Business news 19 October 2023
James Salmon, Operations Director.
UK inflation holds steady at 6.7%. Cost of living crisis sends shoppers back to large stores. UK retail and hospitality faces rates death blow. And more business news that we thought would interest our members.
UK inflation holds steady at 6.7%
UK inflation remained at 6.7% in September, figures from the Office for National Statistics show, ending a run of three consecutive monthly falls. Economists had forecast a fall to 6.6% over the year to September and the higher-than-expected figure triggered a rush to sell bonds.
Yields on 10-year gilts surged 0.15 percentage points to 4.66%, the biggest daily move since July. Swaps markets were left unmoved, maintaining their expectation that the Bank of England will keep rates on hold at 5.25% at its next meeting in two weeks’ time. The core rate of inflation, which omits energy and food prices, eased to 6.1%, down from 6.2% in August but again, slightly higher than forecast by economists.
Explaining the data, Grant Fitzner, chief economist at the ONS, said: “We continue to see food and non-alcoholic beverages prices fall. We’ve also seen falls in the cost of household appliances and airfares, but they were offset by rising prices for petrol and diesel and the cost of hotel accommodation.”
Cost of living crisis sends shoppers back to large stores
A third of shoppers would rather buy from small businesses instead of large retailers, but the cost-of-living crisis has forced almost half to turn to whichever is the cheapest option. A study commissioned by payments provider Tyl by NatWest found 44% of shoppers cited the cost-of-living crisis as the main thing impacting their decision to spend less over the next 12 months.
Mike Elliff, Tyl by NatWest CEO, said: “Customer loyalty, trust, and word-of-mouth recommendations become invaluable assets, and the businesses that go above and beyond to meet their customers’ needs will not only weather the storm, but emerge stronger on the other side. In the face of economic uncertainty, fostering meaningful relationships with customers and the community is the key to resilience and long-term success.”
UK retail and hospitality faces rates death blow
Hospitality and retail chiefs have warned that a spike in businesses rates next year could prove the nail in the coffin for high street businesses. Inflation-linked business rates could increase by up to £1.95bn next year, according to property experts Gerald Eve. Helen Dickinson, head of the British Retail Consortium, said the rise would “inevitably put renewed pressure on consumer prices” while Kate Nicholls, the chief executive of UKHospitality, said the extra costs from business rates alone would be insurmountable for many. Simon Green, head of rates at Gerald Eve, said: “Clobbering high streets, retail parks, office blocks and logistics firms with these sky-high rises will create a significant blow to the economic recovery that everyone wants to see.”
Microsoft’s new ChatGPT-style assistant can go to meetings for you
An artificial intelligence (AI) assistant developed by Microsoft will be available to customers using its office apps from the beginning of November. The tool can summarise meetings held in Teams for anyone who chooses not to attend, draft emails, create word documents, spreadsheet graphs, and PowerPoint presentations in moments. Microsoft 365 Copilot uses the same tech which underpins ChatGPT, created by OpenAI. The BBC’ technology editor, Zoe Kleinman, notes that both Europe’s AI act and China’s AI regulations state that people must know if they are interacting with AI rather than humans, but Collette Stallbaumer, head of Microsoft 365, said it was up to the individual using Copilot to clarify that.
PLSA calls for six changes to enable UK growth investment
The Pensions and Lifetime Savings Association (PLSA) has issued six policy recommendations aimed at encouraging further investment by pension schemes in assets which can help drive growth in the UK economy.
The PLSA, which represents the workplace pension sector, believes incentives should include allowing tax free dividends on investments by pension funds in UK companies. It also wants additional tax incentives in UK start-ups and companies requiring late-stage growth capital.
The policy recommendations come as speakers at the PLSA’s annual conference in Manchester said defined benefit schemes were effectively working against the Government’s productive finance agenda as increasing surpluses are leading many to actively de-risk portfolios. WTW head of GB clients Pieter Steyn said a “wall of money” was coming out of productive assets as increasingly well-funded DB schemes looked to de-risk and funnel assets through to the insurance regime.
House Prices
UK House Prices slowed further in August, according to data from HM Land Registry. The Office for National Statistics said, on an annual basis, average house prices rose 0.2%, easing from a revised 0.7% in July. The average UK house price was £291,000 in August 2023, which was little changed from 12 months ago, but £9,000 above the recent low point in March 2023.
Frozen tax bands to give Treasury an extra £52bn a year
The Government’s freeze on tax bands until 2027/28 will leave workers thousands of pounds out of pocket, according to analysis by AJ Bell. Taxpayers would have earned an additional 6.7% tax-free next April if not for the freeze, which means that someone earning £50,000 will pay £13,000 more in tax over the duration of the freeze. The freeze in tax brackets will also result in more workers being pulled into a higher tax bracket as inflation remains above the Bank of England’s target. The Institute of Fiscal Studies predicts that the number of people paying higher-rate income tax will triple from 3m in 2010 to 9m in 2027. The freeze is expected to generate an extra £52bn a year for the Treasury by 2027/28.
UK Stocks
London has won back its crown as Europe’s largest stock market, as surging crude prices boosted UK oil firms as under-pressure luxury goods firms weighed on Paris. The combined market cap of London’s primary listings excluding ETFs and ADRs is $2.89 trillion, approximately $1 billion above Paris.
English Breakfast Inflation
The English Breakfast index fell as the total cost of the ingredients fell 23p to £35.92 in September demonstrating the fall in food inflation.
BT
BT Group is to start selling kitchen appliances such as smart fridges, kettles and coffee machines as the telecoms group looks for ways to boost growth and raise the profile of its consumer brand, according to the Financial Times. The FT said EE, BT’s mobile and retail division, will sell the household electronic goods from next year in addition to the entertainment products such as laptops, cameras and smart TVs it already sells.
Netflix
Netflix said its crackdown on the sharing of password is working. In the last quarter, the global streaming giant added 8.76m new subscribers, up from 2.4m during the same period in 2022 and boosting overall numbers to 247.2 million. The company also announced it would raise subscription prices in the US, Britain and France.
Tesla
Tesla is pulling back on its rapid expansion expectations as price cuts and subsequent fall in margins, despite cost cutting have hit growth.
HMRC plans second self-assessment helpline closure
HMRC is planning another closure of its self-assessment helpline following a trial over the summer, which received criticism from accountants and business owners. The tax office closed the helpline for three months to direct queries to its digital services, giving taxpayers only two days’ notice. The closure resulted in fines for late tax returns and a drop in customer satisfaction. HMRC chief executive Jim Harra said the demand for the online services helpline exceeded forecasts, leading to poorer service levels initially. While the evaluation of the pilot closure is not yet complete, HMRC is already planning another closure. The tax office stated that it lacks resources to deliver customer service through traditional channels and aims to reduce contact demand by pushing it onto digital self-service.
European Parliament blocks bid to weaken ESG reporting rules
An attempt by some MEPs to weaken new European Sustainability Reporting Standards has been blocked by more than half of the European parliament, meaning more than 50,000 companies must start assessing the impact of their operations on the environment from January. Eelco van der Enden, chief executive of the Global Reporting Initiative (GRI), said the new rules “are a game-changer for corporate accountability, in the EU and globally”. The ESRS standards will apply to all large and listed companies in the EU beginning next year, and by 2028 to non-EU companies operating in Europe.
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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 one will be particularly deadly for suppliers for some time to come.
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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
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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?
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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!
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.