Business news 24 July 2024
Cash payments decline as consumers embrace digital transactions. AI, US trade, activating the economically inactive, UBI, PMI’s, pensions, rents, markets, insolvencies & more business news that we thought would interest our members.
James Salmon, Operations Director.
Cash payments decline as consumers embrace digital transactions
The total number of cash payments in the UK has decreased as more consumers opt for digital transactions using cards and phone apps like Apple Pay and Google Pay. Last year, the UK population made 6bn cash payments, accounting for only 12% of the total, compared to 14% in 2022. In contrast, contactless payments with cards or phones reached 18.3bn, representing 38% of all payments. Adrian Buckle, head of research at UK Finance, stated that the popularity of card payments does not indicate a cashless society, as cash remains the second most frequently used payment method. The Times notes that the Financial Conduct Authority has said banks must consider access to cash before closing branches, ensuring reasonable access to cash withdrawal and deposits for communities.
CMA inks new AI agreement with EU and US
The UK’s competition regulator, the Competition and Markets Authority (CMA), has signed a joint statement with EU and US counterparts to protect competition and the public from the rise of AI. The CMA and its overseas partners will share information and understanding on AI issues and use their powers to address potential risks. The statement has been signed by the European Commission, the US Federal Trade Commission, and the US Department of Justice. CMA chief executive Sarah Cardell stressed the potential of AI to drive innovation and growth, while also highlighting the need for fair and effective competition. The CMA recently launched an investigation into Microsoft’s hiring practices in the AI sector and previously raised concerns about partnerships between tech and AI firms.
Reeves takes charm offensive to New York
The Chancellor is planning a visit to New York next month in an effort to boost US investment in the UK. Rachel Reeves will have a one-on-one dinner with Stephen Schwarzman, the billionaire chairman and chief executive of Blackstone, and breakfast meetings with other Wall Street leaders. Labour wants to boost investment in projects ranging from green energy and infrastructure to housebuilding, to help boost growth and reduce the need for big tax hikes
DWP must focus on work not welfare
The Department for Work and Pensions (DWP) will prioritise work over welfare under a Labour government, the department’s new minister, Liz Kendall, has said. Kendall stressed the need to address various factors that affect people’s ability to find employment, such as health, skills, childcare, and transport. While there will still be conditions and consequences for not seeking work, Kendall wants to see a greater emphasis on upfront support. Labour aims to achieve an 80% employment rate, surpassing other G7 nations. Currently, around 11m working-age individuals in the UK do not have jobs, with 9.4m classified as “economically inactive.” Kendall explained: “Under my political leadership, the DWP will shift from being a department for welfare to being a department for work.”
Long-term sick should be forced to seek work
Former health secretary Alan Milburn has urged the Labour Government to require the long-term sick to look for jobs as a way to tackle unsustainable welfare costs and reduce the country’s reliance on immigration. In a report he presented alongside Liz Kendall, the Work and Pensions Secretary, Milburn said that dealing with record numbers outside the workforce was the “only route to higher levels of economic growth.” While Kendall praised Milburn’s report, she stopped short of backing his plan to impose conditions on sickness benefits stating that the focus would be on upfront help and support.
UBI recipients less likely to be employed
The majority of people given cash for nothing worked fewer hours and spent more time on leisure, a major study into Universal Basic Income has found. They were on average 2% led likely to be employed. Theo Bertram, founder of the Social Market Foundation, said the study “punches a big hole in the case for Universal Basic Income.” But the study also found people had more time to organise their lives, had greater flexibility and improved agency. The three-year long US study was backed by AI investor Sam Altman.
PMI’s
UK July FlashPMI’s were announced earlier with Manufacturing PMI at 51.8, and the Services PMI at 52.4.
Chancellor urged to impose flat 30% rate of pension tax relief
Treasury officials have outlined a plan to raid the pension savings of up to 6m middle-class workers ahead of the Chancellor’s first Budget. Rachel Reeves is expected to consider a proposal for a flat 30% rate of pension tax relief. This will mean higher rate payers will pay an effective 10% tax charge on their retirement contributions for the first time. The policy would save the bottom 80% of earners around £230 per year, while the top 10% would see an average tax increase of just under £2,600 a year, according to the Institute for Fiscal Studies. Sir Steve Webb, a former pensions minister and partner at pension consultants LCP, said: “Giving everyone the same rate of tax relief on their pension contributions might seem fair, but it would be extremely complex to implement for the millions of workers in traditional salary-related pension schemes. The bulk of contributions in such schemes comes from employers and are made without any deduction of tax. If higher earners lost higher rate tax relief they would potentially face a tax surcharge not just on their personal contributions but also on the contributions their employer makes directly to the scheme. This bill could run into thousands of pounds a year in some cases.”
