Business news 20 July 2023
James Salmon, Operations Director.
Inflation falls to 16-month low. 1 in 3 do not have emergency funds. Credit card balances climb by 9.5% . Help over-50s start businesses to boost economy. Coutts & Farage. Microsoft, Tata, Strikes, Tesla, Netflix, insolvencies and more business news that we thought would interest our members.
Inflation falls to 16-month low
Inflation fell to 7.9% in June, from 8.7% in May, according to the Office for National Statistics (ONS). This puts price rises, as measured by the consumer prices index (CPI), at the lowest rate since March 2022. The fall in inflation exceeds analysts’ expectations, with a dip to 8.2% having been forecast.
The ONS said falling fuel prices had driven the slowdown in inflation, with the fact that food prices are rising less quickly also having an impact. Core inflation, which does not include volatile price changes in food and energy, eased to 6.9%. The rate had been expected to remain unchanged at 7.1%.
Grant Fitzner, the ONS’s chief economist, said the drop in CPI inflation showed that the UK was “catching up with the falls we’re seeing in other similar countries.” Both Prime Minister Rishi Sunak and Chancellor Jeremy Hunt welcomed that better-than-expected slowdown in inflation but reiterated the importance of sticking to a plan they hope will halve inflation to around 5% this year. While experts say June’s inflation rate means the Bank of England may opt against a 0.5% hike in interest rates in August, the base rate – currently 5% – is still expected to peak at 5.75%.
Suren Thiru, economics director at the ICAEW, said that rates would “probably” rise again in August, while Yael Selfin, chief economist at KPMG, said the Bank “is unlikely to substantially change its hawkish policy stance,” with inflation continuing to run “significantly above” its 2% target. On the outlook for inflation, she expects it to average 7.5% this year before falling to 3% in 2024.
The EY Item Club expects a 0.25 percentage point rise in the Bank rate next month, with Martin Beck, its chief economic adviser, saying: “The direction of travel is now looking more favourable, following a period when UK inflation appeared to be very sticky.” Barret Kupelian, chief economist at PwC, said the lower-than-expected inflation reading means financial markets no longer expect the base rate to peak at 6.5%.
UK equities responded to the fall in the rate of inflation with the FTSE rising 1.8% to 7588 as the lower inflation level helped relieve recent tensions over interest rates with the peak in bank rates now expected to be below 6%. Sterling also fell to US$1.29 and €1.151
1 in 3 do not have emergency funds
The cost-of-living crisis appears to be taking its toll on people’s savings, with analysis from Hargreaves Lansdown and Oxford Economics showing that a third of people do not have enough cash for emergencies. This is up from one in four just 18 months ago. Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “Our savings have been savaged over the past 18 months, as runaway price rises have flattened our financial resilience.” She said that while savings accumulated during the pandemic lockdowns are “protecting millions of people from running into a brick wall financially,” those who could not put money away “have nothing to fall back on, and face a serious risk of building impossible debts.” The study shows that among the lowest fifth of earners, 28% have emergency savings, while among the highest fifth of earners that rate hits 92%.
Credit card balances climb by 9.5%
UK Finance figures show that outstanding balances on credit card accounts has grown by 9.5% over the past year. UK consumers held more than £61bn in credit card debt at the end of April, up from £57bn last year and £1.2bn more than at the beginning of 2023. Laura Suter, head of personal finance at AJ Bell, said it was inevitable that people would “put more on plastic” amid the cost-of-living crisis. She added: “With more people turning to credit cards and the cost to just keep up the minimum monthly payments increasing, it’s inevitable that more people will end up defaulting on their debt.” Meanwhile, Bank of England data shows that the average rate of interest on a credit card hit 23% in June, a level not seen since December 1995.
MPs: Help over-50s start businesses to boost economy
MPs on the Work and Pensions Select Committee say support to start their own businesses could help reduce the level of economic inactivity in people over 50 and those with disabilities. Committee chair Stephen Timms said that providing support for older people to start their own businesses was an “ideal way” to help them back into work. He said: “There are quite a lot of advantages to being self-employed, particularly for older people and people with health difficulties, because the flexibility that it allows can be a real boon.” Unemployment in the over-50s has risen since the pandemic, with over 3.47m people in this age bracket classed as economically inactive.
Small firms offered Oxford Street deal
Small businesses are being offered rent-free shops on London’s Oxford Street as part of an initiative being run by Westminster Council and the New West End Company. The £10m scheme is also offering a 70% reduction in business rates, a fit-out of stores, as well as marketing and business support. Stores will either be available for single occupancy or as a “themed concept store” shared between multiple brands. Many of the sites being offered were previously occupied by American candy stores which are at the centre of a probe by the local authority and Trading Standards, with it claimed that some have evaded business rates to the tune of £8m.
Coutts & Farage
Documents have come out that show Coutts closed Farage’s account over concerns he is “xenophobic and racist” , had sympathies with Putin, and supported Donald Trump. In storm that followed Sunak said “no one should be barred from using basic services for their political views.” and Andrew Griffith, the City minister, commented that it would “be of serious concern if financial services were being denied to anyone exercising their right to lawful free speech.”
Coutts has been contacted by the FCA, however the regulator said it is ultimately a decision for the bank whom it chooses to do business with.
