Business news 24 January 2025
More firms in financial distress. Earnings growth eases mortgage burden. Chancellor will ‘make necessary changes’. Economic fragmentation cost, fraud, nimby’s, non-doms, markets, insolvencies & more business news that we thought would interest our members.
James Salmon, Operations Director.
More firms in financial distress
According to the latest report from Begbies Traynor, the number of UK businesses in critical financial distress has surged by 50% from September to December 2024, reaching 46,583. The number of UK businesses considered to be in significant financial distress also rose, climbing by 3.5% on the prior quarter to 654,765. The report highlights that sectors such as hospitality and retail are particularly vulnerable due to their typically low profit margins. Ric Traynor, executive chairman of Begbies Traynor, commented: “After a historic rise in critical financial distress… it’s clear that many distressed UK businesses are finding it almost impossible to navigate the challenges they face.” He added for many firms “already dealing with weak consumer confidence and higher borrowing costs,” the increase in National Insurance contributions and the national minimum wage set out in the Budget “could be the last straw.”
Earnings growth eases mortgage burden
According to Nationwide, strong earnings growth has made home purchasing slightly more affordable for first-time buyers. The typical buyer with a 20% deposit now spends 36% of their monthly take-home pay on mortgage payments, down from 2023 but still above the long-run average of 30%. Earnings growth remains at about 5%, and interest rates were lowered to 4.75% last year, easing monthly mortgage repayments. However, the average house price has risen by 3.4% to £292,000, with a cost-to-earnings ratio of 5.0, significantly above the long-term average of 3.9.
Chancellor will ‘make necessary changes’
Amid concerns over Britain’s public finances, Rachel Reeves says she will “make changes” if needed. While the Chancellor has vowed to stick to her fiscal rules on spending and reducing the nation’s debt, economists have warned that her fiscal headroom has fallen from almost £10bn to about £2bn. This, they say, could mean Ms Reeves has to pull back on her spending plans or deliver further tax hikes. Speaking at the World Economic Forum in Davos, Ms Reeves highlighted that the independent Office of Budget Responsibility is set to publish a forecast on March 26, saying: “At that point, I’ll be setting out any changes that are necessary.” With the Government having ruled out major tax rises, it is believed that the Chancellor is more likely to reduce spending.
Consumers to be ‘key driver’ of growth
Analysts at Capital Economics predict that consumer spending will rise by 1.4% in 2025 and 2% in 2026 as the household savings rate falls. Ashley Webb, the firm’s UK economist, said consumer spending will be “a key driver” of economic growth, with the report suggesting that GDP will increase by 1.3% this year and 1.6% next year.
Economic fragmentation could deliver $5.7trn hit
Research from the World Economic Forum shows that economic fragmentation between western economies and eastern economies could cost the global economy $5.7trn, or up to 5% of GDP. Warning over the impact of lower trade, reduced capital flows and lost economic efficiencies, the report notes that developing economies would be the worst hit and could see GDP fall by as much as 10%.
Fraud cases set to soar
The Financial Ombudsman Service (FOS) anticipates that fraud and scams will constitute 35% of its banking and loan cases in the 2025/26 financial year, translating to over 37,000 complaints. This marks an increase from the projected 33,000 cases by the end of the current financial year. Abby Thomas, chief executive and chief ombudsman at the FOS, expressed concern over the ongoing high levels of fraud, saying: “People can feel embarrassed to have fallen victim to a fraud or scam, but these crimes can be complex and incredibly convincing, and nobody should be afraid to come forward.” The FOS also expects to handle around 240,000 new complaints overall, noting that it will resolve around 270,000 cases next year, with this made up of both new complaints and older disputes.
Markets
Global equities responded positively to Trump’s reticence to impose immediate tariffs.
Yesterday, the FTSE 100 closed up 0.23% at 8565.20 and the Euro Stoxx 50 closed up 0.22% at 5217.50. Overnight in the US the S&P 500 rose 0.53% to 6118.71 (a new all time high) and the NASDAQ rose 0.22% to 20053.68.
This morning on currencies, the pound is up and is currently worth $1.2425 and €1.1845. On Commodities, Oil (Brent) is at $78.80 & Gold is at $2776. On the stock markets, the FTSE 100 is currently down 0.34% at 8536 (blame the strengthening pound) and the Eurostoxx 50 is up 0.64% at 5251.
Donald Trump appeared to soften his approach toward China, saying in an interview with Fox News that he would “rather not” use tariffs. Asian stocks rallied and the dollar weakened.
Donald Trump offered international companies “among the lowest taxes of any nation” if they produce their goods in the US but warned that he would impose tariffs if they do not. In a remote address to the World Economic Forum Mr Trump also called on Saudi Arabia and OPEC to bring down oil prices, before demanding that the world’s central banks then lower interest rates “immediately”. Trump said he knows interest rates better than Fed Chief Powell.
US market futures edged lower in overnight trading Thursday after Wall Street hit a record closing high following President Donald Trump’s call to lower interest rates and crude prices.
The Bank of Japan raised its key interest rate to a 17-year high and took a more bullish view on the strength of inflation, fueling expectations for more hikes and supporting the yen.
Roads
A financial crisis at British local councils has been compounded by the country’s rising borrowing costs, with town halls scrapping or delaying projects such as roadworks, new leisure centers and urban regeneration.
