Business news 22 August 2024
Tax hikes loom as borrowing soars. Interest rates, immigration shake up, tax, NI, markets, insolvencies & more business news that we thought would interest our members.
James Salmon, Operations Director.
Tax hikes loom as borrowing soars
The Treasury borrowed £3.1bn in July, significantly exceeding forecasts and marking the highest borrowing for that month since 2021. The Office for National Statistics reported that this figure was £1.8bn more than July 2023, raising concerns about potential tax increases in Rachel Reeves’ upcoming Budget. The Office for Budget Responsibility had anticipated a much lower borrowing of £0.1bn, while City economists expected around £1.5bn. Higher than expected inflation and public sector wage growth drove up borrowing while tax revenues also came in below expectations. Laura Trott MP, shadow chief secretary to the Treasury, accused the Government of fuelling the borrowing crisis by handing large pay rises to public sector workers.
Interest rates
According to a Reuters poll of economists, the consensus view is the Bank of England will lower Bank Rate by 0.25% in November with the rate at 4.75% at end 2024. Between April and July the UK budget deficit totaled £51.4bn. The news has prompted calls for tax increases in October.
Labour’s immigration shake-up to drive homegrown talent
Seema Malhotra, the immigration minister, has outlined Labour’s commitment to reforming the immigration system to prioritise homegrown talent, particularly in engineering and IT. In an article for the Telegraph, she stated: “The real challenge for the economy and the immigration system is to deal with the root cause compelling so many businesses to recruit internationally.” Malhotra argued the previous government failed to enhance UK skills, noting that the number of work visas for overseas recruits in engineering doubled while apprenticeships nearly halved. Labour has tasked the Migration Advisory Committee to explore ways to reduce reliance on foreign workers, including potentially raising salary thresholds for overseas recruits. With net migration figures fluctuating, Malhotra stressed the need for a cohesive approach to immigration and skills training to ensure the system serves the national interest.
Labour could raise employers’ NI after borrowing surge
The chief secretary to the Treasury, Darren Jones, has warned that taxes may have to be raised in the Budget after new figures showed borrowing had been higher than expected. “We will have to consider some tax measures at the Budget on October 30th whilst honouring that promise to the public not to increase income tax, employee National Insurance or VAT,” Mr Jones told Times Radio. The emphasis on employee NI caused alarm amongst business leaders who fear this indicates a looming hike to employers’ NICs. Tina McKenzie, policy chair at the Federation of Small Businesses said: “Labour made a cast-iron manifesto commitment not to increase National Insurance contributions, including on small employers. Taxes on employers must be cut, not raised.”
Markets
Yesterday, markets had a flattish mid-week tone with stocks in a relatively muted mood. The FTSE 100 closed up 0.12% at 8283.43 and the Euro Stoxx 50 closed up 0.57% at 4885.28.
Overnight in the US, the economy created 818,000 fewer jobs than originally reported in the 12-month period through March 2024, the Labor Department reported. The S&P 500 rose 0.42% to 5620.85 and the NASDAQ rose 0.57% to 17918.99.
This morning on currencies, the pound is currently worth $1.3125 and €1.178. On Commodities, Oil (Brent) is at $76.3 & Gold is at $2507. On the stock markets, the FTSE 100 is currently up 0.19% at 8299 and the Eurostoxx 50 is up 0.32% at 4900.
The pound has risen to the top of the G-10 FX pile, climbing 0.2% against the dollar after UK manufacturing and service PMIs topped estimates. Preliminary August services data picked up to 53.3, exceeding a 52.8 forecast. Manufacturing was also in expansion at 52.5 and beat estimates.“Although GDP growth looks set to weaken in the third quarter compared to the impressive gains seen in the first half of the year, the PMI is indicative of the economy expanding at a reasonably solid quarterly rate of around 0.3%,” Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.
Record income tax receipts hit highest July figure in 16 years
Income tax receipts in July reached £32.7bn, the highest for that month since records began in 2008, highlighting the government’s dependence on frozen tax thresholds. Over the past year, total income tax receipts rose to £281bn, an increase of £20.7bn or 8%. Rachel Reeves, the Chancellor, has not indicated plans to raise tax thresholds but has ruled out increasing headline rates. The tax burden is expected to reach its highest level in 70 years, with potential adjustments to capital gains and inheritance tax being considered for the upcoming budget on October 30. Meanwhile, inheritance tax has generated an additional £200m this year, with receipts for April to July 2024 reaching £2.8bn, compared to £2.6bn during the same period last year. This increase is attributed to rising asset values, which have elevated the worth of estates.
Majority of voters want top rate hiked
New research from YouGov reveals that only 15% of Brits support increasing taxes, while 41% prefer to maintain current levels. The study indicates that people are generally against tax rises, but there is notable support for increasing the top rate of income tax (58%) and corporation tax (56%), both of which Labour has pledged not to raise. “People generally support increasing taxes they won’t have to pay, particularly those that apply mainly to the rich,” YouGov noted.
FCA warns insurers over fair value
Insurance firms are under scrutiny from the Financial Conduct Authority (FCA) due to concerns over their ability to provide fair value to customers. The FCA’s report analysed data from 67 firms and revealed that many failed to identify unfair product practices. The regulator stated: “Where failings have caused significant harm to customers, we will seek to make sure firms and senior managers are held accountable.” Although improvements in governance and oversight have been noted since the introduction of new rules in 2021, the FCA highlighted that there are still “too many examples” of poor practices. Potential regulatory actions may include product withdrawals and formal investigations.
