Business news 18 November 2024
Some of the business headlines that we thought would interest our members.
James Salmon, Operations Director.
Economy barely grows in Q3
Office for National Statistics (ONS) data shows that the economy grew by just 0.1% between July and September, falling back from the 0.5% growth seen between April and June. On why growth was weaker in Q3, Ben Jones, lead economist at the CBI, said: “Uncertainty ahead of the Budget probably played a big part, with firms widely reporting a slowdown in -decision-making.” Reflecting on the ONS data, Ruth Gregory, deputy chief UK economist at Capital Economics, said the economy “has a bit less momentum than we previously thought,” but noted that this “doesn’t mean the UK is on the cusp of another recession.” Suren Thiru, Economics Director at the ICAEW, said: “Following a ‘gangbusters’ first half of the year, the third quarter outturn paints a more realistic picture of the UK’s underlying growth trajectory.” He added that growth in Q4 is “likely to be similarly modest.” Chancellor Rachel Reeves said: “Am I satisfied with the numbers published today? Of course, not,” adding that she wants growth “to be stronger, to come sooner.”
Inflation set to climb above 2%
Official data set to be released this week is expected to show that inflation is rising and has gone back above the Bank of England’s 2% target. Consumer prices are predicted to have risen by 2.1% in October, marking an increase from the 1.7% recorded in September. The Bank of England expects inflation to rise to around 2.75% in H2 2024 before falling again.
Reeves faces tax showdown with Trump
Rachel Reeves is facing a potential conflict with the incoming Trump administration regarding the digital services tax (DST) aimed at American tech giants. The DST, which imposes a 2% charge on UK sales of large tech companies, raised £700m last year and has generated £2.3bn since its introduction in 2020. However, it has drawn criticism from Washington, where it is seen as an unfair burden on US firms. Jonathan McHale, a former US trade official, said the US “is likely to feel the need to redress a set of unilateral measures that already costs US firms billions of dollars annually.” The Treasury’s decision to review the DST could provoke retaliatory tariffs from the Trump administration, complicating UK-US trade relations.
EU warns White House over ‘harmful’ tariffs
The EU has voiced concern over Donald Trump’s suggestion that the US could impose tariffs of 10% or more onto goods imported into the country, with Brussels warning that this could “upend global trade.” While officials say the bloc’s economic growth could jump from 0.8% this year to 2.3% in 2025, commissioners warned that “further increase in protectionist measures by trading partners” could have a negative impact on growth. Paolo Gentiloni, the EU’s Economic Commissioner, warned that a “possible protectionist turn in the US trade policy would be extremely harmful for both economies.”
Jobs at risk as rules are tightened
With a number of firms having let go of staff for minor infractions, human-resources consultant Suzanne Lucas suggests that the increase in policy enforcement may be a result of companies wanting to rid themselves of staff obtained during a post-pandemic hiring spree, saying: “When you need to cut head count, you tighten up the rules.” It is noted that EY recently dismissed workers who were caught watching multiple training videos at the same time; Meta sacked employees for spending meal allowances on other items; and Target has fired employees who jumped the queue to snap up popular items ahead of customers.
Tax hike could hit 100k jobs
Analysis by Deutsche Bank suggests that the hike to employers’ National Insurance contributions announced in the Budget could mean 100,000 fewer jobs. Sanjay Raja, the bank’s chief UK economist, said the increase “could further strain the labour market,” warning: “Ultimately, whether it’s through cutting existing payrolls or trimming hiring plans, the increase to NICs will hit employment/employment growth.” Saying that “a little over 100,000” jobs – including future jobs – might be lost, he added: “This won’t happen all at once. More likely, we will see declines in hiring and employment growth, with some firms adjusting more immediately to the increase in tax.”
Tax move hits Britain’s biggest employers
Britain’s largest employers are bracing for a £1bn tax increase due to the hike in employers’ National Insurance contributions set out in the Budget. This change, which raises the employer rate from 13.8% to 15% and lowers the payment threshold from £9,100 to £5,000, is expected to burden firms like Amazon and Royal Mail with additional costs of £110m each. Business leaders, including Stuart Machin of Marks & Spencer, have condemned the hikes as a “double whammy,” warning that they could stifle wage growth and inflate prices. The Treasury aims to raise £25bn annually from these measures, but concerns are mounting over their impact on various sectors, including retail and telecommunications. Some of the UK’s biggest supermarkets – Tesco, Asda, Sainsbury’s, Morrisons and M&S – are facing a £650m increase in their costs, while Allison Kirkby, CEO of BT, indicated that the firm would incur a £100m loss and may need to raise prices to mitigate the effects.
PM defends IHT changes for farms
Sir Keir Starmer has defended the recent changes to inheritance tax for farms, saying that it will not affect “the vast majority” and insisting that the “small number that would be affected” would only pay 20% and it would spread over 10 years. The Prime Minister added that he understood the concerns of farmers and insisted he wanted to support them. Despite Treasury data indicating that around 75% of farmers will be unaffected, many farmers contest these figures, citing Department for Environment, Food and Rural Affairs data showing that 66% of farm businesses exceed the £1m threshold for tax liability. Despite calls to reverse the IHT reform set out in the Budget, Chancellor Rachel Reeves insists that she is “not going to be changing” the measure.
PM faces farmer fury
Sir Keir Starmer faced significant backlash from farmers during the Welsh Labour conference in Llandudno, where he was accused of being “cowardly” for avoiding protesters who are unhappy with proposed changes to inheritance tax unveiled in the Budget. Treasury data suggests that around three-quarters of farmers will pay nothing in inheritance tax as a result of the changes. However, farmers have challenged the Government’s figures, arguing that 66% of farm businesses exceed the £1m threshold for inheritance tax.
