Business news 17 June 2024
Bank of England and interest rates, inflation, hybrid workers happier, summer hours, markets, tax, politics, insolvencies & more business news that we thought would interest our members.
James Salmon, Operations Director.
Bank of England set to hold rates steady
The Bank of England will this week leave interest rates on hold, even as inflation looks set to fall to the Bank’s 2% target. The Bank of England is expected to keep interest rates at 5.25% when its Monetary Policy Committee meets later this week. This comes as data for April shows that services inflation, which the Bank has identified as a crucial metric of domestic price pressures, fell less than had been expected.
Ruth Gregory, deputy chief UK economist at Capital Economics, said the Bank “made it clear that the economic data will determine when it starts to reduce Bank Rate … and the tone of the incoming data since then has been disappointing.” Robert Wood, chief UK economist at Pantheon Macroeconomics, believes the Bank’s Monetary Policy Committee is “itching” to follow the European Central Bank and cut rates, so expects policymakers to deliver a rate reduction in August. Bank of America Europe economist Ruben Segura Cayuela said that while he expects rate setters to be cautious in their approach, he still expects six cuts between now and the end of 2025.
BoE unlikely to cut rates before election
The Bank of England is expected to keep interest rates unchanged before the general election, even if the inflation target of 2% is met. Official figures are projected to show a drop in consumer price inflation from 2.3% to 2%, hitting the central bank’s target for the first time in nearly three years. However, the majority of the Bank’s Monetary Policy Committee is expected to vote for no change in the base rate of 5.25% due to concerns over high inflation in the services sector and wage growth. Financial markets are predicting the first interest rate cut in August, followed by two more reductions before the end of the year.
Brits unsure on inflation rate
Research from the Bank of England suggests the public have not been closely following movements in the rate of inflation. A poll for the Bank in May, when inflation stood at 3.2%, found that the average respondent believed it was at 5.5%. The rate has since fallen even closer toward the Bank’s 2% target, hitting 2.3% in April. The survey also shows that 34% of people think the Bank’s target is too high, while 10% said it was too low. It was also found that 42% think interest rates should go down and just 10% believe rates should go up.
Brown calls for overhaul of BoE interest payments
Former Prime Minister Gordon Brown has called for an overhaul on the Bank of England’s interest payments to commercial lenders. The former Labour leader’s proposal to stop interest payments on reserves held by banks at the Bank of England could save the taxpayer up to £3.3bn per year. However, analysts warn that this change could lead to high street banks cutting savings offers or raising mortgage rates. The proposal could add around £170 per year to the cost of an average mortgage. Meanwhile, Reform UK, led by Nigel Farage, is calling for the complete scrapping of interest paid on reserves to save up to £40bn. The Bank of England’s current arrangement with the Government has resulted in the Treasury covering the Bank’s losses, amounting to tens of billions per year.
Hybrid workers happier, healthier and more productive
Hybrid working makes employees happier, healthier and more productive, according to the International Workplace Group (IWG) research. The poll of 1,026 people who divide their working week between home and the office saw 79% say they feel less drained, 78% said they were less stressed and 72% are less anxious. The survey also saw 86% say that the extra free time that comes from not having to commute has improved their work/life balance. Three-quarters of respondents said that going back to working five days a week from the office would have a negative impact on their wellbeing. It was also found that 74% of hybrid workers felt they were more productive, 76% said they were more motivated, and 85% said their job satisfaction has improved.
More businesses offering ‘summer hours’
More businesses are adopting flexible working practices to attract and retain talent, with a number of firms offering “summer hours” which allow employees to finish early on Fridays during the summer months. HMRC says everyone has the legal right to request flexible working from their first day in a job. With analysis suggesting flexible work improves the mood of workers, a report by Deloitte has found happier workers at a UK call centre worked faster and achieved 13% more sales than their less-happy colleagues.
Work events shift away from pubs
Bosses are seeking alternative venues for work events as Gen Z employees shun drinking, while HR departments are also concerned about liability for bad behaviour. Emma Morris, director of Embrace HR, says younger employees with healthier lifestyles “don’t see it as a rite of passage to go out and drink and get absolutely wasted.” With more firms moving toward activities and experiences than boozy nights out, Saxon Moseley, head of leisure and hospitality at RSM, comments: “Going for an experience is more likely to entice people to come in than simply [going] for a drink.”
Markets
On Friday, the FTSE 100 closed at 8146 and the Euro Stoxx 50 closed at 4839. Over in the US the S&P 500 fell 2 to 5431.60, the Nasdaq rose 0.12% to 17688.88.
Paris shares fell a further 3% after leaders of France’s left wing parties allied themselves in a new coalition called the New Popular Front in a move aimed at unifying their vote. German stocks were also off on the perceived heightened political risks in the EU.
This morning the pound is currently worth $1.266 and €1.183. Brent is at $82.50, Gold is at $2322. The FTSE 100 is down at 8125 and the Eurostoxx 50 is flat at 4839.
Boeing
Boeing has uncovered a new production problem, this time with its 787 Dreamliner jets. Hundreds of fasteners have been incorrectly installed on the fuselages of some undelivered jets.
Barratt Developments
Barratt Developments proposed £2.5 billion merger with rival housebuilder Redrow is facing an official competition inquiry after the regulator the CMA widened its initial probe. Combined the two firms would build about 23,000 homes a year and make more than £7bn in revenue.
Superdry
Superdry dodged insolvency through a £10 million lifeline from its founder Julian Dunkerton. Back in April, the group warned it could go bust if it wasn’t able to undergo vast restructuring including the reduction of rents with landlords. Dunkerton is set to inject “a significant amount of his own money” as he underwrites a £10 million equity raise, all of which is part of the company’s plans to delist.
