Business news 24 February 2025
Corporate zombie risk rises. Entrepreneur support could boost economy. Procurement Act boosts small firms. Budget driving up prices and hitting employment. Consumer confidence, retail, fraud, markets, insolvencies & more business news that we thought would interest our members.
James Salmon, Operations Director.
Corporate zombie risk rises
Analysis by BDO has revealed a surge in the number of British firms at risk of becoming ‘zombie’ companies – those with enough money to continue operating and service their debts but not enough to invest in growth. BDO’s poll of 20,000 businesses found that 15.9% of mid-sized UK firms – those with sales of between £10m and £500m – are at risk of becoming zombies. This marks a 3.5% increase on a year ago. Property had the highest proportion of “at risk” companies, at 25.1%, while leisure and hospitality came second, with 23.4% of businesses deemed to be at risk. Ben Peterson, a partner at BDO, said: “In the light of the challenging economic conditions over the past 18 months it’s no surprise that the number of mid-market businesses at risk of becoming zombie companies is on the rise … rising borrowing costs and inflationary pressures have significantly impacted their financial stability.”
Entrepreneur support could boost economy – FSB
The Federation of Small Businesses (FSB) has suggested that making it easier for self-employed people to secure mortgages or retire could help to boost the economy. This came after an FSB poll of more than 1,300 self-employed people found that 25% said being self-employed has made it harder to access a home loan, with 16% saying that savings or capital they would used to expand their business has been used to pay a mortgage. It was also shown that 37% do not pay into a pension. The poll also found that 17% of entrepreneurs are using bank overdrafts to stay afloat or maintain their enterprise, with credit cards (16%) and financial support from family and friends (9%) also utilised.
Procurement Act boosts small firms
Emma Jones, founder and chief executive of Enterprise Nation, says the Procurement Act 2023 marks a significant shift in public procurement by aiming to enhance smaller enterprises’ access to Government contracts. She says the Act allows for a more strategic allocation of resources, fostering innovation and economic growth. The new legislation simplifies the bidding process and mandates consideration of social value, enabling local councils to prioritise regional contractors. Ms Jones says this change is crucial as it encourages public bodies to embrace smaller, innovative businesses, ultimately benefiting taxpayers and improving public services. She notes that “at least 60% of the start-up and early-stage businesses we work with have an element of social purpose embedded into their business model.”
Budget is driving up prices, retailers warn
Analysis shows that retailers, suppliers and manufacturers are raising their prices due to measures set out in October’s Budget, including hikes to taxes and the minimum wage. Employers currently start paying NICs when an employee earns more than £9,100 per year but this threshold will fall to £5,000 in April. The rate of National Insurance paid by employers will also increase, climbing from 13.8% to 15%. A recent survey by manufacturing lobby group Make UK shows that 69% of companies expect to pass cost increases on to customers. Roger Barker, director of policy at the Institute of Directors, says firms are concerned over the impact a global trade war could have on prices, saying: “The fear is that the UK economy may find it difficult to get back to the low levels of inflation, which would enable interest rates to be cut significantly.” This, he added, is “weighing on business confidence, which remains at historically low levels.”
Budget hits employment, PMI shows
February saw a “marked decline” in employment, according to S&P’s Purchasing Managers’ Index, with firms flagging the impact of the Budget. Chris Williamson, chief business economist at S&P Global Market Intelligence, said: “One in three companies reporting lower staffing levels directly linked the reduction to policies announced in last October’s Budget.” Rob Wood, chief UK economist at Pantheon Macroeconomics, suggested that issues in the jobs market may not be as severe as the PMI suggests, warning: “The qualitative nature of the survey – asking how many firms are cutting employment, rather than how much- is likely to exaggerate weakness after the payroll tax hikes.” The PMI also points to a slowdown in demand, with new orders falling at the fastest pace in a year and a half. New orders from overseas declined at the fastest pace since November 2022. Thomas Pugh, an economist at RSM, suggested that weak economic growth in the UK’s major trading partners is “depressing demand.” The PMI slipped to 50.5, with this slightly lower than the 50.6 recorded in January on an index where a reading above 50 points to growth.
