Business news 20 December 2023
James Salmon, Operations Director.
CPI falls to 3.9%. Pimco warns of ‘hard landing’. Mounting costs and red tape hit UK exporters. tax, HMRC, bullying small businesses & more business news that we thought would interest our members.
CPI falls to 3.9%
Breaking news – UK inflation (CPI) fell faster than anticipated and dropped to 3.9% in November, in the lowest annual reading since September 2021. Economists polled by Reuters had expected a modest decline in the headline consumer price index to 4.4%, after the 4.6% annual reading of October surprised to the downside by dropping to a two-year low. Month-on-month, headline CPI fell by 0.2%, compared to a consensus forecast of a 0.1% increase. The drop was driven by falling fuel and food inflation.
Elsewhere, the Eurozone announced its final inflation figures for the year 2023 – the November 2023 core inflation rate was 2.4%, down from October’s 2.9% and closer to the ECB’s long-time target inflation rate of 2%.
Pimco warns of ‘hard landing’ for UK economy
One of the world’s biggest active bond fund managers, Pimco, has warned that the UK is at high risk of a serious economic downturn in 2024. Daniel Ivascyn, chief investment officer at Pimco, predicts that the UK will suffer greater economic strain than the US economy next year. He states that higher interest rates are having more of an impact on British consumers than their American counterparts, leading to a higher probability of significant economic deterioration. Ivascyn also warns that Europe’s economy could also struggle in 2024. Both the US and UK central banks have left interest rates on hold in recent months. The Bank of England continues to push back against market expectations of interest rate cuts next year. UK business confidence has fallen for three consecutive months, with the services sector experiencing gloom. The UK economy shrank by 0.3% in October, suggesting a weakening towards the end of 2023. Global GDP growth is predicted to slow to 2.1% next year, according to analysts at Oxford Economics.
Rishi Sunak wants Britain to move on from high tax era
Rishi Sunak, the Prime Minister, shares his vision for Britain’s future in a piece for the Daily Express. He emphasises the need to move on from the high tax, high spend, and high borrowing era of the pandemic and energy crisis. Sunak warns against Labour’s £28bn unfunded spending plans, stating that they would jeopardise the progress made. He highlights the importance of tackling inflation and points to how “the biggest package of tax cuts since the 1980s” starts from next month, with a 2% cut in NICs, which will save more than £450 for an employee paid £35,000 a year.
Mounting costs and red tape hit UK exporters three years after Brexit
Almost two-thirds of British exporters are finding it harder to sell to the EU due to a constant stream of new red tape from Brussels, according to a survey by the British Chambers of Commerce (BCC). The survey revealed that 60% of exporters to the EU reported increased difficulty in the past year, compared to 18% of exporters to non-EU countries. The worst-hit sectors are agrifood, chemicals and advanced manufacturing, which, having already adapted to post-Brexit customs changes, are now facing reporting requirements on their supply chains, carbon emissions and plastic packaging usage. BCC director-general Shevaun Haviland said: “We need to take a smart but flexible approach to how we handle these alterations to keep their impact to a minimum.”
US considers strikes against Houthi sites in Yemen
Shipping rates between Asia and the Mediterranean have jumped by a fifth since the Iran-backed Houthi rebels started attacking ships entering the Red Sea from the Gulf of Aden, according to Lloyd’s List editor-in-chief Richard Meade. Four of the world’s biggest shipping companies have diverted their vessels. Yael Selfin, chief economist at KPMG, warned that businesses may not be able to swallow the extra costs as margins are already tight and consumers may not be able to absorb them either. A rise in petrol prices is on the horizon as oil prices edge up following BP’s decision to pause all shipments through the Red Sea. The warnings come as the US contemplates military strikes against Houthi sites in Yemen after the group vowed to continue attacks against Israel-linked cargo ships in the Red Sea.
Thousands face ‘long phone queues’ as HMRC moves services online
Tens of thousands of people rushing to do their self-assessment tax returns by January 31 face having to wait in “long phone queues,” due to HMRC pushing more services online, senior MPs warned. The Commons Treasury Committee criticised the move by HMRC away from self-assessment call handlers. Treasury Committee chairwoman Harriett Baldwin expressed concern that this reduction in service will leave people sitting in long phone queues in the run-up to the deadline for filing tax returns. HMRC boss Jim Harra defended the move, stating that most customers are digitally able and report a good experience when using online services. He asserted that customers who can do so should use online self-serve options for simple queries to get a quicker response and free up helpline advisers for more complex queries.
