Business news 24 December 2023
James Salmon, Operations Director.
CPA over the holidays. Retail sales, GDP, gift aid, IPO’s, AI, & more business news that we thought would interest our members.
For CPA Members – CPA over the holidays
CPA offices shut down for the holidays on Friday 22nd December at 1pm and will be opening again on Tuesday 2nd January 2024.
Please note that due to planned maintenance work – the members area of our website will be also unavailable from Monday 25th December. It should be up and running on Friday 29th or if possible earlier.
Retail sales climb in November
Retail sales grew by more than expected last month, with trading boosted by Black Friday discounts. Office for National Statistics (ONS) figures show that the amount of goods bought rose by 1.3% in November compared to October. Sales at non-food stores rose by 2.3%, exceeding the 0.2% growth recorded in October. Total sales volumes decreased by 0.8% in the three months to November when compared with the previous quarter. Darren Morgan, director of economic statistics at the ONS, said: “With the three-month trend continuing to fall and overall sales still below pre-pandemic levels, it’s still a challenging time for retailers.” Jacqui Baker, head of retail at RSM UK, commented: “The last-minute rush that many retailers are hoping for might not come to fruition, as some families cut back on gift giving this year or restrict themselves to smaller budgets.” She added: “That may force retailers to start Boxing Day sales early and extend discounting throughout January – in what could be a tough start to 2024.” Lisa Hooker, of PwC, said: “In spite of the headline improvement in sales last month, Christmas is still likely to come down to the wire for retailers.”
Retailers hope for bumper weekend
High street retailers are hoping for a strong final Christmas shopping weekend after a disappointing season and many retailers have launched early sales, offering discounts of up to 50%. Despite a late surge in footfall, the timing of Black Friday has impacted December sales and retailers are hoping for a last-minute boost. “Retailers have a lot of ground to make up and the question is whether it will come too late for some,” said Paul Martin, head of UK retail at KPMG. Zelf Hussain, a partner in PwC’s restructuring practice, said that if sales do not surge over the weekend, the scale of discounts are likely to be even higher in the Boxing Day sales
ONS: Economy shrank in Q3
Revised data from the Office for National Statistics (ONS) shows that the economy shrank in Q3, with GDP contracting by 0.1% between July and September. Previous analysis had suggested growth had been flat in the quarter. Revised data also shows that there was zero growth between April and June, with previous estimates having suggested that Q2 had seen growth of 0.2%. While the Office for Budget Responsibility, the Government’s official economic forecaster, expects growth of 0.1% in Q4, Martin Beck, chief economic adviser to the EY Item Club, said the economy in the fourth quarter “is likely to flatline at best, with a technical recession a serious possibility.” Thomas Pugh, economist at RSM UK, said: “The downward revision for Q3, combined with the weakness in October, means there is a significant risk that the economy could fall into recession at the end of the year. However, we still think the economy will manage to eke out some growth in Q4, meaning a recession should be avoided.” Reflecting on the ONS data, Chancellor Jeremy Hunt said the “medium-term outlook” for the economy is “far more optimistic than these numbers suggest.”
Monetary policy will be restrictive
Sarah Breeden, the Bank of England’s deputy governor for financial stability, says monetary policy will be restrictive for an extended period of time. Ms Breeden, a member of the Monetary Policy Committee, said that while the economy is “moving in the right direction” to return inflation to the Bank’s 2% target, “our job isn’t done.” She said she is focused on whether there is “evidence of more persistent inflationary pressures which means we may need to tighten further” adding: “Regardless, monetary policy still needs to be restrictive for an extended period of time to keep pushing down on inflation and to return it sustainably to target.” Noting that she will use scenario analysis to determine how to vote on the bank rate, Ms Breeden insisted that she will approach monetary policy decisions by “paying great attention to how real world outcomes differ from our expectations and adjusting accordingly.”
