Business news 16 October 2024
Inflation surprises. Small business owners lament lack of time. Red tape is ‘killing’ Britain. Chancellor plans £40bn in tax rises and spending cuts. Wage growth, employment, tax fears, markets, insolvencies & more business news that we thought would interest our members.
James Salmon, Operations Director.
Inflation surprises
UK inflation fell unexpectedly to 1.7% in the year to September, the lowest rate in three-and-a-half years. Lower airfares and petrol prices were the main drivers behind the surprise slowdown, official figures showed. Even stubborn services inflation eased too to 4.9% from 5.6% (5.2% had been estimated).
It means inflation – the rate prices rise at over time – is now below the Bank of England’s 2% target, paving the way for further interest rate cuts.
Economists polled by Reuters had expected the headline rate to come in at a higher 1.9% for the month, in the first dip of the print below the Bank of England’s 2% target since April 2021.
Inflation has been hovering around that level for the last four months, and came in at 2.2% in August.
Core inflation, which excludes energy, food, alcohol and tobacco, came in at 3.2% for the month, down from 3.6% in August and below the 3.4% forecast of a Reuters poll.
With inflation falling lower than most economists expected, markets have been beting on interest rate cuts when the Bank of England next meets in November, boosting the market and hitting the pound.
Small business owners lament lack of time
Research reveals that small business owners are losing an average of £4,000 annually due to time constraints affecting their financial management. A study of 500 SME owners found that 68% have not updated their expenditure management strategies, with 9% concerned about unnecessary monthly spending between £1,000 and £3,000. The research, commissioned by Smart Energy GB, highlights that 33% struggle with excessive responsibilities. To combat these issues, 89% of owners are open to new approaches, with 57% adopting technology to enhance productivity.
Eric Schmidt: Red tape is ‘killing’ Britain
Google’s former CEO, Eric Schmidt, has said that excessive bureaucracy and red tape is holding Britain back. Speaking during a Q&A with Sir Keir Starmer at the International Investment Summit in London, Mr Schmidt said: “The cost of capital and the delay is killing you, and furthermore you’re not going to achieve your 2030 energy goal, which is laudable, without fixing this.” He explained: “Democracies, especially something as old as this one, have so many ways in which people can say no. I’d much rather – and I think the business community would much rather – have a single person who can say yes or no…and then they can move on.” The Prime Minister said removing red tape is a challenge but the Government would endeavour to set up some of the structures that will remove the bureaucracy that blocks investment.
Chancellor plans £40bn in tax rises and spending cuts
Treasury officials believe the Chancellor will need to find £40bn through increased taxes and cuts to spending in order to avoid real-terms cuts to government departments. According to the Financial Times, Rachel Reeves has been told that filling the reported £22bn black hole will only keep public services standing still. The Chancellor is hoping to make a major investment in the NHS and other public services, telling her colleagues: “The budget will be about protecting working people, starting to fix the NHS and rebuilding Britain. We cannot turn around 14 years of damage in one budget, but we can start to deliver on our promise of change.” The news comes as Ms Reeves faces a major backlash over plans to hike employers’ NI contributions. Jeremy Hunt, the shadow chancellor, said in a piece for the Telegraph: “It appears that the new Labour Government’s first Budget will mean lower growth, lower wages, and fewer jobs – with working people paying the price. It’s a bad sign they are abandoning their manifesto promises so quickly. This is shaping up to be one of the most damaging Budgets in memory.”
IMF: Reeves must slash spending to get debt down
The International Monetary Fund (IMF) has warned that Rachel Reeves should cut government spending if she wants to reduce debt indicating that relying on tax rises alone would be undesirable. National debt currently stands at 100% of GDP in Britain, and the IMF says the UK, alongside the US, France and Italy are among the countries where debt is on track to keep rising until the end of the decade. This comes as the Fund warned on Tuesday that global debt was expected to hit $100trn (£76trn) for the first time this year. Separate analysis by the IMF warned that countries with high debt levels faced a higher risk of investors reacting negatively to a spending spree, leading to a sharp increase in sovereign bond yields.