Tory MP accuses HMRC of “bullying” self-employed workers
Conservative former cabinet minister David Davis has criticised HMRC for its treatment of TV presenter Kaye Adams, calling it a “disgrace” and accusing the tax office of bullying self-employed workers. Adams won a legal case against HMRC over her employment status. The case revolved around IR35 rules, which aim to prevent tax avoidance by disguised employees. Adams’ victory is part of a series of high-profile disputes between HMRC and broadcasters. Davis said: “What HMRC are trying to do is move the guidelines by coercing Ms Adams and using her as an example to intimidate other self-employed workers to give in to HMRC’s bullying. This is a disgrace. It has gone on for too long.” He added: “When is the Government going to review IR35 and, ideally, abolish it?”
FCA admits listing rules overhaul could lead to more failures
The Financial Conduct Authority (FCA) has announced reforms to encourage companies to list their shares in the UK. The proposals aim to make it easier for companies to list in the UK and compete globally. The reforms include a switch to a financial information disclosure-based system to protect investors. The FCA acknowledges that these changes may increase the risk of company failures but believes they better reflect the economy’s risk appetite for growth. The changes would also do away with the premium and standard listing segments, replacing them with a single category for commercial companies. The number of companies listing in the UK has declined by 40% since 2008, with the UK accounting for only 5% of global IPOs between 2015 and 2020. Meanwhile, a survey by Teneo found a third of UK chief executives have considered moving their listing overseas while 81% said the advantages of a UK stock market quote had diminished over the past year.
Scottish Budget: Higher earners to pay more income tax
Higher earners in Scotland will face higher taxes as the government seeks to reduce cuts to public services and fund a council tax freeze. Scotland’s finance secretary, Shona Robison, announced the introduction of a new 45p tax band for those earning above £75,000, with the top rate for those earning above £125,140 rising from 47% to 48%. Robison claimed that the tax increases, along with freezing tax thresholds for intermediate and higher rates, will raise £1.5bn more than if Scotland had matched rates in the rest of the UK. Sean Cockburn, chairman of the Chartered Institute of Taxation’s Scottish technical committee, raised concerns that the gaps between Holyrood and Westminster on income tax will widen if the UK Government cuts income tax in its Spring Budget. He said: “The Scottish government’s income tax plans increase divergence between higher earners in Scotland and the rest of the UK and we cannot rule out the possibility that divergence could widen further in the spring.” Bruce Cartwright, chief executive of the Institute of Chartered Accountants of Scotland, said: “The Scottish government’s budget is both short-sighted and fails to drive sustained economic growth.”
High-performance battery developer goes bust
AMTE Power, a high-performance battery developer, has called in administrators after facing financial troubles. The company’s plans to build a new plant in Dundee were scrapped, leading to an investor pulling out of fresh funding. AMTE Power has appointed FRP Advisory as administrator to find a buyer, and trading of its shares has been suspended. The company had planned to build a half-gigafactory in Dundee to produce batteries for clients such as BMW and Cosworth. Despite recent breakthroughs in charging technology, AMTE Power did not secure enough firm orders or find a patient investor to support its expansion.
Asda bosses say there are “no gaps” in its finances
Asda, the UK’s third largest supermarket, has denied any financial gaps in its accounting structures and assured MPs of its strong finances despite having £4.2bn of debt. The supermarket chain’s leadership team faced questions from Parliament’s Business and Trade Select Committee, where they defended their financial position. Mohsin Issa, co-owner of Asda, dismissed suggestions of unaccounted money and stated that the accounts had been signed off by auditors. Asda confirmed its debt across different registered companies in the UK. Liam Byrne MP expressed concern over the unclear amount of debt the company is facing. Michael Gleeson, Asda’s CFO, defended the use of holding companies based in Jersey and emphasised that the company pays UK corporation tax on all its operations. The scrutiny comes after reports of rival retailer Morrisons seeking an urgent overhaul to improve its finances.
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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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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.