Dyson urges ministers to ‘go for growth’
With revised Office for National Statistics (ONS) data for Q2 and Q3 showing that the UK is at risk of falling into recession, Sir James Dyson has accused political leaders of not “going for growth.” Sir James said wealth generation and growth have become “dirty words” as politicians focus on bringing down inflation. He said: “I’ve always believed that inflation isn’t quite the enemy everyone thinks it is. If you’ve got growth, a bit of inflation doesn’t matter,” adding: “If you get inflation down and kill growth, I think you’re in trouble.” Sir James also praised the aggressive, tax-cutting economic policies of Kwasi Kwarteng, saying the former Chancellor “wasn’t raising taxes. He was going for growth.”
Higher-rate taxpayers reclaim £740m in tax through gift aid
Higher-rate taxpayers reclaimed £740m in tax after making charitable donations through gift aid in the 2022/23 tax year. This is up 37% in three years after more people were dragged into higher tax bands by frozen thresholds. Some 5.28m higher-rate taxpayers made use of gift aid, up from 3.83m in 2019/20. It is noted that giving money to charity can reduce how much inheritance tax (IHT) is paid on an estate. If a person leaves at least 10% of their estate to charity, they can reduce the rate of IHT that may apply to the estate from 40% to 36%.
City IPO market may pick up in 2024
While the IPO market in London has been slow this year, with only 23 companies listing on the London Stock Exchange in 2023, there are signs that the market may pick up in 2024. Experts say factors such as falling inflation and interest rates, as well as the potential return of private equity firms to listings, could attract investors to purchase shares. Officials are also making efforts to attract IPOs by proposing changes to the rules to make the City more attractive. However, some bankers remain cautious, warning that companies may not be ready for IPOs after focusing on maintaining profit margins during the past year. Additionally, experts say political instability and the track record of recent IPOs could hurt investor confidence. Matthew Beesley, chief executive of fund manager Jupiter, expects to see more activity because of the pent-up demand from companies that have been holding back, saying: “It just takes one or two successful IPOs to signal that the market is open and functioning again.” Marcus Stuttard, a senior official at the London Stock Exchange, comments: “The conditions are there for companies to do an increased number of IPOs. We’re seeing more of the audit firms doing pre-IPO preparations … and huge momentum behind regulatory reform.” “Everything is pointing in the right direction,” he adds.
Commercial property landlords struggle as valuations plummet
Commercial property landlords are facing a challenging time as valuations of their properties continue to decline. The lack of dealmaking and the rapid increase in interest rates have contributed to the drop in property values. Investors believe that property values may still have further to fall, as reflected in the stock market values of real estate investment trusts (REITs). Many REITs are trading well below their net asset value, indicating that investors do not believe the portfolios are worth what they claim. To combat this, property groups are considering mergers and acquisitions to create larger entities that can compete with international giants. The industry expects more mergers and acquisitions in the coming year as landlords seek to regain their footing on the global stage.
AI and the world of work
City AM’s Amber Murray looks at what technology could mean for jobs in 2024, saying that AI is “certainly poised to change the way we work.” She cites EY’s recent European Financial Services AI Survey which found that nearly 80% of financial services leaders across Europe expect Generative AI to significantly affect productivity and change roles. Xuesong Zhao, manager of the Polar Capital Global Technology Fund, says AI will disrupt industries and bring “significant productivity gains.” Ms Murray highlights comments from Elon Musk, who believes: “There will come a point where no job is needed – you can have a job if you want to for personal satisfaction, but the AI will be able to do everything.”
PM delayed illegal migration crackdown amid fears OBR would slash tax-cutting headroom
Sources say Rishi Sunak delayed a crackdown on illegal migration after voicing fears that the Office for Budget Responsibility (OBR) would reduce his headroom for tax cuts. The Prime Minister was considering announcing measures restricting the arrival of foreign workers in the autumn, but waited until December. Part of the reason for the delay was concern that the budget watchdog would significantly reduce the Government’s headroom. Mr Sunak eventually announced a significant package of measures after official figures showed that net migration hit 745,000 in the year to last December. An OBR spokesman said that they have not yet undertaken any analysis of the implications of these measures. It is noted that Conservative MPs have criticised the OBR for focusing its “scoring” of migration policies largely on the basis of the benefits the additional labour brings to the economy.
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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 seen many financial crises, this one will be particularly deadly for suppliers for some time to come.
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.
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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.
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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?
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.