UK Manufacturing PMI fell to a 14-month low of 46.4 in February from 48.3 in January, missing market expectations of 48.4 and from 48.3 in January, a preliminary estimate showed on Friday and from. It marked the sector’s sharpest contraction since December 2023, as output declined for the fourth consecutive month at an accelerating pace, with sales weakening in both domestic and overseas markets.
UK Companies offloaded employees at the fastest pace since the midst of the global pandemic this month, figures showed on Friday. According to data released earlier on Friday, staffing numbers had dropped at the quickest pace since November 2020 in February as employers braced for higher payroll costs and muted demand.
Salaries climb despite job market slowdown
Britain’s job market has experienced its worst start to a year since the pandemic-related lockdowns, according to Adzuna, with fewer than 828,500 jobs available in January. This marks a decline of 1.9% from December and 4.5% from a year earlier. Despite this downturn, advertised salaries were up 7.02% on January 2024 to hit a record high of nearly £40,850. Andrew Hunter, the co-founder of Adzuna, said sectors including manufacturing, maintenance and retail had driven the increase in salaries, reflecting the “increasing competition for talent in key sectors, even as overall hiring slows.” Salaries in these sectors have been nudged up by the tight labour market and competition to attract and retain employees. It is noted that the Bank of England fears sustained wage growth could push inflation towards 3.75% later this year, significantly above its 2% target.
Low-paid jobs at risk from tax hikes
Tax hikes on businesses that were announced in the Budget are expected to put pressure on employers, with concerns that low-paid workers will be hardest hit. The reduction in the salary threshold at which businesses start paying employer’s National Insurance contributions are set to have an impact. While employers currently start paying NICs when an employee earns more than £9,100 per year, as of April 2025, this threshold will drop to £5,000. The reforms will also see the rate of NI paid by employers increase from 13.8% to 15%. Nye Cominetti, principal economist at the Resolution Foundation, has voiced concern that the increase in employer National Insurance, alongside a higher minimum wage and changes to employment rights, “disproportionately impact low-paid workers.” She argues that it “would have been more sensible to raise tax revenue in a way that didn’t hit low-paid workers the hardest.”
Hospitality jobs will be hit by higher costs
A survey of hospitality businesses has found that 70% plan to reduce employment amid increases to tax and wages, while 60% expect to cancel planned investment and 29% will reduce trading hours to cut costs. The British Beer and Pub Association, the British Institute of Innkeeping, and UKHospitality have urged ministers to delay a plan to cut the threshold at which employers start paying National Insurance contributions. The industry groups said pubs, restaurants and hotels “will be forced to make painful decisions to weather these new costs,” warning that this “will have damaging impacts on businesses, jobs and communities.”
Consumer confidence climbs
Consumer confidence has started to rise, according to market research company GfK. The firm’s consumer index improved from -22 in January to -20 in February, with households saying they were more optimistic about their personal finances and the economic outlook. Neil Bellamy, consumer insights director at NIQ GfK, said that the index was still low while “the majority of consumers continued to wrestle with the impact of higher prices following more than two years of high inflation.” Noting that prices remain above the Bank of England’s target, he added that “people don’t expect the economy to show any dramatic signs of improvement soon.”
Retail sales climb in January
Office for National Statistics (ONS) data shows that retail sales volumes were up 1.7% in January, having dipped 0.6% in December. Analysts had predicted growth of just 0.3%. While food sales were up 5.6% in the opening month of 2025, non-food retailers saw sales fall by 1.3%. ONS senior statistician Hannah Finselbach said: “Retail sales rebounded strongly in January following four months of consecutive falls.” She added that the “broader picture” shows that retail sales decreased across the three-month period and are below pre-pandemic levels. Thomas Pugh, an economist at RSM UK, noted that the latest data may be more about seasonal adjustments than genuine growth. Looking ahead, Silvia Rindone, UK and Ireland retail lead at EY, forecasts consumer spending growth of 1.6% for this year, a rate that would outpace the 1% recorded in 2024.