Triple tax threat for pension savers
Savers are facing a potential triple tax burden on their pensions due to recent Government reforms which will see retirement savings included in the inheritance tax net, affecting one in 10 families as estates exceed frozen tax-free thresholds. Previously, workers could save up to £1.07m without incurring tax charges, but this lifetime allowance was abolished in April. As a result, retirees could face a 40% inheritance tax charge, alongside income tax on withdrawals for beneficiaries.
One in three unaware of retirement tax trap
According to Shawbrook Bank, nearly one in three individuals approaching retirement are uncertain about their income tax obligations. The study reveals that 35% of women aged 55 to 68 are unaware of potential tax implications, compared to 23% of men in the same age group. While pensioners enjoy a tax-free allowance of £12,570, any income exceeding this threshold may be subject to tax.With the new state pension set to increase by over £470 in April, concerns have arisen that it may surpass the personal allowance, leading to tax liabilities for those relying solely on the state pension. Adam Thrower, head of savings at Shawbrook, warns: “A shock tax bill is never welcome, especially for those planning retirement.”
Regulators will ‘modernise’ redress system
Officials plan to overhaul the way that consumers claim compensation from financial services firms, with the Chancellor saying the Government has “developed a new agreement” between the Financial Conduct Authority (FCA) and the Financial Ombudsman Service (FOS) that will help prevent “mass redress events.” The regulators have outlined a number of potential changes to the redress system, including giving companies longer to respond to complaints and reducing the scope to appeal against decisions. James Dipple-Johnstone, deputy chief ombudsman at FOS, said: “We have seen how large volumes of complaints in particular areas can impact the effectiveness of the system,” adding: “By further strengthening our work with the FCA and industry, we can identify and address these issues more promptly to ensure better outcomes for all.” The watchdogs have opened a “call for input” to gather feedback on changes to the system. David Postings, head of UK Finance, welcomed the plans, saying the FOS has “the potential to cut across the remits and rules of other regulators, making the regulatory landscape more complex and costly [and] we have long called for this to be looked at.” beneficiaries.
Barclays boss backs City reforms
C.S. Venkatakrishnan, the chief executive of Barclays, has praised Rachel Reeves for taking an “important step in promoting investment and risk-taking,” suggesting that the Chancellor has “underlined that the financial sector is a critical part of the national interest.” This comes after Ms Reeves set out a series of reforms designed to ease rules regulating the City with the aim of bolstering economic growth. The Chancellor has outlined plans to replace parts of the tough post-financial crisis regime on senior managers and certification; reform the consumer redress system for customers of financial companies; and shake-up the pensions industry. Mr Venkatakrishnan says he is “encouraged” that the Chancellor and Andrew Bailey, governor of the Bank of England, “have seized the occasion by defining a constructive and co-operative agenda that promotes the role of the financial industry and supports free trade.” He added that they “seek to address imbalances in regulation, which have promoted safety at the expense of growth.”
House price forecast slashed
Estate agency Hamptons has revised its growth forecast for house prices, reducing the 2026 estimate from 5% to 3.5%. This adjustment is attributed to concerns that the Budget will lead to prolonged higher interest rates. The firm said: “The dampening effect of higher interest rates alongside a fairly lacklustre and higher tax economy” has influenced the decision to downgraded its forecast.
Strike vote looms at HMRC
Workers at HMRC are set to vote on potential strike action following the dismissal of three union representatives from the Public and Commercial Services (PCS) union. The representatives were reportedly sacked for “demanding fair pay, pensions and jobs,” and over 200 union members are being balloted as management refuses to reinstate them. Fran Heathcote, PCS general secretary, has urged the tax office’s management to “avoid strike action and the subsequent disruption to services” by reinstating the representatives.
Typhoo exploring rescue options
Typhoo Tea has filed a court notice to appoint administrators EY to explore rescue options. Dave McNulty, chief executive of Typhoo, said: “This action has been taken to enable us to pursue a sale of the business,” adding: “This does not mean that we are in administration.” The company’s losses widened to £38m from £9.6m in the year to the end of September 2023, while sales fell to £25.3m from £33.7m.
Liberty Steel unit’s restructuring proposal means hefty losses for creditors and taxpayers
Liberty Steel’s restructuring plan for its Speciality Steel UK business may result in taxpayers losing much of what they are owed, with claims made by HMRC reduced by 80%.
Pizza Hut looks to raise funds
The operator of Pizza Hut restaurants in the UK, Heart With Smart (HWS), is aiming to raise over £10m to manage rising costs following tax increases announced in the Budget. The funds may come from selling part of the business or new investments from current shareholders. HWS anticipates a £4m rise in labour costs, approximately 14%, due to increased National Insurance contributions and the National Living Wage. Interpath has been engaged to oversee the fundraising process.
Markets
On Friday, stocks were weaker. US retail sales rose 0.4% in October (after a 0.8% increase in September) suggesting US consumers reacted to the interest rate easing on September. The FTSE 100 closed down 0.09% at 8063.61 and the Euro Stoxx 50 closed down 0.8% at 4794.85.
Stocks fell on Friday, closing out the worst week in more than two months, as Trump trades lost steam and investors bet the Federal Reserve will have to slow the pace of policy easing.
The US dollar continued to climb against other major currencies as the view took hold that the US Federal Reserve would not cut interest rates further this year. Sterling drifted back towards US$1.264 and also fell against the Euro to €1.1980.
Chinese leader Xi Jinping told US President Joe Biden that he’s ready to work with Donald Trump to improve the relationship between the world’s biggest economies.
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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.