Business news 19 August 2024
Labour has inherited a resurgent economy
Labour has inherited a resurgent economy. New business council. New Zero will cause factories to close. Employment Rights Bill spells trouble for business. Import costs, housing, ted Baker, retail, strikes, fraud, markets, insolvencies & more business news that we thought would interest our members.
James Salmon, Operations Director.
For small business owners who extend credit, it’s crucial to stay informed about the latest economic and regulatory developments. Recent insights from various industry experts reveal that despite claims of economic challenges, the UK economy is showing resilience with healthy growth rates, low inflation, and unemployment. However, potential regulatory changes under the Labour government could significantly impact business operations, including proposed reforms to workers’ rights and energy pricing, which could increase costs and operational complexities.
The introduction of the Employment Rights Bill, which aims to strengthen workers’ rights, may impose new challenges, particularly around zero-hours contracts and flexible working policies. Additionally, proposed changes to electricity pricing could affect manufacturing costs, especially for energy-intensive industries, making it more expensive to operate in certain regions.
For businesses reliant on imports, recent post-Brexit customs charges have also introduced additional financial burdens, with higher costs potentially impacting profitability. As the business environment evolves, it’s vital to keep an eye on these developments and prepare accordingly to mitigate any adverse effects on your operations.
Labour has inherited a resurgent economy
Labour’s claims about inheriting a dire economic situation from the Tories should be treated with a pinch of salt, according to a senior economist. Ben Zaranko, of the Institute for Fiscal Studies, the think tank, told Today on BBC Radio 4: “The first thing to stress is that the economy is growing at a relatively healthy rate. Inflation is now back close to its 2% target, unemployment is low. So when the government says it’s got the worst economic inheritance ever, we should treat that with a healthy dose of scepticism. When they say they have got a terrible public finance inheritance, I think I have much more sympathy.” But he goes on to explain that any additional fiscal space created by a growing economy, rising retail sales and falling inflation, will be taken up by recent pay deals agreed with unions.
New business council aims to drive public private enterprise
Andrew O’Brien, the director of policy and impact at Demos, writes in City AM on Labour’s record on public private partnerships over the decades, pointing out that “partnership with business has been the cornerstone of Labour’s policy to the economy arguably since Harold Wilson was leader.” However, the results have been mixed and despite various quangos being instituted they’ve never been given the resources they need to do their work. O’Brien notes that repeated reviews have highlighted the short-termism in British corporate governance, which dissuades businesses from taking long-term investment decisions. Whether or not Sir Keir Starmer fulfils his promise to reform the Companies Act to put “long term value creation” at the heart of corporate decision-making remains to be seen, he adds. Demos is teaming up with Headland to establish a Business Partnership Council to examine the long-term changes that need to be made to create an effective collaboration between the public and private sectors.
Net zero electricity pricing will force factories to close
The Energy Secretary has been warned that introducing so-called zonal energy pricing would force factories to close and investment to shift abroad. Make UK, the industry lobby group, warned in a consultation response to Ed Miliband’s proposals to overhaul electricity pricing: “Steel or other energy intensive industries would have no realistic option to relocate their very heavy assets to more favourable pricing zones and would instead be forced to shut down. Moreover, encouraging a factory to move makes it open to moving out of the UK entirely, as it will reconsider all its options for the best location.” The change would mean areas close to green energy production pay less for power. UK Steel also opposes the move. The group’s Frank Aaskov said “zonal pricing is an extreme reform of the electricity market,” adding: “The new Government inherited this policy idea, but it now has the opportunity to bin it, ensuring the steel industry can invest.”
Employment Rights Bill spells trouble for business
Labour’s incoming worker’s rights bill, known as the Employment Rights Bill, is set to ban zero-hours contracts and end policies of fire and re-hire. The bill will also make parental leave, flexible working, sick pay, and protection from unfair dismissal available from day one. However, unprepared firms may face “colossal challenges” and legal action, according to Toma Pagojute, chief HR officer at Quinyx. The introduction of immediate sick pay for all employees could lead to increased absences and understaffing, she says, adding that the Government needs to provide clearer guidance on flexible working and fair agreements that give true flexibility to all employees. TV star Jeremy Clarkson has also raised concerns over Deputy Prime Minister Angela Rayner’s workers’ rights reforms, suggesting foreign entrepreneurs will choose Europe over the UK as a result.
Labour’s job market intervention brings serious risks
Despite the UK’s problems, it remains a “paragon of economic competitiveness,” writes Kallum Pickering, chief economist at Peel Hunt. It consistently ranks high in global leagues for ease of doing business and labour market flexibility. With a light-touch regulatory approach, the UK has become the world’s second largest exporter of services, trailing only the US, and a leader in financial services, law, medicine and technology. However, with Labour returning to power, regulatory interventionism is back on the table, says Pickering. The Government’s proposals include minimum wage increases, enhanced powers for trade unions, a ban on zero-hours contracts, and more rights for workers. “The results of these short-sighted policies will either be unremarkable at best, or outright damaging,” Pickering concludes.