Government finances under pressure despite £15.4bn surplus
Chancellor Rachel Reeves is under increased pressure to raise taxes or cut public spending after Office for National Statistics (ONS) data revealed that Government borrowing was more expensive than expected in January, while tax revenue fell below expectations. While the Government’s budget surplus hit £15.4bn – the highest level since records began in 1993 – it fell short of the £20.5bn predicted by the Office for Budget Responsibility (OBR). The ONS figures also show that borrowing was up £11.6bn on a year ago. For the full year, borrowing came in at £118.2bn, exceeding the OBR’s £105.4bn forecast. Looking ahead, Cara Pacitti, senior economist at the Resolution Foundation think-tank, said the economic data “could leave the Chancellor in the unenviable position of needing to raise taxes or cut spending to meet her fiscal rules.” Dennis Tatarkov, senior economist at KPMG UK, offered a similar warning, saying that if Ms Reeves remains committed to her fiscal targets, “the Spring Statement may need to contain more tax and spending changes.” Elliott Jordan-Doak, senior UK economist at Pantheon Macroeconomics, warned that “it appears that all the Chancellor’s headroom has gone.” Nabil Taleb, an economist at PwC, noted that higher debt payments and weak economic growth would leave the public finances more exposed to future economic shocks.
Minister: 2.5% of GDP on defence is ‘ambitious’
Education secretary Bridget Phillipson believes that increasing UK defence spending to 2.5% of national income is “ambitious.” With senior figures including Nato secretary general Mark Rutte saying the UK will need to increase defence spending to protect national interests, Ms Phillipson was asked if the Prime Minister would promise US President Donald Trump that Britain will spend “much more.” She told the BBC’s Sunday with Laura Kuenssberg: “Let’s be clear, 2.5% is ambitious,” but insisted: “We will get there.” Britain currently spends 2.3% of GDP on defence, equivalent to £54bn. It would cost around an extra £6bn a year by 2030 to increase the rate to 2.5%.
Pandemic loan fraud losses rise by £500m
A Government review has uncovered more than 10,000 additional cases of suspected fraud involving pandemic-related loans. The British Business Bank review of loans which had been defaulted on and settled by the Government shows that the number for the 2023 financial year has almost doubled from 16,846 to 31,437. The fraudulent loans for 2023 amount to over £500m, bringing total losses for the year to £1.2bn, up from £648m. A Department for Business and Trade spokesperson said: “These figures do not represent an increase in the overall amount paid out, and instead are a result of lenders reclassifying existing payouts following their extensive work to tackle fraud in the schemes.” HMRC’s annual report from 2021/22 said 2.5% of the £19.7bn delivered through self-employed support had been lost to fraud, and the Treasury said it expected to write off £4.3bn of the £5.8bn of public money fraudulently claimed by businesses during the pandemic. According to Insolvency Service data, 1,431 company directors have been disqualified due to suspected fraud involving pandemic-related financial support
Markets
On Friday, UK markets lacked direction closing out a mixed week for equities, as investors remained cautious around the escalating tensions in Europe, the FTSE 100 closed down 0.04% at 8659.37 and the Euro Stoxx 50 closed up 0.25% at 5474.85.
Over in the US stocks fell heavily. The sharp selloff put US indexes in negative territory for the week as traders digested weaker-than-anticipated economic data. The S&P 500 fell 1.7% and the Nasdaq 100 fell 2.1%, weighed down by a selloff in the biggest technology stocks. The Russell 1000 also fell 1.8%.
This morning on currencies, the pound is currently worth $1.2635 and €1.12075. On Commodities, Oil (Brent) is at $74.55 & Gold is at $2942. On the stock markets, the FTSE 100 is currently down 0.13% at 8648 and the Eurostoxx 50 is down 0.16% at 5466.
The euro gave up early gains, while German stocks rose as investors took in the implications of a win by German conservative leader Friedrich Merz in Sunday’s elections. US stock futures pointed to a rebound after Friday’s selloff.
Apple has said it will invest $500 billion in the USA over the next four years, hiring 20,000 workers and producing AI servers in order to avoid Donald Trump’s tariffs on goods imported from China. The tech titan will separately stop offering secure encryption to users of its cloud storage in Britain, after the government sought access to the data to battle criminality.
Alibaba pledged to invest at least 380bn yuan ($53bn) in cloud-computing and artificial-intelligence infrastructure over the next three years.
