Yonder, and Zopa, has urged Rachel Reeves not to raise capital gains tax (CGT) and business asset disposal relief (BADR) at the upcoming Budget. They argue that such increases could “end up lowering the tax take” and jeopardise the UK’s startup ecosystem by diminishing incentives for business creation. The letter highlights that the UK would have the second-highest CGT rate in Europe, potentially deterring entrepreneurs and investors. The group warns that discouraging entrepreneurship could lead to a decrease in overall tax revenue, stating: “Policymakers should also understand that entrepreneurship is an engine for further economic growth.”
Weight-loss jabs to tackle worklessness
Health Secretary Wes Streeting has proposed trials to assess the impact of weight-loss medications like Ozempic and Mounjaro on reducing worklessness among unemployed individuals. He highlighted that “widening waistbands” are straining the NHS, costing £11bn annually, more than smoking. However, he also stressed the importance of personal responsibility in maintaining healthy lifestyles.
Markets
Yesterday, the FTSE 100 closed up 0.47% at 8292.66 and the Euro Stoxx 50 closed up 0.74% at 5041.01. Overnight in the US the S&P 500 rose 0.77% to 5859.85 and the NASDAQ rose 0.87% to 18502.69.
This morning on currencies, the pound is currently worth $1.308 and €1.199. On Commodities, Oil (Brent) is at $74.25 & Gold is at $2654. On the stock markets, the FTSE 100 is currently down 0.38% at 8261 and the Eurostoxx 50 is also down 0.38% at 5022.
Oil prices fell by around 3% in early trading in Asia, after the Washington Post reported that Israel was willing to strike Iranian military targets rather than oil or nuclear facilities.
Shares in British gambling firms fall amid tax threat
British gambling companies saw their shares fall sharply on Monday following reports that Treasury officials could tap the sector for up to £3bn in extra taxes. The Social Market Foundation and the Institute for Public Policy Research have both put forward proposals to the Labour Government suggesting raising the amount of duty paid by the industry. Collectively, shares in gambling companies listed on the FTSE fell by more than £2bn. James Wheatcroft, analyst at the investment bank Jefferies, said: “The proposals apparently being considered would all but wipe out bookmaker profitability in the UK, per our estimates.”
Hiring slowdown continues to plague PageGroup
PageGroup, one of Britain’s largest recruitment firms, has reported a significant decline in demand for its services, with gross profits falling to £201.4m, a 17% drop compared to the previous year. Chief Executive Nicholas Kirk stated: “We continued to see challenging market conditions throughout the group in the third quarter,” highlighting a lack of confidence in the economy as a major issue. The company anticipates an operating profit of £58m for the year, which is half of what it achieved in 2023. The recruitment sector has faced a downturn over the past 18 months, with businesses cautious about hiring amid ongoing geopolitical and economic uncertainties. PageGroup has also experienced double-digit profit declines across all divisions, particularly in France and Germany, while the UK market saw a 13.5% profit drop.
Reeves cuts National Wealth Fund budget
Labour has diluted its manifesto commitment to invest £7.3bn in the National Wealth Fund (NWF), the rebranded UK Investment Bank. Officials confirmed the fund would only get £5.8bn with the remaining £1.5bn reportedly allocated elsewhere. A spokesman for the Treasury said £7.3bn of public money would still be spent on infrastructure but would not all go via the fund. The extra £5.8bn takes the NWF’s total financial firepower of £27.8bn. Labour said the NWF will have a remit to support the party’s growth and clean energy missions. The news came as the Government announced £63bn had been “committed” to investment in the UK by private businesses. Much of this had previously been announced, but new pledges include a £1.1bn cash injection into Stansted Airport by its owner Manchester Airports Group; £1bn confirmed by DP World to create 400 new jobs and make London Gateway the UK’s largest container port within five years; £279m from US pharmaceutical giant Eli Lilly to tackle “significant health challenges”, such as obesity, and £20bn over the next five years from Australian firm Macquarie towards various infrastructure projects.
Reeves could kill off salary sacrifice schemes
Chancellor Rachel Reeves is expected to target employer pension contributions in her upcoming Budget on October 30, raising concerns about the future of salary sacrifice schemes. Jonathan Reynolds, the business secretary, hinted at this move, which could lead to significant changes for employers and employees alike. Experts warn that imposing National Insurance on pension contributions may result in businesses cutting back on pay rises and other benefits. Nimesh Shah from Blick Rothenberg stated: “If the Chancellor made it so that employer’s NI (at 13.8%) was applied to salary sacrifice pensions, I expect businesses to seriously rethink the viability of the scheme.” The potential changes could discourage smaller employers from adopting salary sacrifice arrangements, ultimately impacting workers’ retirement savings.
Red Tape
Prime Minister Keir Starmer vowed to slash regulatory red tape to boost anemic investment in the country. “We’ve got to look at regulation across the piece, and where it is needlessly holding back investment … mark my words, we will get rid of it,” he told delegates at the government’s inaugural International Investment Summit, held at London’s Guildhall.