PM insists Labour will keep tax promises
Sir Keir Starmer has reiterated Labour’s commitment to not raise taxes on “working people,” including income tax, VAT, and national insurance. In a BBC interview, the PM stated: “We intend to keep the promises that we made in our manifesto.” However, with the upcoming Budget on October 30, there are concerns about potential increases in employers’ national insurance contributions, a move the Tories insist would break Labour’s manifesto pledge. The Liberal Democrats also called on the Chancellor, Rachel Reeves, to row back on the plans, arguing that it was not the time to further raise taxes on businesses and entrepreneurs. Pressure has increased on Reeves after a clip emerged of her castigating Tory plans in 2021 to increase national insurance contributions, including those by employers, labelling the move a tax on jobs that would “make each new recruit more expensive and increase the costs to business”.
ONS reports slowdown in UK wage growth
Official data reveals that average regular earnings growth has decreased to 4.9% for the three months ending in July, down from 5.1% previously, marking the lowest level since June 2022, according to the Office for National Statistics (ONS). Rob Wood, chief UK economist at Pantheon Macroeconomics, commented: “Slowing wages make a November rate cut a slam dunk.” The decline in wage growth follows a record high of nearly 8% in summer 2023, although it still surpasses inflation, rising by 2.6% in the three months to August. The ONS also reported a drop in job vacancies and a slight decrease in payroll numbers, indicating a weakening jobs market. Despite this, the unemployment rate unexpectedly fell to 4% in the three months to August. The Resolution Foundation cautioned that ongoing labour market softness could signal the end of significant pay increases.
Hiring slump hits Robert Walters
Robert Walters, the white collar recruiter, has reported a 12% decline in net fee income to £79.9m for the three months ending September. The UK market saw a 19% drop to £12.5m, attributed to firms pausing hiring due to uncertainty surrounding upcoming employment laws and fiscal measures. In the Asia-Pacific region, income fell by 12% to £35m, impacted by challenging conditions in Hong Kong and public sector job cuts in New Zealand. Chief executive Toby Fowlston stated: “As we approach the end of 2024, I am confident that we will close the year a stronger business than when we entered.” The recent Employment Rights Bill, which includes reforms like the abolition of zero-hours contracts, has raised concerns among business groups about increased hiring costs and potential unemployment rises. A British Chambers of Commerce survey indicated that only 56% of firms are seeking new staff, the lowest in three years.
London’s unemployment hits three-year high
Recent data from the Office for National Statistics (ONS) reveals that London’s unemployment rate has surged to 5.5% for the June to August quarter, marking the highest level in nearly three years. This increase translates to 280,000 individuals seeking employment, contrasting with a slight decline in the national unemployment rate, which fell to 4.0%. London now holds the second highest unemployment rate in the UK, just behind the north east at 5.6%. However, the rise in unemployment may be attributed to more individuals re-entering the workforce rather than a decrease in job availability.
Britain suffers biggest jump in male worklessness in G7
New analysis shows that young British men are becoming increasingly likely to shun both employment and education. According to the Organisation for Economic Co-Operation and Development (OECD), the proportion of working age men participating in the labour force has plunged from a record high of 84% in 2009 to 80.9% this year – the steepest fall among G7 nations. Female labour force participation also fell in the UK, but by just 0.4 percentage points, from a peak of 75.2% at the start of 2020 to 74.9% in spring 2024.
Trial will assess anti-obesity jab effect on employment
Wes Streeting, the Health Secretary, has proposed administering new weight loss jabs, such as Mounjaro, to unemployed individuals to help them return to work and alleviate pressure on the NHS. The Government has announced a £279m investment from pharmaceutical company Lilly to support the initiative. Mr Streeting said: “The long-term benefits of these drugs could be monumental in our approach to tackling obesity. For many people, these weight loss jabs will be life-changing, help them get back to work, and ease the demands on our NHS.”
Revised wage growth figures adds £100m to state pension bill
Revised figures from the Office for National Statistics (ONS) reveal that the Chancellor faces an extra £100m state pension bill due to wage growth over the summer. The ONS adjusted its wage growth figures for May to July from 4% to 4.1%, a difference pensions expert Sir Steve Webb said would cost an extra £100m due to the triple lock pledge. “The rate of the new state pension will now be close to £12,000 per year, very near to the £12,570 tax-free personal allowance. This is likely to put extra pressure on the Chancellor to take action on tax allowances in the coming years,” Sir Steve, a partner at LCP, said.