Nimby’s to be disarmed
Prime Minister Keir Starmer has announced plans to prevent legal challenges from causing delays to major infrastructure projects, in the latest effort by the UK government to convince investors and businesses that it is serious about pursuing economic growth. Opponents of infrastructure projects will be limited to one judicial review of a project, stopping them using repeated cases tying up projects for years. Starmer said he was “putting builders first, not the blockers” and “disarming the NIMBYs who are hell-bent on slowing down our progress as a nation.”The Business Secretary said The planning and Infrastructure Bill will deliver these reforms, as well as broader measures, to make it faster, cheaper and more certain to build the infrastructure we need. Chancellor of the Exchequer Rachel Reeves said “the answer can’t always be no” when it comes to approving major infrastructure works and planning decisions, in the latest indication the UK’s Labour government will push ahead with controversial projects in a bid to spur economic growth. “This was the problem in the last government,”
Reeves to ease non-dom tax changes
Chancellor Rachel Reeves has announced that reforms around the non-dom tax status will be amended, telling the World Economic Forum in Davos that upcoming legislation will be altered to help non-doms repatriate their funds to the UK at a discounted tax rate. This, she said, stems from “listening to the concerns” of non-domiciled residents. Recent research by analytics firm New World Wealth found that the UK lost a net 10,800 millionaires in 2024 – a 157% increase on 2023. The Adam Smith Institute calculates that this would have cost the Treasury income tax equivalent to that of over half a million average taxpayers. James Quarmby, a partner at law firm Stephenson Harwood, said the amendment was the first public signal that the Government was listening to the concerns of non-doms and their advisors. Rachel de Souza, tax partner at RSM UK, said: “Whilst an increase to the temporary repatriation facility must be a good move, it is woefully inadequate to prevent wealthy non-dom and British entrepreneurs from leaving the UK.”
Sainsburys
Sainsburys said it was proposing to reduce its headcount by over 3,000 roles as it seeks savings to counter a “particularly challenging cost environment.” The group, which trails only Tesco in UK grocery market share, said it plans a 20% reduction of senior management roles. Sainsbury’s also proposes to close the remaining patisserie, hot food and pizza counters in its stores as well the remaining 61 Sainsbury’s Cafes. It said it would look to redeploy staff where it could.
Supermarkets unite against tax changes
Waitrose and Ocado have joined nine major food retailers in opposing the Government’s proposed changes to inheritance tax, which farmers argue could lead to the fragmentation of family farms. The National Farmers’ Union has warned that the proposed 20% inheritance tax on farms valued over £1m could have dire consequences, including increased suicide rates among farmers. Treasury minister James Murray defended the tax changes as a “fair approach,” but critics argue that the lack of consultation has created significant discontent. Shadow Environment Secretary Victoria Atkins has called for a review of the tax reforms, highlighting the human cost of these policies.
Workspace
Workspace said it was adapting to the changing office rental market, after a third-quarter slowdown in new lettings. The London-based operator of flexible office rentals, including factory conversions, said market uncertainty reduced customer activity in the three months to December 31. Workspace estimated the total value of new lettings during the period was £6.0 million, down 27% from £7.6 million the year prior. The average number of new lettings per month was about 91,versus 93 year-on-year.
Potential administrators approached over Thames Water crisis
The Government is reportedly preparing for a potential bankruptcy of Thames Water by approaching restructuring advisers including Teneo, Interpath, and EY. Thames Water, which serves 16m customers, is struggling under a £15bn debt pile and is seeking £3bn in emergency funding to avert collapse. An unnamed official said that the Government is “ready now” for special administration if necessary, emphasising that temporary nationalisation is the “strongest lever” that ministers have “to make sure that another market-led, private-led solution is found.”
Trump hits out at EU over ‘unfair’ taxes
In a speech at the World Economic Forum in Davos, President Donald Trump condemned the European Union for its “very unfair” treatment of the US, particularly regarding regulations on American technology firms. He said: “The EU treats us very badly,” highlighting a substantial tax burden. Mr Trump has passed an executive order threatening retaliation against countries – including the UK – that have agreed to impose a minimum corporate tax rate of 15% on multinational companies.
Boeing
Boeing said it expects to lose $3.9bn in the October-December quarter, as the planemaker counted the cost of a two-month strike that paralysed aircraft production. It also lost money on some big military contracts in America
HMRC scam calls soar
There has been an 84% increase in scams impersonating HMRC as the self-assessment tax return deadline approaches, with fake calls threatening legal action or financial penalties for immediate payment. Official figures reveal that 144,298 scam referrals were reported to HMRC between November 2023 and October 2024, marking a 16.7% increase from the previous year.
Real Madrid break €1bn revenue barrier
Real Madrid have made history by becoming the first football club to generate over €1bn in a single year, according to Deloitte’s Football Money League. The club’s record earnings of €1,045bn surpassed Manchester City’s €837m. Matchday revenues doubled to €248m following renovations to the Bernabeu Stadium, while commercial revenue increased by 19% to €482m due to new sponsorship deals and merchandise sales. Tim Bridge, lead partner in the Deloitte Sports Business Group, said: “While commercial revenue dominates the income of the top 10 Money League clubs, broadcast income remains crucial for teams in the second half of the rankings.”
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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.