Business news 20 September 2024
Consumer confidence takes a nosedive. Bank of England faces criticism over rates hold. Retail, National debt, investments, tax, markets, insolvencies & more business news that we thought would interest our members.
James Salmon, Operations Director.
Consumer confidence takes a nosedive
The longest-running measure of consumer confidence nosedived, raising concerns about whether government rhetoric about Budget “pain” has overly worried the general public.
Consumer confidence in the UK has sharply declined, with the GfK consumer confidence index dropping to minus 20 this month, down from minus 13 in August.
Neil Bellamy, consumer insights director at GfK, remarked that this decline is “not encouraging news for the UK’s new government.” Explaining that the fall reflects growing concerns over the Budget, particularly regarding potential tax increases.
People’s view of their own personal finances in the future has also turned negative again, down nine points to -3.
Bank of England faces criticism over rates hold
The Bank of England held rates at 5% on Thursday with Governor Andrew Bailey claiming inflationary pressures, despite easing slightly, are still a threat to the economy.
Some were critical of the move, with Suren Thiru, economics director at the ICAEW, calling the BoE “painfully cautious” and the decision a “notable setback” for households and businesses.
Julian Jessop, at the Institute of Economic Affairs, added: “The MPC judged that there had not been enough economic news since August to justify another cut. This is hard to square with the signs of a further easing in inflation pressures and weaker economic growth, both in the UK and abroad.”
Retail
Retail Sales rose 1% in August and were ahead 2.5% year on year helped by strong summer weather.
UK debt
Office of National Statistics said the UK debt to GDP has been provisionally estimated at 100% at the end of August 2024. Government borrowing rose in August to the highest level for the month since the Covid pandemic in 2021. ONS figures show that borrowing reached £13.7bn last month, £3.3bn more than in August last year.
Public borrowing for the first five months of the financial year reached £64.1bn, some £6bn more than forecasts by the Office for Budget Responsibility (OBR).
The increase in debt in August means that national debt rose to 100% of the UK’s annual economic output (GDP), a level last seen in the early 1960s.
Markets
Yesterday, the UK market lagged the global upswing in values due to a rising pound. The FTSE 100 closed up 0.91% at 8328.72 and the Euro Stoxx 50 closed up 2.24% at 4943.38. Overnight in the US, indices rose sharply extending recent gains with key indices touching new highs. The S&P 500 rose 1.7% to 5713.64 and the NASDAQ rose 2.51% to 18013.98 as Wall Street traders bet the Federal Reserve will be able to engineer a soft landing.
Despite the cut in US interest rates on Wednesday, the Bank of England yesterday held Bank Rate at 5% commenting that inflation remains sticky. There was only one dissenting vote, Swati Dhingra who wanted to lower by 25 basis points.
Governor Andrew Bailey held out the prospect of lowering rates saying ‘if inflationary pressures continue to ease, we should be able to reduce rates gradually over time’. The Governor and other MPC members are said to be concerned over high pay growth and tight labour market conditions due to people not returning to work post pandemic.
This morning on currencies, the pound is currently worth $1.329 and €1.191. On Commodities, Oil (Brent) is at $74.6 & Gold is at $2610. On the stock markets, the FTSE 100 is currently down 0.5% at 8284 and the Eurostoxx 50 is down 1% at 4895.
City of London makes foreign investment call
According to a report by the City of London Corporation, Britain could attract up to £7.7bn in additional foreign sovereign investment by 2030 if it implements a comprehensive strategy. Chris Hayward, Policy Chairman of the City of London, stressed the need for a “streamlined and organised system” led by a public-private council chaired by the Chancellor. The report highlights that sovereign wealth and public pension funds have significantly increased their UK investments, resulting in an additional £13.4bn from 92 deals in sectors like innovative technology, infrastructure, and renewable energy.
Interest in Isas soars as interest rates rise
In the 2022-23 financial year, approximately 12.5m adult Individual Savings Accounts (Isas) were opened, a rise from 11.8m the previous year, according to HM Revenue and Customs. The increase is attributed to higher interest rates, with cash Isas seeing a notable uptick of 722,000 subscriptions, while stocks and shares Isas experienced a decline of about 126,000. However, with the Bank of England recently cutting interest rates, experts suggest that savers may need to reassess their strategies. Elsa Littlewood, private wealth tax partner at BDO, suggested that with Isas are costing the Exchequer almost £5bn a year in tax relief, they could become a target in the Budget next month.
Blow for Vestager as UK wins fight against EU tax order
Britain has successfully challenged an EU order to recover €13bn from various multinationals, including the London Stock Exchange and ITV. The European Commission had claimed that the UK’s Controlled Foreign Company (CFC) rules provided an illegal tax advantage to these firms. However, the Luxembourg-based Court of Justice of the European Union (CJEU) ruled in favour of Britain, stating: “The Commission and the General Court erred in law in finding that the rules applicable to CFCs constituted the appropriate reference framework.” It added: “The Court recalls that the Commission … is in principle required to accept the Member State’s interpretation of the relevant provisions of its national law, unless it is able to establish that another interpretation prevails in the case-law or the administrative practice of that Member State.” This ruling is final and cannot be appealed, marking a significant setback for EU regulators in their tax enforcement efforts.
OECD sees total commitment to finalise global tax pact
The Organisation for Economic Cooperation and Development (OECD) maintains that there is “100% commitment among members to get it done” regarding a global tax pact aimed at highly profitable multinationals. Despite delays and hesitations from major countries, nearly 130 nations missed a mid-year deadline to finalise the treaty, which seeks to redistribute taxing rights primarily affecting large U.S. digital firms like Google, Amazon, and Apple. OECD tax director Manal Corwin emphasised the urgency of finalising the agreement before the year’s end. Meanwhile, the second pillar of the 2021 global tax deal is being implemented, establishing a 15% minimum corporate tax rate, with 19 countries already signing on to a treaty that allows developing nations to tax certain outbound payments.
Government urged to cut consultant costs
The Institute for Government (IFG) has called on the UK Government to reduce its dependence on management consultants, highlighting that £5.4bn worth of contracts will expire during this Parliament. In 2025, over 1,700 contracts valued at £2.4bn will end, alongside IT services contracts worth £23.4bn. New Chancellor Rachel Reeves aims to halve consultancy spending, targeting savings of £1.23bn over the next two years. The Government plans to publish a new national procurement policy statement in February to enhance transparency and align spending with its missions. City AM notes that a cut in public sector contracts comes at a challenging time for the Big Four as they trim jobs following reduced demand against a tougher economic backdrop.
Mercedes-Benz AG
Mercedes-Benz AG cut its guidance for 2024 projecting lower earnings with its industrial business ‘significantly below’ 2023 due to weak China demand. Mercedes shares are off 8% in early Frankfurt trading.
Thames
Thames Water is working with a group of its creditors to try to delay a cash crunch, including the release of reserves. It only has enough money to last until the end of May.
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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.