Six in 10 support tax hikes for greater NHS funding
A poll of 1,131 adults shows that 61% want to see NHS spending increase, even if it means their personal taxes were higher, while just 16% said they want to see lower taxes even if it means health service spending is reduced. On public services more broadly, 40% said they would accept higher taxes if it meant more funding. More than a quarter (27%) of respondents said they wanted to see tax cuts even if it meant less spending on public services. Among over-55s, 46% said they would pay more tax to fund higher spending, with just 20% saying they would prefer tax cuts. However, just 34% of those aged 18-34 wanted higher spending and 37% preferred tax cuts.
Labour looks to ‘pro-innovation regulatory framework’
Jill Treanor in the Sunday Times considers what a Labour government may mean for the Financial Conduct Authority (FCA). She suggests that the relationship between the City watchdog and the current government has been strained in recent times, saying “signs of political tensions were plain” before the election was called, with Chancellor Jeremy Hunt questioning the FCA’s plans to “name and shame” firms that are being investigated. Ms Treanor also highlights that Bim Afolami, the Economic Secretary to the Treasury, has reminded the FCA of its duty to promote competition and growth, saying: “There’s no point having the safest graveyard.” Considering whether shadow Chancellor Rachel Reeves would encourage the regulator to adopt a pro-growth stance, Ms Treanor says there is an argument that Ms Reeves “will have little choice as her spending plans require the economy — fuelled by the financial services industry — to grow.” She also cites a source who says it is “implausible” that Labour would back down on the FCA’s consumer duty regime. Labour’s manifesto, Ms Treanor highlights, made references to creating the “conditions to support innovation and growth in the sector” and “ensuring a pro-innovation regulatory framework,” while also promising to create a Regulatory Innovation Office.
Reeves eyes closer UK-EU trade ties
Shadow Chancellor Rachel Reeves will this week highlight plans to boost investment by breaking down EU trade barriers, saying a Labour government “would look to improve our trading relationship with Europe” and suggesting the party could revise parts of the 2020 Brexit deal. She has also emphasised the benefits of mutual recognition of qualifications for financial services workers, saying: “The majority of people in the City have not regarded Brexit as being a great opportunity for their business.”
Labour manifesto leaves door open to tax rises
Labour’s manifesto is not the “sum total” of its spending plans, according to the party’s Wes Streeting, with this leaving the door open to concealed tax rises. While Labour has ruled out increasing income tax, VAT, or National Insurance, it has not made the same commitment for levies such as council tax, fuel duty, capital gains rates, or pensions. The Tories argue that any additional spending would need to be funded by tax hikes and accuse Labour of not being honest with the public. Independent experts warn that Labour would have to increase taxes unless it imposes deep spending cuts or breaks its own fiscal rules. The Labour manifesto confirms £8.5bn in tax rises, taking the UK’s overall tax burden to its highest level in history.
Tax hikes coming, despite manifesto silence
Ruth Sunderland in the Mail looks at Labour’s pre-election pledges, saying that what is left out of election manifestos is “always as important as what is trumpeted.” She points to the likelihood of “nasty tax rises,” noting that the Institute for Fiscal Studies analysis suggesting that there will need to be tax rises or cuts in public spending to meet targets on reducing national debt. Labour, Ms Sunderland suggests, is likely to target the wealthy, although its manifesto “says nothing overt about wealth taxes.” She goes on to suggest that Labour punishing the rich could be a “mere softening-up exercise for a full-blown assault on the middle classes.”
Energy Secretary questions Labour’s net zero plan
Labour’s ban on new North Sea oil and gas will create a £4.5bn black hole in the public finances that will have to be filled by higher taxes, the Energy Secretary has warned. Claire Coutinho has accused Sir Keir Starmer of planning to take Britain “back to the dark ages” with his net zero plan to phase out domestic production. Tory analysis has claimed that the ban would lead to lost tax takings of £4.5bn over the next 10 years and £12.4bn in total as North Sea production dwindles. Ministers have warned that the plan would also threaten 200,000 highly paid jobs that are dependent on the sector. Labour dismissed the claims as “desperate nonsense” and said its plans to invest in renewable energy production would lower bills for households.
Buyers in physically demanding jobs face mortgage scrutiny
Buyers in physically demanding jobs such as firefighters, police officers, and construction workers may face more scrutiny when applying for a 40-year mortgage, according to brokers. These industries have statistically lower retirement ages, making lenders more cautious. The number of first-time buyers taking mortgages with terms longer than 35 years has increased to 21% from 9% in March 2022.
G7 leaders back fairer tax system
Leaders of the G7 have expressed support for a fairer international taxation system, particularly endorsing a global minimum tax. Italian Prime Minister Giorgia Meloni said a multilateral convention on the global minimum tax is ready to be signed off at a technical level.
Body Shop creditors could recoup more than expected
The Body Shop’s unsecured creditors could recoup nearly £5m more back from the beauty chain than initially expected, according to administrator FRP. Based on an analysis of the statement of affairs FRP prepared for its creditors, unsecured creditors could get back 17p in the pound. Initially, FRP thought they would get 15p for every pound they were owed by the fallen high street giant. FRP estimates the beauty business has £52.7m of realisable assets, which have a book value of £484.6m to repay creditors. That compares to its original forecast of £47.6m in April. HMRC, along with other preferred creditors, are owed £6.8m and have first claim on any money recovered. That would leave £45.9m for unsecured creditors, who are owed £269.9m. The Body Shop has 652 creditors.
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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.
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!
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Check our compensation calculator to see how much your business could be owed!
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