Checks on food and plants leave companies nursing higher costs
Customs agents and businesses have complained to the government about being charged for checks on goods that never took place after post-Brexit controls were imposed on food and plant imports from the EU. Errors with the new system were highlighted in an online meeting with officials from the Department for Environment, Food and Rural Affairs (Defra). The charges, known as the Common User Charge, have already run into tens of thousands of pounds for some smaller businesses. Trade groups have warned of higher food prices and squeezed margins for importers as a result of the charges. Talks for a “veterinary deal” with Brussels are due to begin next year. William Bain, head of trade policy at the British Chambers of Commerce, said a deal was essential to prevent higher costs being passed on to consumers through higher prices.
Housing bosses doubt targets can be met
Housing chiefs are warning that Labour will fail to meet its target of building 1.5m homes over the next five years due to a diminished pipeline of existing planning approvals for the next two years. Developers would have to deliver an unprecedented number of homes in the later years of this parliament to make up the difference. Greg Hill, deputy chief executive of housebuilder The Hill Group, said: “You could have all the money in the world, the permissions don’t exist.”
Euro 2024 helps drive rise in sales
The Office for National Statistics (ONS) reported a 0.5% increase in retail sales volumes last month, with department stores and sports equipment shops leading the way as England’s run to the final of the men’s football European Championship helped drive a recovery in retail sales. However, big-ticket purchases were still being held back due to the cost of living crisis. The latest snapshot showed growth in sales of groceries, sporting goods, and audiovisual sales. Fashion sales struggled, while spending on homeware and furniture performed badly.
Markets
On Friday, the London market drifted lower after a broadly positive week with the FTSE 100 closed down 0.43% at 8311.41 and the Euro Stoxx 50 closed up 0.68% at 4840.52. In the US the S&P 500 rose 0.2% to 5554.25 and the NASDAQ rose 0.21% to 17631.72 as the hope for lower US rates keeps markets bouyed.
This morning on currencies, the pound is currently worth $1.2966 and €1.1747. On Commodities, Oil (Brent) is at $79.27 & Gold is at $2502. On the stock markets, the FTSE 100 is currently down 0.16% at 8298.56 and the Eurostoxx 50 is up 0.1% at 4845.42.
Ted Baker’s remaining stores to close after talks stall
Ted Baker’s remaining 31 stores will shut for the last time this week after talks over a future licensing partnership with Mike Ashley’s Frasers Group stalled. The firm behind Ted Baker’s UK shops, No Ordinary Designer Label (NODL), fell into administration in March this year after which its administrator, Teneo, was forced to close 15 stores with the loss of more than 200 jobs. US firm Authentic Brands Group owns the intellectual property to Ted Baker and had been searching for a new partner to run the retail and online business in the UK and Europe. The brand will continue to be available via wholesale partners such as John Lewis and House of Fraser.
Revolut valued at £35bn
Revolut has been valued at £35bn in a share sale, making it Europe’s most valuable start-up and surpassing the valuations of Barclays and NatWest. The fintech firm recently obtained a UK banking licence and is considering a stock market flotation. The share sale allows employees to sell around 11% of their stock, amounting to nearly £400m. Revolut’s valuation has increased from £26bn in a previous funding round. The company aims to surpass 50m global customers by the end of the year.
Restructuring experts scramble to recover £15m from failed telecoms start-up
Restructuring experts are trying to recover £15m from failed telecoms start-up, Internet Mobile Communications, known as Bank of Telecom, after discovering a £15m black hole in its accounts. The company collapsed into administration two months ago, and advisers at Interpath have struggled to locate the funds. The business accounts were found to be almost empty, with a balance of only $1,500. Bank of Telecom, which allowed the trading of SMS and voice traffic between mobile companies, had reported revenues of $677m last year. The company owes around £36m to lender Investec and £95m to its mobile customers.
Labour will make it easier for unions to strike
Trade unions will be able to strike even if most of their members do not vote for one, according to the Telegraph, which reports on Labour’s plans to repeal the Trade Union Act 2016. The act sets legal thresholds for strike ballots, requiring at least half of a trade union’s members to participate in the vote for the strike to be allowed. It also mandates that for “important public services,” such as the NHS and transport, at least 40% of the union’s total members must vote for action. Labour intends to remove both thresholds under its Employment Rights Bill. The Conservatives argue that repealing the act would “open the floodgates” to more strikes, but Labour has defended its approach, stating that it will lead to fewer strikes and save the economy money. A Business Department analysis in 2016 suggested that the 50% threshold would reduce the number of strike days by 35%. Kevin Maguire in the Mirror slams the “anti-trade union hostility” of the opposition arguing that they want workers to remain “subsisting on thin gruel in the [Dickensian] workhouse.”
