Business news 25 June 2024
Average UK wage rises by just £16 since 2010. More workers expect to switch jobs. Increase in protectionism slows global economy.Markets, insolvencies, manufacturing, tax, politics & more business news that we thought would interest our members.
James Salmon, Operations Director.
Average UK wage rises by just £16 since 2010
A report by the Resolution Foundation reveals that average weekly wages in Britain have risen by just £16 in real terms since 2010. The think tank found that sluggish GDP and productivity growth since the 2008 financial crisis have hindered improvements to average living standards in the UK. The report highlights that if pay had grown at the same rate as in Germany and the United States, the average British worker would be £3,600 a year better off. However, the deceleration in real wages has been more pronounced in the UK compared to other rich countries. The British economy has faced multiple shocks, including the 2008 crisis, Brexit, the pandemic, and an energy price surge. Average real incomes remain 1.2% below the 2021 level, although wages have recently outpaced inflation. The UK minimum wage has increased since 2016, helping to reduce inequality at the lower end of the income distribution. Recent research also shows growth in the spending power of the lowest paid, reaching the highest level in three years.
Salaries fall
UK Monthly Salary Figures fell 0.1% month-on-month in May, down for the first time since October 2023, despite the recent introduction of the National Living Wage. Versus last year, salaries were up 2.7%. The jobs market remained flat in terms of job vacancies, on a month-on-month basis, though annual vacancies continued to decline, down 18.7% on the same time last year.
More workers expect to switch jobs
The proportion of workers who expect to switch employers in the next 12 months is higher than during the “Great Resignation” period of 2022, according to a PwC survey. Around 28% of the surveyed workers said they were “very or extremely likely” to move from their current companies, compared to 19% in 2022 and 26% in 2023. The survey also revealed that workers are embracing emerging technologies such as generative artificial intelligence (GenAI) and prioritising upskilling amid rising workloads and workplace uncertainty.
Increase in protectionism slows global economy, warns OECD
The Organisation for Economic Co-operation and Development (OECD) has warned that an increase in protectionism is slowing down the global economy by impeding international trade in services. Over the past decade, there has been a 25% rise in barriers to online sales of services, with countries adding extra hurdles to communications infrastructure and data connectivity. The OECD estimates that freeing up trade in services could give the global economy a $1tn boost.
UK economy primed for success – Vanguard
Whoever wins the election next week, the UK economy is well-placed for rapid growth next year, says Joe Davis, global chief economist at Vanguard. The source of the growth will come from consumers spending more of their disposable income as inflationary pressures ease. Davis also expects interest rate cuts from the Bank of England, further driving growth and optimism in markets. On a separate topic, Davis expects AI to be as transformation for the economy as the introduction of electricity, and more important than the internet and computers.
Markets
Yesterday, the FTSE 100 closed up 0.53% yesterday at 8281.55 and the Euro Stoxx 50 closed up 0.89% at 4950.98. Overnight in the US the S&P 500 fell 0.31% to 5447.87, the Nasdaq fell 1.09% to 17496.82 as Nvidia shares tumbled on some profit taking. Nvidia has fallen 19% since its peak on the 20th of June. It is still up 140% this year.
This morning the pound is currently worth $1.2693 and €1.1829. Brent is at $85.69, Gold is at $2330. The FTSE 100 is down 0.1% at 8274 and the Eurostoxx 50 is down 0.47% at 4927.
Britain a “Banana Economy” with no infrastructure plan, says investor
Pension Insurance Corporation, one of the UK’s biggest infrastructure investors, has described Britain as a “Banana Economy” with a lack of viable projects to invest in. Dominic Veney, the finance director of the insurer, estimated that around £200bn of fresh capital would be invested over the next decade as insurers like PIC take over legacy pension schemes. Infrastructure and housing projects producing reliable income decades into the future were a perfect match for the liabilities, he said.
UK child poverty crisis revealed in new reports
The crisis of poverty in the UK has been exposed by two new reports, revealing the devastating impact of low wages and price increases on 900,000 children. The Trades Union Congress (TUC) found that over the past 14 years, an additional 1,350 children per week in households with at least one working parent have fallen into poverty. The TUC report highlighted the toxic combination of wage stagnation, insecure work, and cuts to social security as the main factors driving child poverty. The Institute for Fiscal Studies (IFS) thinktank reported that 30% of children now live in households below the poverty line, up from 27% in 2010. The IFS also predicted that an additional 670,000 children would be affected by the two-child limit on benefits. The reports point to the challenge facing the next government, with public services struggling for resources.
Manufacturing
The UK Manufacturing Sector showed an improvement in the latest CBI Industrial Trends Survey, with a reading of -18 for June, an improvement from the previous -33, also better than the estimated value of -26. Manufacturing output volumes were “broadly unchanged” in the three months to June, after rising for the first time in a year and a half in the quarter to May. Output is expected to rise modestly in the 3 months to September, the survey found.
CGT hike would harm small businesses
Labour’s potential increase in capital gains tax (CGT) rates could have a significant impact on small businesses, warns Claire Madden, managing partner at Connection Capital. While Labour has ruled out increasing income tax, VAT, and national insurance, the possibility of hiking CGT remains open. However, a blanket increase in CGT rates would not only affect gains on publicly quoted stocks or investments in second homes, but also impact investors who have taken significant risks to back small, growing companies. Madden highlights that almost half of high net worth private investors would reduce their allocations to equities if CGT was equalised with income tax. This could be disastrous for SMEs, who often struggle to access funding from traditional sources.