Reeves advised to merge council pension schemes
The UK’s local government pension schemes (LGPS) could merge into a single “sovereign wealth fund” and unlock £40bn for British infrastructure projects, according to the Pension Insurance Corporation (PIC). The PIC, which manages £47bn in assets, supports the consolidation of the fragmented LGPS to funnel retirement cash into the economy. The LGPS is currently split across 87 different funds and spends £2bn per year on fees. “A single LGPS with a sophisticated, long-term investment strategy might put up to £40bn into vital infrastructure,” said Tracy Blackwell, chief executive of the PIC. “That could make a big difference to the UK’s economic prospects.” The call comes after Rachel Reeves, the Chancellor, tabled plans over the weekend to force consolidation of the local government pensions sector in a bid to unlock investment into the economy.
Markets
Yesterday, markets turned from US politics to corporate earnings. The FTSE 100 closed down 0.38% at 8167.37 and the Euro Stoxx 50 closed up 0.40% at 4916.80. Overnight in the US the S&P 500 dropped 0.16% to 5555.74 and the NASDAQ fell 0.06% to 17997.35.
European stock dropped as investors digested key earnings from major companies and after an unimpressive start to the results from the “Magnificent Seven” mega-cap tech titans as Tesla and Alphabet disappointed.
This morning on currencies, the pound is down and currently worth $1.288 and €1.189. On Commodities, Oil (Brent) is at $81.4 & Gold is at $2413. With stock markets, the FTSE 100 is down .4% at 8133 and the Eurostoxx 50 is down 1.2% at 4857.
Struggles to replace retiring financial advisers
With the average age of a financial adviser rapidly approaching 60, the industry is preparing for a reckoning as they attempt to replace those leaving. Only 26% of financial advisers are under 40, while most are in their late 50s – the average planned age of retirement sits at just 52. Clients are concerned about the prospect of their financial planner retiring, with 21% believing it will happen within the next two years. The number of young financial advisers has been dropping rapidly, while the number of advisers over 60 has increased. “As the sector is set to lose so many of its most experienced workforce, more must be done to make it an attractive career for new talent – both to the younger generation just starting out and those looking to switch from other professions,” said Simon Taylor, head of strategic partnerships at Investec W&I.
Women in Scotland match men in business start-ups
For the first time ever, the number of female entrepreneurs in Scotland has matched the number of men, marking a “landmark moment” in business. According to the Global Entrepreneurship Monitor (GEM) report, 8.6% of working-age women in Scotland were running or setting up new businesses in 2023, compared to 9.8% of men. This represents “statistical parity” between the genders. “It is a landmark moment because for the first time ever we are seeing that there is statistical parity between early stage male and early stage female entrepreneurial activity in Scotland,” said Prof Sreevas Sahasranamam of the University of Glasgow.
Average rents hit record high
The average rent being asked outside London has reached a new record of £1,314 per month, according to Rightmove. Rental prices in London have also surged to an unprecedented high of £2,661. Availability of rental properties is gradually recovering, but remains lower than pre-pandemic levels. Tim Bannister, Rightmove’s director of property science, highlighted the imbalance in the market, with 17 inquiries for every available rental property. Richard Lane, chief client officer at debt advice charity StepChange, expressed concerns about the financial strain on renters, with many using credit to afford their rent and struggling to keep up with bills and credit commitments.
Tesla
Tesla dropped after a fourth straight quarter of disappointing profits ($1.5 billion, down 45%). The robotaxi prototype is promised for October. The new lower cost car isn’t due in production until 2025 and the promise in the near future of humanoid robots seems more of a distraction then a leap forward to investors.
The electric-vehicle giant said that it would focus on “company-wide cost reduction”, “growing our traditional hardware business” and “accelerating development of our AI products and services”.