Sir Keir Starmer has called for an overhaul of the regulatory framework, stating it is “time to upgrade the regulatory regime” to better support business growth. He stressed the need for regulators to prioritise growth, saying: “We will rip up the bureaucracy that blocks investment.” Starmer acknowledged the challenges facing public services and finances but insisted on a long-term vision for economic stability. Technology Secretary Peter Kyle supported the initiative, but insisted that “ripping out” bureaucracy would not compromise standards.
Labour’s private school tax guidance criticised
Leading tax advisers have criticised Labour’s private school tax guidance, published last week by HMRC, arguing that it contradicts itself and is not properly thought through. The document references guidelines about “closely related services” that are exempt from VAT, but experts say these rules were effectively now redundant because of the move to tax education.
UK financial services consulting set to struggle this year
Consulting for the global financial services sector is projected to recover in 2024, with revenues expected to rise from 2.6% in 2023 to 5%, surpassing $80bn (£60bn) for the first time, according to the Source Global Research report. Notably, only 1% of surveyed companies plan to reduce their reliance on external consulting, while 60% intend to increase it. Peter Curry, senior research analyst at Source Global Research, stated: “Many of the concerns that troubled the sector in 2023 are still present in 2024, but this year, companies who were previously uncertain about their financial position are now beginning to loosen their purse strings.” However, the UK’s consulting market is expected to contract by 2% in 2024, contrasting with a global boost in private equity consulting, which is anticipated to grow by 8% in the US.
Nvidia
Nvidia, makers of AI enabling chips saw its shares reach a record high, following a 8% rise over the past week, giving it a market capitalisation of $3.4trn, as investors appear to have returned to their bullishness about AI’s potential profitability. Meanwhile Bloomberg reports that the US government is considering capping the export of Nvidia’s chips to some countries.
Google & small reactors
Alphabet owned Google has signed a deal with Kairos Power to use small nuclear reactors to run its energy-hungry artificial intelligence data centres. The agreement will see Google start using the first reactor within this decade, with more planned by 2035. Details of the deal, including cost and reactor locations, have not been disclosed.
Taxpayers on hold for 719 years
Taxpayers have spent a staggering 719 years on hold to HMRC over the past year, as average call waiting times continue to rise. According to research by UHY Hacker Young, the average call length has increased by 19%, now averaging 27 minutes and two seconds. Alarmingly, only 42% of calls were answered by an adviser, with many calls either deflected or abandoned. Neela Chauhan, partner at UHY Hacker Young, stressed the need for improved customer service, stating: “Delays in processing customer queries also hinder HMRC’s ability to resolve tax issues.”
Greensill’s creditors see £41m recovery
Greensill’s administrators have successfully recovered £41m for creditors, as detailed in the latest report from Grant Thornton covering the six months ending September 7. The firm indicated that the timeline for unwinding Greensill’s assets will extend beyond the initial March 7, 2025 deadline, with the total amount available for unsecured creditors remaining “uncertain at this stage.” The directors had previously estimated claims exceeding $1.6bn, but Grant Thornton noted that some claims were significantly higher. Chris Laverty, a restructuring partner at Grant Thornton, stated that legal letters are being prepared to demand contributions for creditor losses. The report also highlighted ongoing investigations into the company’s affairs prior to its collapse, with GFG Alliance’s outstanding balance of $587m still under negotiation.
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Why you should become a member of CPA!
The Credit Protection Association (CPA) has been assisting thousands of UK businesses to get paid, since 1914. We have supported our members through all sorts of difficult trading environments. With high interest rates and a struggling economy and elevated insolvencies, our services can help your business navigate these difficult waters.
Unlike other credit management and debt collection companies, we offer a range of services to our members that are all included as part of a fixed annual subscription, tailored to your needs.
Under your annual subscription you will have access to our main services:
- Our Creditcare credit reports provide credit ratings and limits along with a host of detailed information on your potential customers to enable you to trade with confidence and set appropriate credit policies for new customers.
- Our monitoring service will alert you to any significant changes in the status of those customers.
- Our Overdue account recovery service can be used to chase up payment on any invoices to those customers that have not been paid on time. Unlike other debt collection companies, this service directs your customer to pay direct to you and allows you to maintain your goodwill with them, rather than inserting ourselves into your relationship with you customer and insisting they pay CPA instead. Our Overdue account recovery service resolves over 80% of accounts referred to us.
All of the above services and other complimentary services such address verification, are included in your subscription!
And for the small minority of debts not resolved through our Overdue account recovery service, you can refer the debt to our collections department to escalate the late payment collections process.
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 and be warned of any potential risks. CPA has been improving business cash flow for over 100 years, by tackling late payers and campaigning against the late payment culture in the UK.
Unlike other credit management companies, we offer our members a fixed annual subscription regardless of how high the value of their debts maybe!
Rather than to borrowing more money to improve your cashflow, CPA suggests that business owners tackle the problem at its source. If late payments are a strain on your cashflow, then talk to CPA about how we can help you reduce those late payments.
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’s collection department 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.