Construction industry fears tax raid
Mark Reynolds, chief executive of Mace Group, has expressed concerns that fears of a tax raid in the upcoming Budget are deterring investment in the UK construction sector. He stated: “What we are not doing is making growth investments,” highlighting a reluctance to commit to new projects due to expectations of increased capital gains tax. Despite the Prime Minister’s announcement of £63bn in private sector spending, Reynolds noted that confidence is low, with many businesses focusing on cost-cutting rather than expansion. He warned that if capital gains tax rates are misaligned with other countries, it could lead to a significant drop in private equity investment. The Construction Leadership Council estimates that the current planning system is costing the sector £11bn annually in lost productivity, further complicating the investment landscape.
Markets
Yesterday, the FTSE 100 closed down 0.43% at 8257.14 and the Euro Stoxx 50 closed down 1.87% at 4946.73 as sentiment took another turn south.
Oil majors BP and Shell declined on reports of a weaker demand outlook for Crude. Airlines benefited from the drop in oil, with British Airways owner IAG leading the gains.
Overnight in the US the S&P 500 fell 076% to 5815.26 and the NASDAQ fell 1.01% to 18315.59.
This morning on currencies, the pound is currently worth $1.300 and €1.195. On Commodities, Oil (Brent) is at $74.13 & Gold is at $2681. On the stock markets, the FTSE 100 is currently up 0.65% at 8303 and the Eurostoxx 50 is down 0.82% at 4906.
Oil Prices tumbled more than 4% yesterday to a near two-week low due to a weaker demand outlook and after a media report suggested Israel would not strike Iranian oil targets, easing fears of a supply disruption.
Markets were hit by dark news out of LVMH and ASML with LVMH signalling a drop in the luxury goods market and ASML releasing tepid sales predictions well below market expectations hitting predictions for big tech and AI and causing a $420 billion meltdown among global chipmakers.
Shein
Fast fashion Chinese giant Shein has picked Barclays and UBS Group to help with its potential London IPO, which may happen as soon as early 2025.
New £550m investment to tackle housing crisis
Sir Keir Starmer has announced a significant £550m private investment aimed at addressing the UK’s housing shortage. Schroders, Man Group, and Resonance are among the firms launching new impact investment funds to support the construction of tens of thousands of homes. The money, spread around 54 local authorities, is expected to deliver 5,200 homes on sites such as former car parks and industrial land that can be difficult to build on. Additionally, the Government will allocate £68m to local councils for developing homes on brownfield sites, contributing to the goal of building 1.5m new homes over the next five years.
Tax fears dampen new home demand
The looming threat of tax increases in the upcoming Budget is causing a significant decline in demand for new homes, according to Bellway’s CEO, Jason Honeyman. He stated: “We have many customers who have got concerns about the October Budget so they are delaying decisions.” Speculation surrounds potential hikes in national insurance contributions, capital gains tax, and inheritance tax, alongside possible increases in fuel duty and pension raids. Bellway reported a 30% drop in annual revenues to £2.4bn and a staggering 62% fall in profits to £183.7m, with home sales plummeting to 7,654 in the year ending July, over 3,000 fewer than the previous year.
Tax hike could threaten hospitality jobs
Increasing employers’ national insurance contributions (NICs) may jeopardise jobs in the hospitality sector, which currently faces 95,000 vacancies, according to UKHospitality chief executive Kate Nicholls. She stated: “What this clearly demonstrates is the need for the Government to incentivise sectors like hospitality to create jobs and support employment.” Nicholls warned that raising NICs would “hammer” the sector, as staffing costs are already the largest business expense. Elsewhere, Rain Newton-Smith, director general of the Confederation of British Industry (CBI), argued hiking NICs paid by businesses will put firms off hiring and hamper economic activity.
US Banks
Goldman Sachs topped estimates for third-quarter profit and revenue on strong results from its stock trading and investment banking operations. The bank said profit surged 45% from a year earlier to $2.99 billion, or $8.40 per share, as revenue climbed 7% to $12.7 billion.
Bank of America reported a smaller drop than expected in third-quarter profit. Earnings per share of $0.81 were down from $0.90 in the same quarter last year but were higher than the $0.77 cents average estimate from Wall Street.
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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.