Business news 25 October 2023

James Salmon, Operations Director.

Unemployment climbs to 4.2%. Flash PMI shows decline in business activity. WFH declines as energy costs climb.  And more business news that we thought would interest our members.

Unemployment climbs to 4.2%

Office for National Statistics (ONS) figures show that the unemployment rate between June and August was 4.2%. This was up from 4% in the March-to-May quarter, but unchanged from last month’s data. The ONS said the new data was “experimental”, with Darren Morgan, its director of economic statistics, saying the ONS has “produced a new metric, produced by adjusting our headline survey estimates using robust administrative data sources, adding that this “maintains the accuracy of our key statistics.”

Jake Finney, an economist at PwC, said: “The UK labour market remains tight but is cooling, with unemployment rising, vacancies declining, and pay growth slowing.” On the impact the latest figures will have on interest rates, Ashley Webb, UK economist at Capital Economics, said the Bank of England “will probably continue to believe that interest rates are gradually doing their job,” meaning it is unlikely to raise interest rates again.

Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, said the figures “added to the evidence” that rates would be held, while Thomas Pugh of RSM UK said rate setters would probably “wait to see wage growth and inflation return to more normal levels, rather than resuming rate hikes.”

Separately, UK Manufacturers cut employee numbers for the first time in nearly three years as output contracted in the quarter to October, according to the business trade body’s latest industrial trends survey.

Flash PMI shows decline in business activity

British businesses have reported another decline in activity, with experts flagging the risk of a possible recession.

S&P Global’s ‘flash’ PMI for the UK economy in October came in at 48.6 on an index where a figure above 50 indicates growth. This was a slight improvement on September’s reading of 48.5 but marks the third straight month of contraction. The services sector fell to a nine month low of 49.2, while manufacturing picked up to a three month high of 45.2.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said: “The UK economy continued to skirt with recession in October, as the increased cost of living, higher interest rates and falling exports were widely blamed on a third month of falling output.”

Ruth Gregory, deputy chief UK economist at Capital Economics, said the “trajectory supports our view that GDP contracted in both Q3 and Q4 and that a mild recession is perhaps already underway.” Rhys Herbert, senior economist at Lloyds Bank, said the figures show that both services and manufacturing businesses “are still being impacted by high costs and a tight labour market.”

WFH declines as energy costs climb

Analysis shows that 56% of UK workers are more inclined to work in the office and are now commuting four days a week or more because of soaring energy prices. The Virgin Media O2 Business Movers Index saw 21% of respondents say that free heating had encouraged them to go back to the office full-time, with this rising to 24% for workers over 65.

Jo Bertram, managing director of Virgin Media O2 Business, said: “Our data shows increasing numbers of UK workers heading into the office — with free heating and the promise of stronger working relationships deemed more valuable as businesses continue to shape a balanced hybrid future of work.”

Small firms face justice gap due to ombudsman decision

Small companies have been left with “nowhere to turn for justice” during banking disputes following a decision not to extend the reach of the Financial Ombudsman Service, according to an employers’ group. The Financial Conduct Authority (FCA) has decided that it would not be proportionate to provide access to the ombudsman’s dispute resolution services to companies that do not meet the existing thresholds. The FCA had widened access in 2019 to include small businesses with annual turnover of less than £6.5m and either fewer than 50 employees or a balance sheet smaller than £5m.

The Federation of Small Businesses (FSB) has called on the Government to legislate for a banking tribunal service to be funded by a levy on the banking sector, to address the lack of success of the Business Banking Resolution Service and the inability of most companies to afford action in the civil courts. “This has left a justice gap, causing much disquiet among the small business community,” said FSB chairwoman Tina McKenzie.

HMRC warns of rise in tax scams

HMRC has warned people filling in self-assessment tax forms about the increasing prevalence of fake tax scams through fraudulent texts, emails, and phone calls. In the 12 months leading up to September, HMRC received over 130,000 reports of tax scams, with 58,000 of them involving fake tax rebates. With around 12m people expected to file a self-assessment tax return for the 2022/23 tax year, fraudsters are targeting them by impersonating HMRC.

Treasury Minister refuses to rule out tax rises

A Treasury minister has refused to rule out tax rises in the Autumn Statement. Victoria Atkins, Financial Secretary to the Treasury, was asked twice whether Jeremy Hunt could increase the tax burden, given that the Chancellor has already effectively ruled out tax cuts. Asked if the nation could be confident that Mr Hunt is not going to increase the tax burden, Ms Atkins told Times Radio: “I should just start by saying actually we have the lowest tax burden of any major European economy and I know that nobody likes paying taxes, I absolutely understand that. But I think we all understand that the social contract is that we pay our taxes so that we can contribute towards our society and to pay for the services we all care so very deeply about.” Asked again if she could say whether the tax burden could rise, Ms Atkins said: “I absolutely understand why people are calling for lower taxes but it is important to explain why we have had to, for example, increase taxes on the most profitable largest businesses in the UK to try and help pay off some of that debt that we have on our government books at the moment.” She went on to highlight the Prime Minister’s “three-pronged approach” saying that by halving inflation, growing the economy and reducing debt, “we are going to ensure that in the longer term we as Conservatives are able to offer tax cuts to the country.”

Lloyds profits triple

Lloyds Banking has backed its outlook for 2023, including UK margin guidance, as it reported better-than-expected profits and a fall in bad debts. The high street lender reported said pre-tax profit in the third quarter more than tripled to £1.89 billion up from £576 million last year, and ahead of the £1.77 billion consensus. Net income edged up 1% at £4.51 billion from £4.48 billion with net interest income up 1% to £3.44 billion from £3.39 billion.

Banker bonuses

The UK will confirm that it is scrapping caps on banker bonuses as part of its post-Brexit bid to boost the City of London, the Financial Times reported, citing people familiar with the situation. The move follows a consultation earlier this year on plans to abolish a 2014 regime inherited from the EU that limits bonuses to twice base pay for employees of banks, building societies and investment firms.


Microsoft said revenue grew almost 13% year over year in the quarter from $50.12 billion in the year-ago quarter, according to a statement. Net income, at $22.29 billion, increased 27% from $17.56 billion, or $2.35 per share, in the same quarter a year ago. Microsoft’s Intelligent Cloud segment produced $24.26 billion in revenue, up 19% and above the $23.49 billion consensus.


Alphabet reported 11% revenue growth in the third quarter, as a rebound in advertising pushed expansion into double digits for the first time in over a year. The shares dropped almost 7% in extended trading as the cloud business missed analysts’ estimates.

Overnight, the DOW rose 0.62%, the S&P 500 rose 0.73% and the NASDAQ rose 0.93%

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