Meanwhile, Microsoft has begun canceling leases for data-center capacity in the US, which may reflect concern about whether it’s building more AI computing than it needs.
The European Union estimates that the first wave of Donald Trump’s steel and aluminum tariffs will hit as much as €28 billion of the bloc’s export.
BMW Oxford
BMW is halting its investment in a plant in Oxford as electric vehicle demand has stalled, The Times reported Saturday. The Munich, Germany-based carmaker will review the timing of plans to manufacture battery electric minis at the works in Cowley. BMW back in 2023 had said it would invest a total of £600 million at the site. Demand for electric vehicles has stalled amid concerns about a lack of charging infrastructure and a high cost of switching from a petrol or diesel equivalent.
Big banks score record profits
With Standard Chartered having reported a record profit for 2024, it means Barclays, HSBC, NatWest, Lloyds and Standard Chartered recorded an all-time high of £50.3bn in combined profit. The banks also returned £35bn to investors. Russ Mould, investment director at AJ Bell, said the FTSE 100’s Big Five banks “are running like cash machines right now.” Analysts anticipate further modest profit increases in 2025 and 2026, driven by cost-efficiency and a stable economic environment. Dan Cooper, UK banking and capital markets leader at EY, has expressed cautious optimism for 2025, noting expected growth in net interest income and fee income.
Just Eat.
The Amsterdam-based technology company, Prosus said it has agreed to acquire Just Eat Takeaway.com for about 4.1 billion euros cash., which owns a stake in Tencent, The price represents a premium of 63% to Just Eat Takeaway’s closing share price on Friday last week, and a 49% premium over the three-month volume-weighted average price. Just Eat Takeaway, which has a market capitalisation of 2.60 billion, will continue to be based in Amsterdam under its existing name and will maintain its key brands. Prosus said the proposed takeover is subject to regulatory approvals. In the same statement, Just Eat Takeaway said its management board and supervisory board unanimously recommended the deal.
HMRC issues WFH warning
HMRC has issued a warning to employees working from home, highlighting the risks of claiming work expenses without verifying their eligibility. The tax office cautioned that many could face significant financial repercussions, saying: “Don’t get caught out by ads promising quick tax refunds for working from home.” HMRC has emphasised the importance of checking eligibility for tax refunds, which can include expenses for tools, travel, and uniforms, and advised employees to avoid agents and claim directly.
Fresh tax hikes will hinder growth
With analysts expecting the Chancellor to announce further tax hikes later this year, the Times offers opposing views on whether doing so would be the right move. Conservative MP Sir Iain Duncan Smith argues that tax hikes would be damaging, suggesting that since the £40bn tax raid delivered in October’s Budget, “Bank of England growth forecasts have halved and business confidence has plummeted.” He suggests that that instead of raising taxes, the Chancellor should cut government costs, arguing that this would improve productivity and increase tax revenues. Sir Iain warns: “If the Chancellor wants growth, hiking taxes is not the way to do it.” In contrast, Danny Sriskandarajah, chief executive of the New Economics Foundation think-tank, says that raising taxes is necessary “if we are to fix our public services in the short term and to close the yawning fiscal gap in the long term.” He says that the Chancellor was right to raise capital gains tax but notes that rates are still not equal with income tax. He says: “It is crazy that these lower capital gains rates allow the very rich to pay a lower effective rate of tax than some teachers or nurses.”
Firms told to deliver ‘social value’ to land government contracts
Companies looking to secure public contracts have been told to focus on net zero and diversity goals, with firms urged to show how they will provide “social value.” A guide to the Government’s new procurement rules tells companies to detail how they will “remove barriers to entry for young people and under-represented groups” and help with “accelerating net zero,” as well demonstrate the “highest standards” of “environmental sustainability.” The National Procurement Policy Statement also urges government departments to direct more money to charities and NGOs. Former Business Secretary Sir Jacob Rees-Mogg criticised the guidance, saying: “The intention of the Procurement Act 2023 was to maximise value for money for taxpayers. When the public finances are under such strain trying to use it for woke virtue signalling is especially foolish and potentially unlawful.”
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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.
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- 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
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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
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