Tory and Labour manifestos ‘singularly fail’ to address fiscal challenges
The Institute for Fiscal Studies (IFS) has analysed both Labour and Conservative’s manifestos and found neither comes even remotely close to addressing the major fiscal questions facing the country. Paul Johnson, director of the non-partisan thinktank said the parties had “singularly failed even to acknowledge some of the most important issues and choices to have faced us for a very long time”. He explained: “Their proposals on tax, benefits and public service spending would be barely enough to detain us in analysing a modest one-year fiscal event. They certainly don’t answer the big questions facing us over a five-year parliament.” Speaking of the parties’ pledges not to increase specific taxes or tax rates, Johnson said: “These tax locks are a mistake. They will constrain policy if a future government decides that it does in fact want to raise more money to fund public services. They also put serious constraints on tax reform – something which the Conservatives seem to have all but ruled out, and which is notable in the Labour manifesto by its absence.”
Taxes to rise regardless of election outcome
An expert has warned that taxes will likely increase in the coming years, regardless of the General Election outcome. Hargreaves Lansdown experts predict a £620 annual tax increase for millions of workers, with frozen income tax thresholds being the main contributor. Sarah Coles, head of personal finance at Hargreaves Lansdown, explained that even if the Conservatives increase the personal allowance for pensioners, taxes will still rise for many individuals. The Conservatives also plan to reduce the main rate of employee National Insurance and eliminate the 6p rate for self-employed workers. Coles highlighted that council tax could also increase, and Labour’s Rachel Reeves has mentioned the possibility of a flat rate for pension tax relief. It is advised to plan accordingly and consider contributing to pensions and cash ISAs to mitigate potential tax increases.
Shein files papers for London listing
The Chinese fast fashion chain Shein has filed papers with the Financial Conduct Authority (FCA) for an initial public offering on the London Stock Exchange. A hostile response from lawmakers and regulators in the US prompted the company to abandon plans to list in New York, but questions have been asked in the UK too over Shein’s governance – many institutional investors, politicians and industry bodies are worried about working conditions for the people in its supply chain. Following news of a potential UK listing, both Labour and Conservative politicians have said Shein would be required to adhere to UK regulations and operate to the highest standards. Separately, industry figures are calling on the next government to close a tax loophole that allows companies like Shein to bypass UK import duties by shipping individual parcels directly to customers from overseas. Labour said it had no plans to change the rules, a move described as short-sighted by one boss, pointing to the massive loss of revenue for the Treasury.
BNPL firm folds
A major buy now, pay later firm, Laybuy, has collapsed into administration. Laybuy’s UK arm, with around 300,000 customers, has appointed administrators at FTI Consulting. Although Laybuy is no longer accepting new transactions, customers have been advised to continue to make payments as normal. The UK arm’s administrators are working closely with Deloitte New Zealand and Deloitte Australia, who are now responsible for managing the entire company. Laybuy put itself up for sale in April and was reportedly looking to delist from New Zealand’s junior stock exchange. The collapse of the UK arm was necessary due to unsuccessful efforts to secure additional investment or sell the business and/or assets.
Nearly 90% of financial services firms confident about year ahead
A survey of 501 senior financial services decision makers commissioned by professional services and tech firm Davies has found 89% of businesses rate their performance over the last 12 months as “good” (50%) or “very good” (39%) with the same proportion saying they were confident about how their business will perform over the coming year. Pino Vallejo, chief executive of consulting at Davies, said: “Given the challenging economic climate that has defined the past three years, it is positive to see that the UK’s financial services sector is full of confidence.”
Latest Insolvencies
Appointment of Administrator – REDAG CROP PROTECTION LTD
Appointment of Administrator – CARTWRIGHT BROS. (HAULAGE) LIMITED
Appointment of Liquidators – WOOD ISS LIMITED
Appointment of Liquidators – INTERACT CONSULTANCY LTD
Appointment of Liquidators – GRATIA RESIDENTIAL CARE HOME LIMITED
Appointment of Liquidators – DAVID SEOW LIMITED
Appointment of Liquidators – LEVANPALM LIMITED
Appointment of Liquidators – MCKIBBIN ASSOCIATES LIMITED
Petitions to wind up (Companies) – PORT CLARENCE ENERGY LIMITED
Appointment of Liquidators – SHUTDOWN SOLUTIONS LIMITED
Petitions to wind up (Companies) – A & S MOTOR MECHANICS LIMITED
Appointment of Liquidators – SPOTON WELL MANAGEMENT LIMITED
Petitions to wind up (Companies) – TYRIE DEVELOPMENTS LIMITED
Appointment of Liquidators – CAMBRIDGE ASSOCIATES IN MANAGEMENT LIMITED
Appointment of Administrator – SMALL WORLD FINANCIAL SERVICES GROUP LIMITED
Petitions to wind up (Companies) – SHELLEY ENGINEERING (REDHILL) LIMITED
Petitions to wind up (Companies) – SECUROSTORE HOLDINGS LTD
Petitions to wind up (Companies) – TEAM HARD RACING LIMITED
Petitions to wind up (Companies) – HUOLI DRAGONFLY CAPITAL LIMITED
Petitions to wind up (Companies) – 638 GREEN LANES LIMITED
Petitions to wind up (Companies) – JKN OILTOOLS LIMITED
Appointment of Liquidators – WOODWARE REPETITIONS LIMITED
Appointment of Administrator – RIVUS FLEET SOLUTIONS LIMITED
Appointment of Liquidators – JOHNNY GREEN PRODUCTIONS LIMITED
Appointment of Liquidators – BALEPHUIL BAY LIMITED
Appointment of Liquidators – STACKABILITY LIMITED
Appointment of Liquidators – DFPL CONSULTING LTD
Petitions to wind up (Companies) – GOLDEN HOMES PROPERTY GROUP LTD
Appointment of Liquidators – CLINCAM RESEARCH LTD
Appointment of Liquidators – CATALYST BUSINESS CONSULTING LIMITED
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Get compensated for previous late payments
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.