Business news 24 November 2023
James Salmon, Operations Director.
Black Friday, PMI’s, the Energy cap, house prices, consumer confidence, more on the Autumn Statement, markets insolvencies and more business news that we thought would interest our members.
Black Friday loses its lustre in spite of big discount deals
PwC analysis shows that consumer interest in Black Friday has dropped from 61% in 2022 to 44% this year, with spending expected to fall from £23bn to £20bn.
PMI’s show return to growth
The UK’s private sector returned to growth in November, according to the S&P Global/CIPS UK PMI. The upturn comes on the back of three months of decline. S&P Global said the improvement was the result of a return to business activity expansion in the service economy, alongside a softer downturn in manufacturing production. The survey of manufacturers and service providers recorded a score of 50.1 for November on an index where a figure above 50 represents growth.
This is higher than the 48.4 forecast by experts and above October’s 48.7. The PMI for the services sector came in at 50.5. While the manufacturing sector saw a six-month high, the 46.7 reading still signals a decline in output. Tim Moore, economics director at S&P Global, said the survey suggests that the economy “found its feet again in November.” Ashley Webb, an economist at Capital Economics, said the report will “add to the Bank of England’s unease about the stickiness of inflation.”
A softer downturn in the manufacturing production also helped. The flash UK services PMI business activity index climbed to 50.5 (October 49.5), a four-month high, while the flash UK Manufacturing PMI at 46.7 (Oct: 44.8) was a six-month high.
Energy price cap to rise in January
Household energy prices will rise in January, with Ofgem saying the typical annual household bill is set to go up from £1,834 to £1,928, a rise of 5%. Ofgem chief executive Jonathan Brearley says the regulator has told suppliers it expects them to “identify and offer help to those who are struggling with bills.” Dr Craig Lowrey, principal consultant at energy analysts Cornwall Insight, said a rise in energy bills was “the last thing households need.”
House Prices to fall 4.7% in 2024
House prices will reach their lowest point at the end of 2024, according to a forecast from the Office for Budget Responsibility (OBR). The OBR says house prices will grow by 0.9% in 2023 before falling by 4.7% next year, reaching their lowest level in Q4. The price of the average UK home will “reach a low of around £266,000 at its trough in the final quarter of 2024”, according to the OBR’s forecast.
Consumer confidence climbs
UK Consumer Confidence has bounced back despite the ongoing cost-of-living concerns as consumers look set to “loosen their purse strings” and enjoy the festive season with households more willing to splash out on major purchases ahead of Christmas, the survey found.
GfK’s long-running Consumer Confidence Index rose by six points in November, although it still languishes firmly at minus 24. Confidence in the general economy over the next 12 months also increased by six points to minus 26 – 32 points higher than a year ago. Confidence in personal finances over the next year rose 5 points to -3, while the major purchase index climbed ten points to -24.
Joe Staton of GfK said: “Recent ups and downs in confidence have underlined the topsy-turvy economic mood as encouraging news about falling inflation and wage growth was offset by high personal taxation, alongside costly fuel and energy bills.”
Citi pushes back rate cut forecast
Citigroup expects the Bank of England to deliver its first rate cut in August next year, having previously forecast that rates would be reduced in May. Economists at Citi said they expect a 100 basis points of cuts through 2024 and that monetary policy must “not only wait for clear evidence that wage inflation has eased, but also that fiscal policy will not use any subsequent space to meaningfully increase the risk.”
Economists warn over funding for tax cuts
The Institute for Fiscal Studies (IFS) says the tax-cutting Autumn Statement is set to be funded by cuts to public services. The IFS said the cuts were “completely undeliverable,” with director Paul Johnson saying the “substantial” cuts are being “paid for by planned real cuts in public service spending.” He warned that that £20bn tax giveaway in the Autumn Statement is based on “questionable … possibly implausible” cuts to departmental spending budgets after 2025. This comes after Chancellor Jeremy Hunt announced that National Insurance will be reduced from 12% to 10%, while several tax breaks for businesses will be extended or made permanent.
Tax cuts favour richest 20%, says think-tank
The top fifth of earners in the UK will gain £1,000 on average from tax cuts set out in the Autumn Statement, while the poorest 20% will only be £200 better off, according to a report by the Resolution Foundation. The think-tank also found that real average earnings adjusted for inflation are not expected to return to their 2008 peak until 2028, marking a 20-year pay stagnation. The analysis suggests that this parliament is on track to be the first in which real household disposable incomes fall – by 3.1% from December 2019 to January 2025, leaving households £1,900 poorer at the end of the parliament. Torsten Bell, chief executive of the Resolution Foundation, said that “despite the tax-cutting rhetoric,” taxes are on course to rise by 4.5% of the UK’s GDP between 2019 and 2020 and 2028 to 2029, equivalent to £4,300 a household.
Chancellor defends tax cut decision
Chancellor Jeremy Hunt has defended his decision to cut National Insurance by 2p, despite calls to cut inheritance tax or income tax. Mr Hunt said he did not opt for “crowd-pleasing taxes” in his Autumn Statement as a pre-election giveaway, arguing that he chose to cut the taxes that will have the best long-term impact on the economy. He told ITV’s Good Morning Britain: “Those aren’t necessarily the taxes on the tip of everyone’s tongue but they are the taxes that will make the biggest difference to our long-term prosperity.” The Chancellor added: “I was able for the first time to start to bring down taxes. I am completely open about the fact it is only a start but it’s the right thing to do.”
Markets
UK markets were mixed yesterday with the US closed for Thanksgiving. Oil remained under pressure with Brent just above $80 pressure after OPEC’s decision to postpone this weekends policy meeting. Sterling was higher in the wake of the PMI data. The UK services PMI climbed to 50.5 (October 49.5), a four-month high, while the UK Manufacturing PMI at 46.7 (Oct: 44.8) was a six-month high.
Nissan
Nissan is to invest £2 billion in a UK electric car plant in Sunderland where it will build electric Qashqai and Juke models, saving 6,000 jobs. This will go alongside a new battery plant that will also be needed.
Barclays
Barclays is working on plans to save as much as £1 billion, which could involve cutting as many as 2,000 jobs, mainly in the British bank’s back office, a person with direct knowledge of the proposals told Reuters. Managers at Barclays, led by Chief Executive C.S. Venkatakrishnan, are reviewing proposals to bolster its profitability. As part of these 1,500 to 2,000 jobs could be cut if implemented in full, the person said.
Latest Insolvencies
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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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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
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.