Cineworld’s £35m rescue plan revealed
Cineworld’s US parent company plans to inject £35m into its UK operations if a proposed restructuring is approved by creditors next month. This funding aims to modernise its ageing cinema estate and enhance its competitiveness against rivals. A Cineworld spokesperson stated: “The Restructuring Plan will provide Cineworld in the UK with the opportunity to obtain further funding to meet its working capital needs.” The restructuring could lead to the closure of several multiplexes, with 33 sites needing rent reductions to remain viable. Cineworld has already confirmed the closure of six cinemas and is facing challenges from landlords regarding the restructuring plan. The company, which operates over 100 sites in the UK, is currently advised by AlixPartners and has been in crisis due to a significant debt burden.
Crown Agents closes after nearly 200 years
Crown Agents, a not-for-profit organisation established in 1833, has entered liquidation after 191 years of operation. The directors cited an inability to secure necessary funding and a £50m pension liability as key factors in their decision. They stated: “While there were a number of contributing factors to this outcome, primarily we were unable to secure the revenue needed to sustain operations.” The organisation, which evolved from handling payments for British colonies to an international development agency, has made all 150 staff redundant. Liquidators from Kroll Advisory are now working to recover debts and assess the status of overseas subsidiaries.
JD Sports Fashion
JD Sports Fashion updated its shareholders on its second quarter trade, in the 13 weeks ended August 3. The retailer reported like-for-like sales growth of 2.4% and organic sales growth of 8.3% in the second quarter, which it said demonstrated “the strength and agility of our multi-brand model.” Notably, JD saw double-digit organic sales growth in North America and Europe, supported by the success of its JD store rollout programme. Looking ahead, Chief Executive Regis Schultz said: “The global macro environment remains volatile and so we continue to be cautious on our outlook for the rest of the year.”
Hays
Hays reported that net fees in the year ended June 30 fell 14% to £1.11 billion from £1.29 billion a year ago. Pretax profit plummeted 92% from £14.7 million from £192.1 million. Hays maintained its core dividend per share at 3.00p. Looking ahead, Hays said that near-term conditions “remain challenging” but in line with is expectations. It noted that September is the key trading month in its first quarter, but it it “too early to assess trends.
Airports
New long-haul routes and strong travel demand means Gatwick Airport had 7.7% more passengers in the first half of the year.
The Labour Government has approved the expansion of London’s City airport to the consternation of enviromentalists.
Snail farm could be tax avoidance scam
A Liverpool city centre office building has been home to a snail farm for over a year, raising suspicions of tax avoidance. The operation, run by Snai1 Primary Products 2023 Ltd, has 15 crates with as few as two snails each, potentially qualifying for agricultural use and business rates exemption. Terence Ball, the firm’s director, claims the farm is legitimate, but other snail farmers question the viability of such a small operation. The High Court previously ruled a similar tenancy by Ball as a “sham” aimed at avoiding business rates. Liverpool City Council is monitoring the situation closely, stating that “the misuse of the agricultural exemption… is a business rates avoidance tactic.”
Latest Insolvencies
Appointment of Liquidators – FORESIGHT SURGICAL LTD
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Appointment of Administrator – AVANTE PROPERTY DEVELOPMENTS LTD
Appointment of Liquidators – SEDGEMILL LIMITED
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Appointment of Liquidators – GREENMEADOW DEVELOPMENTS LIMITED
Appointment of Administrator – DISRUPTIVE FOODS LTD
Appointment of Liquidators – LOMOND CONSULTANCY LIMITED
Appointment of Liquidators – MITCHELL CHARLES DEVELOPMENTS LIMITED
Appointment of Liquidators – BOULEVARD KITCHEN & APPLIANCE CENTRE LIMITED
Petitions to wind up (Companies) – VALUE VISTA NEWCASTLE LIMITED
Petitions to wind up (Companies) – CR LAB INSTALLATIONS LIMITED
Winding up Order (Companies) – ACTIVE DYNAMIC LIMITED
Petitions to wind up (Companies) – 3 COUNTIES CAR SALES LTD
Appointment of Liquidators – BUSINESS MORTGAGE FINANCE 3 PLC
Petitions to wind up (Companies) – SAYURIT SUSHI ( SOUTH EALING) LIMITED
Appointment of Liquidators – STRANDLAND LIMITED
Appointment of Liquidators – MDL ENGINEERING (CUMBRIA) LIMITED
Appointment of Administrator – THE HOLWELL SPORTS AND SOCIAL CLUB LIMITED
Petitions to wind up (Companies) – HIGHBURY LEISURE LIMITED
Appointment of Liquidators – REDHILL PROPERTY INVESTMENTS LIMITED
Appointment of Liquidators – URBAN GREEN DEVELOPMENTS LIMITED
Petitions to wind up (Companies) – BARHAM PROPERTY LTD
Appointment of Liquidators – BARTLETT PROPERTY SERVICES LIMITED
Appointment of Administrator – CTD TILES LIMITED
Winding up Order (Companies) – TRIKA LTD
Appointment of Liquidators – MULTIPLICATION LIMITED
Appointment of Liquidators – REGIONAL FOSTER FAMILIES LTD
Appointment of Liquidators – KMSE ESTATES LIMITED
Winding up Order (Companies) – ELDON HOUSE LIMITED
Appointment of Liquidators – KNIGHTON-LAUDER LIMITED
Winding up Order (Companies) – GOLDSMITH ACCOUNTING SERVICES LTD
Petitions to wind up (Companies) – HERITUS MANAGEMENT LIMITED
Petitions to wind up (Companies) – RUSSELL & JABAR LTD
Winding up Order (Companies) – INFINITE PROGRESS LTD
Appointment of Liquidators – CERTA PROJECT MANAGEMENT SOLUTIONS LIMITED
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.