Covid fraud ‘police’ unit lacking in governance
The Government’s pandemic fraud investigation unit, known as Natis, lacked proper oversight and governance, according to an independent review by Mazars. The review found that Natis, a part of Thurrock council with staff working throughout Britain, also had problems accounting for money it seized from business owners suspected of abusing pandemic loans and grants. Natis was contracted by the Tory government in 2020 and was presented as a national law enforcement service and even used a “.police” email domain, but the unit is not a law enforcement authority and has now been ordered to stop using the police web domain and email addresses. Natis has helped secure only six criminal prosecutions and recovered just £17m in suspected fraud losses. Mazars suggested it be overseen by a trusted senior individual and improves its accounting for seized money.
Governments could raise over $2tn by copying Spain’s wealth tax
Governments copying Spain’s wealth tax on the super-rich could raise more than $2tn (£1.5tn) to finance the climate transition, according to the Tax Justice Network. The Spanish government introduced a temporary “solidarity” wealth tax on the net wealth of individuals exceeding €3m (£2.6m), which is estimated to apply to the richest 0.5%. The Tax Justice Network suggests that a similar tax on the top 0.5% wealthiest households worldwide, at a rate of 1.7% to 3.5%, would raise about $2.1tn. The study excludes some exemptions in the Spanish tax and estimates that as much as $31bn a year would be raised in the UK. The G20 is exploring plans for a global minimum tax on billionaires, with support from France, Germany, Spain, and South Africa. However, reaching an agreement could take years and face opposition in several countries.
Birmingham city council’s financial collapse could have been avoided
A report by accountants and researchers at the Audit Reform Lab at Sheffield University claims that severe cuts in public services could have been avoided if the lead up to and handling of Birmingham city council’s financial collapse last year had been better managed. The report questions the extent of the cuts imposed on the council by central government and highlights errors in the council’s financial problems, including the misdiagnosis of the issues and the premature disclosure and potential overstatement of the equal pay liability. But the report argues that there should have been more focus on the failing IT system, which cost millions to fix, and cuts to council funding by Westminster, rather than the equal pay issue. Grant Thornton, which audited the council, defended its work and said the report “presents significantly inaccurate and misleading information and inferences as to our role as the council’s auditors”. Birmingham council leader John Cotton acknowledged the council’s failings but also blamed the previous Tory government for neglecting local government for 14 years.
Rightmove
Property portal Rightmove says the number of buyers contacting estate agents to view houses for sale jumped 19% from a year ago since the BOE’s reduction of interest rates.
Rightmove’s House Price Index showed the average UK asking price fell 1.5% to £367,785 in August, in-line with the 20-year average during the typically quiet month. In addition to seasonal slowness, those who did enter the market in August were likely urgent to sell, pricing more competitively and pushing down prices overall, Rightmove explained.
Universal seeks tax breaks for Bedford investment
Universal is in talks with ministers about tax incentives for building a multibillion-pound resort in Bedford. The US company, owned by Comcast, has acquired 500 acres of land in the UK as a potential site for Europe’s largest theme park. The talks with officials regarding tax and infrastructure arrangements are crucial for the site’s development, according to the Financial Times. If the negotiations fail, Comcast may consider other locations in Europe or elsewhere. A decision is expected by the end of this year. The theme park in Bedford is estimated to bring £50bn of economic value to the UK over the first 20 years.
Fears of Budget tax changes prompt wealth moves
Wealthy savers are taking action and preparing for tax rises ahead of Labour’s first Budget, following claims of a £22bn shortfall in public finances. Financial advisers and wealth managers have reported an increase in clients seeking advice and taking defensive action. Pensions, inheritance tax (IHT), and capital gains tax (CGT) are expected to be targeted by Chancellor Rachel Reeves. Clients are accelerating pension contributions and realising assets to maximise tax relief and avoid higher CGT rates. There are concerns that pensions could be subject to inheritance tax, which would fundamentally change how clients are advised, according to Alexandra Loydon of St James’s Place.
Accountancy firm warns of convincing HMRC scam letter
An accountancy firm has warned businesses about a convincing scam letter impersonating the HMRC tax office. The letter, which closely resembles an HMRC letter, asks recipients to verify their financial information. The scam was flagged by Azets accountancy firm, who noticed that the email address used by the scammer did not have a gov ending. HMRC issued an urgent scam alert, advising citizens to be cautious of tax scams and to check HMRC scams advice on GOV.UK. Other accountancy firms have also shared the scam alert. Experts have advised recipients to check for distorted logos, google the address, and never click on links in emails or texts.
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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.