Alphabet
Alphabet’s revenue reached $84.7bn in the last quarter, a rise of 14% compared with the same period last year but below AI driven expectations. The jump was largely down to growth in cloud computing and advertising. Alphabet shares fell as the company’s CEO called for patience before they saw concrete results from artificial-intelligence investments.
Reckitt
Reckitt Benckiser Group Plc plans to sell some of its home-care brands – including Cillit Bang and Airwick, which generate almost £2 billion in revenue – and review options for its infant formula business as it seeks to turn around the business following a period of poor performance.
CEO Kris Licht said Reckitt wants to focus on “powerbrands” like Strepsils and Durex, and some homecare brands like Harpic, Vanish, as well as Dettol and Lysol, it’s disinfectant products.
Thames
Thames Water is now worth nothing, according to Australian investors, Queensland Investment Corporation, which owns about 5% of Thames, as they mark down the value of its investment to zero.
Easyjet
EasyJet said it is set for a “record-breaking summer” as third-quarter earnings improved. Revenue for the quarter ended June 30 rose 11% to £2.64 billion from £2.36 billion a year earlier. Headline pretax profit shot up 16% to £236 million from £203 million. Passenger numbers rose 8% during the period.
Mitie Group
Mitie Group today said revenue grew in its first quarter boosted by recent acquisitions, an increase in projects and variable work and pricing. The London-based outsourcer said revenue in the three months to June 30 increased 11% to GBP1.16 billion from GBP1.05 billion a year prior. Chief Executive Phil Bentley said the good trading momentum from last year has continued into the first quarter of financial 2025. “We remain on track to deliver our high-single digit revenue growth expectations for the year,” he added. He noted double digit revenue growth from the Projects business, including the benefit from the previous year’s acquisitions. “Contract wins and renewals also remained high, following a record final quarter in [financial 2024], reinforcing the strength of our market leading, technology and data-rich capabilities,” Bentley added.
Compass
Compass Group today hailed strong growth across the board as it raised guidance for full-year growth in operating profit. “All regions continue to perform well, and industry trends remain strong, providing Compass with an exciting pipeline of new business opportunities,” the Chertsey, England-based contract caterer said in a trading statement. In the financial third quarter to June 30, Compass said organic revenue rose 10%. “As expected, net new business growth accelerated in [the third quarter], whilst pricing moderated in line with inflation. Volumes continued to benefit from the quality of our offer and the value gap compared to the high street,” Compass said.
Airbus
Airbus said that its order backlog is now so large that it is turning away customers, especially in the narrow body or single-aisle short-haul space. Speaking at the Farnborough Airshow, chief executive Guillaume Faury said it cannot produce planes quickly enough to match demand in the market currently.
Coca-Cola
The Coca-Cola Company has raised its full-year guidance following a posting a round of second-quarter results that should keep shareholders sated for now. The company saw a 3% increase in revenues to $12.4 billion while operating income improved by 10%. Operating margins improved to 21.3% from 20.1% in the previous year, although earnings per share dipped 5% due to currency headwinds.
Porsche
Porsche has issued a profit warning a day after announcing it is ditching its 2030 electric vehicle sales targets. Porsche is “currently affected by a significant supply shortage with regard to special aluminum alloys” following a flooding at a production facility.
Italy seizes €121m from Amazon
Italy’s tax police have seized €121m from Amazon’s Italian unit as part of an investigation into alleged tax fraud and illegal labour practices. The Milan Prosecutors’ Office accuses Amazon Italia Transport of circumventing tax laws and reducing social security payments. Prosecutors claim that this system allowed Amazon to keep its service prices competitive in Italy.
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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 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.
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.
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 turning to more debt, CPA suggests that business owners tackle the problem at its source. If late payments are a strain on your cash flow, then talk to CPA about how we can help you reduce those late payments.
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. CPA’s overdue account recovery service is a polite, efficient service designed to encourage prompter payments while maintaining goodwill. We direct your customers to pay directly to you, not to us and want to support and reinstate your direct relationship with your customer, not take it over, destroying goodwill.
Unlike other credit management companies, our overdue account recovery service is available to our members on a fixed annual subscription so you can pass any overdue accounts to this service and it is included in your subscription!
Our Overdue account recovery service resolves over 80% of accounts referred to us although our collections department is there to escalate the collections process on the remaining few if you require it.
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 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.