Business news 20 June 2024

Some of the business news that we thought would interest our members.

James Salmon, Operations Director.


PM promises more tax cuts after inflation hits target
Rishi Sunak has promised to cut taxes further after inflation fell to the Bank of England’s target for the first time in nearly three years. The Prime Minister said the fall in the rate of price growth was evidence the economy has “turned a corner” under his premiership. He told LBC: “It is because of that economic stability that we have restored, which was my priority when I got this job, that we have now been able to start cutting people’s taxes. If I win this election, I want to keep doing more of that, cutting people’s taxes at every stage of their life.” The PM also hit out at billionaires Sir Jim Ratcliffe and John Caudwell after they announced they were backing Labour saying they may be able to afford Labour’s tax hikes but millions of working people could not.

Labour resists calls to close UK tax loophole used by Shein
Despite calls from campaigners and some retailers, Labour has said it will not close a tax loophole which allows companies to avoid import duties by shipping small packages directly to customers. The loophole is utilised by fast fashion giant Shein, but Labour is hoping to persuade the Chinese retailer to list in London and burnish its pro-business credentials. Tax Justice UK head of advocacy and policy Rachael Henry said: “The fact the US and the EU seem to be paying closer attention to the tax arrangements of global online retailers signals that an incoming government in the UK should do the same.” The fashion retailer claimed it was “fully compliant with all tax policies and pays applicable taxes including corporation tax, VAT and employment taxes”.

Advance private school fee payments risk tax disputes
Parents using advance payment schemes to escape Labour’s plans to add VAT could be “sleepwalking” into protracted tax disputes, experts have warned. Tax experts are now concerned that schools using the schemes could face legal challenges from HMRC in the future, and be left with a huge tax bill that they could then try to pass on to parents. Dan Neidle, the head of the Tax Policy Associates thinktank, said schools that in the past only saw a couple of parents each year using the prepayment schemes now had dozens signing up, with the practice becoming more common. “People are not going into this with their eyes open. They’re sleepwalking into a potential dispute, doing something complicated without thinking about the risks. I think that’s a bad mistake.”

Gove claims Labour will cost first-time buyers £11,250
Michael Gove has claimed that Labour’s refusal to match a Tory stamp duty cut would leave young couples worse off. The Tories have pledged to make a temporary threshold of £425,000 permanent, but Labour has not, meaning it would revert to £300,000 from next April. The Housing Secretary said reinstating the original threshold would cost 200,000 first-time buyers an extra £3,500 on average, with some facing a bill as high as £11,250. Writing in the Telegraph, Laura Trott, the Chief Financial Secretary to the Treasury, said: “Getting people to own their own home has never been a priority for Labour, and it never will be.” But Labour dismissed the claims as “baseless mudslinging” with a spokesman saying: “Over 14 years the Tories have completely failed on housing, and homeownership has become a pipedream for most working families.”


Tories and Labour vow to protect SME lending
The Prudential Regulation Authority (PRA) is set to announce its plans for the latest round of Basel rules, known as Basel 3.1, in the coming months. The initial proposals, released in December 2022, raised concerns that they could severely impact lending to SMEs. But both Labour and the Conservatives have committed to ensuring that small businesses can access the finance they need. The PRA proposed requiring lenders to hold a higher level of capital against loans to the sector and hold a higher capital level against secured loans compared to unsecured loans. Martin McTague, national chair of the Federation of Small Businesses (FSB) said: “It is welcome that both Labour and the Conservatives have committed to changes to protect the flow of funding to small firms.”


EY survey finds Europe needs greater political stability
Europe must foster greater political stability, cut red tape and reduce energy price volatility to reverse a declining trend in foreign investment, consulting firm EY said on Wednesday based on a survey of business leaders. The more than 500 executives surveyed rank political instability, including upcoming elections, populism and polarisation as the second-biggest risk, trumped only by an increased regulatory burden. “As geopolitical and global trade tensions intensify, European policymakers need to be equipped to respond rapidly and decisively,” EY said.


Wealth firm launches service to avoid conflicts of interest
Quilter Cheviot has launched a service to help Big Four staff avoid conflicts of interest. The wealth firm said it had been working with PwC, Deloitte, EY and KPMG since the Financial Reporting Council’s Revised Ethical Standard was introduced in 2019. The new standard increased the need for individuals working in large accountancy firms and their immediate family members to gain approval for their investments to avoid conflicts of interest. “We know one size does not fit all with personal independence procedures and Big Four firms, but we are confident that for each we have built a compelling proposition to not only reduce their risk when investing, but also save them time in the reporting process,” said Nick Holmes, Quilter Cheviot’s managing director of investment management.

Bridgepoint nears £550m takeover of Alpha FMC
London-listed buyout firm Bridgepoint is closing in on a £550m takeover of Alpha Financial Markets Consulting (Alpha FMC), a specialist consulting firm. The deal, expected to be announced before a Takeover Panel deadline on Thursday, comes after both Bridgepoint and rival private equity group Cinven expressed interest in acquiring Alpha FMC. The company, which competes with the consulting arms of the Big Four accountancy firms, as well as Accenture and IBM, has a market valuation of around £440m.


Could Labour reverse Britain’s culture of risk aversion?
The Telegraph’s Szu Ping Chan talks to business leaders about how Britain has become stifled by red tape over the past few decades, leading to a slump in growth and appetite for risk. She points to the introduction of various accounting standards and ballooning regulation – the UK spends nearly £6.1bn of public money every year on servicing around 90 regulatory bodies. James Palmer, a senior partner and M&A specialist at Herbert Smith Freehills, comments: “To be honest with you, a lot of the new rules are wonderful for the legal profession because they mean everybody needs to spend more money with us, but they are not good for the country at all.” Experts fear a Labour government will do little to ease the burden, with the party likely to adopt a safety-first mentality, something ICAP founder Lord Spencer says risks leading to permanent stagnation.


Labour vows to close gender pay gap and mandate flexible working
The shadow chancellor has promised to close the gender pay gap “once and for all” and make flexible working the norm if Labour wins the election. Rachel Reeves told the Guardian large companies would be required to publish action plans to close the gender pay gap while flexible working would be the default from day one for all workers, with some exceptions. However, Labour would not legally enforce businesses to reduce the gender pay gap, said Reeves, rather it wants to work with them instead, although they would be obliged to implement an action plan. Reeves also wants women to occupy 50% of the seats on company boards, up from the current 42% figure, and an increase in the number of female executives.


Inflation returns to target, but rate cut likely delayed
The Office for National Statistics (ONS) has reported that inflation in the UK fell to 2% in May, down from 2.3% in April, marking the first time it has hit the target since July 2021. Prime Minister Rishi Sunak hailed the news as a sign that the economy has “turned the corner” after nearly three years of above-target inflation. However, experts believe that the Bank of England will not cut interest rates until September. Suren Thiru, economics director at ICAEW, said: “Despite this landmark fall in inflation, concerns over both underlying price pressures and changing policy in the run-up to a General Election means a June interest rate cut is almost certainly off the table.” Jake Finney, economist at PwC, points out that consumer prices have risen by 20% since inflation was last at target.

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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.