Strikes
London Underground staff will go on strike in July on the 23rd, 25th, 26th, 27th and 28th. The RMT strikes start today.
Microsoft & Activision
Microsoft and Activision extended the deadline to complete their merger to 18th October ti give them time to clear regulatory hurdles
Tata to spend £4bn on UK battery factory
Tata, the owner of Jaguar Land Rover, has confirmed plans to build its flagship electric car battery factory in the UK. The new gigafactory near Bridgwater, which will be one of the largest in Europe, will initially make batteries for Jaguar Land Rover, with plans to eventually supply other car manufacturers as well. Production at the new factory is due to start in 2026 and the plant is expected to create 4,000 jobs and thousands more in the wider supply chain. Tata said it will invest £4bn in the site and it is understood that the Government is providing subsidies worth hundreds of millions of pounds. Tata is believed to have asked for £500m of financial assistance. Energy Secretary Grant Shapps told the BBC’s Today programme that the incentive offered to Tata “is large,” saying ministers “fought very hard” to secure the facility for the UK.
However, the UK car industry remains in decline with over 30 battery factories planned in Europe. UK car production is less than half volumes it was in 2016 when Brexit was voted for.
House Prices
UK House Prices for May were around £7,000 lower than last September’s peak, according to fresh data from the ONS. The average UK house prices increased by 1.9% in the 12 months to May, down from a revised 3.2% in April 2023, with the northeast seeing the highest annual percentage change among all English regions at 4%.
Month-on-month, growth slipped, from 0.5% in April to 0% in May. The ONS data shows that the average house price hit £286,000 in May, with this £6,000 higher than a year ago but £7,000 below the recent peak seen in September 2022. Across the UK, house prices in England rose 1.7% in the year to May, while Wales saw growth of 1.8%, prices in Scotland climbed 3.2% and Northern Ireland led the way, with prices up 5%.
Gabriella Dickens, a senior UK economist at Pantheon Macroeconomics, expects to see a “peak-to-trough” drop in house prices of around 10%, noting that even if the decline is that steep, prices will still be around 15% higher than their pre-pandemic level. Meanwhile, the ONS report also shows that private rents increased by 5.1% in June, marking the steepest month-on-month increase since records began in January 2016.
Firms face tougher rules on company payouts
Ministers have proposed tougher rules that would force companies to show they can afford dividends and other payouts. The Department for Business and Trade said rules the rules, which it expects to come into force in 2025, will apply to firms with at least 750 employees and annual turnover of £750m or more. It said the measures “respond to lessons learned from major and sudden corporate collapses in recent years.”
Simplification hope for cluttered tax system
In the wake of the closure of the Office of Tax Simplification, Tim Sarson, head of tax policy at KPMG UK, in City AM, says there have long been calls for tax to be simplified, saying the UK’s tax statute “looks complicated,” with few people understanding “all of its inner workings.” He argues that while reshaping tax policy into a “20-page pamphlet, introducing a flat rate tax system and pushing all tax compliance through a simple app” is “a nice idea … it’s hard and unlikely to happen anytime soon.” Mr Sarson says some of the complexity is there for a reason, suggesting that the “simpler and more broad-based you make a tax, with fewer exceptions, the more people you’ll over-burden with it.” He goes on to argue that there is “plenty of clutter in the system that could be removed,” declaring: “The Office of Tax Simplification may be dead, but long live its mission.”
Netflix
Netflix added 5.9 million subscribers in the Q2 as it continues to discourage password-sharing. Revenues grew by approximately 3% YoY, to $8.2 billion and is expecting $1.5 billion more in free cash flow this year than expected, due to the Writers and Actors strike reducing new content spend. However shares fell 8.3% as the subscriber growth and revenue didn’t match predictions.
Tesla
Tesla’s quarterly revenues grew 47% YoY with deliveries up 83% but reduced prices mean the operating margin dropped to 9.6% and earnings per share came in at $0.91. However the stock fell as investors digested the guidance on further price drops and lower future margins.
Easyjet
Easyjet reported pre-tax profit of £203m to end June 2023 ahead of estimates of £160m on revenues up 34% to £2.36bn. The airline is now looking to add to its 163 airplanes already on order for delivery by 2028.
Climate
Italy recorded temps of 45.9c yesterday in Sardinia, closing in on the European record of 48.8C as the southern continent is blasted by Saharan heat.
Latest Insolvencies
Appointment of Liquidators – ERINVALE CONSULTING ASSOCIATES LIMITED
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Appointment of Liquidators – ATTICUS ADVISORY LTD.
Appointment of Administrator – PROCAM TAKE 2 LIMITED
Appointment of Administrator – CHRISTOPHER KANE LIMITED
Appointment of Administrator – 154 LR LIMITED
Appointment of Liquidators – KANIKA CONSULTING LTD
Appointment of Liquidators – ROBINHILL PROPERTIES LIMITED
Appointment of Liquidators – FREETHSSHEF26 LIMITED
Appointment of Liquidators – SIGNATURE FLIGHT SUPPORT HEATHROW LIMITED
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Petitions to wind up (Companies) – THE BATTING LAB LTD
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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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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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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?
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.