Business news 28 May 2024
Retail sales slump in April. Shop price inflation back to ‘normal’ levels. Energy bills to fall under new price cap. Election talk, markets, insolvencies & more business news that we thought would interest our members.
James Salmon, Operations Director.
Retail sales slump in April
Office for National Statistics (ONS) data shows that retail sales fell by 2.3% in April compared with a month earlier. Analysts had expected a decline of about 0.5%. Revised figures for March show there was a 0.2% dip compared to February, with the previous calculation having pointed to flat sales. The ONS figures show that sales were up 0.7% in the three months to April when compared to the three months to January. Oliver Vernon-Harcourt, head of retail at Deloitte, said: “April’s retail sales were more disappointing than expected,” adding that although consumer confidence continues to rise, “many remain apprehensive and are not yet loosening their purse strings.” Peter Arnold, EY’s chief economist, said that it was “clear that the retail sector is still struggling to generate much momentum.”
Shop price inflation back to ‘normal’ levels
Shop price inflation has fallen to the lowest level since November 2021, according to analysis by the British Retail Consortium (BRC) and NielsenIQ. Price increases fell to 0.6% year-on-year in May, down from 0.8% in April. This is well below the peak of 9% recorded in May 2023. Over the past month, shop prices have risen by 0.2%, compared with a 0.3% contraction in April. Mike Watkins, head of retailer and business insight at NielsenIQ, said: “After a number of months of falling input prices, we are now seeing food inflation stabilise and retailers continue to pass on price cuts to shoppers.” BRC chief executive Helen Dickinson added: “Shop price inflation has returned to normal levels.”
Energy bills to fall under new price cap
Regulator Ofgem has announced a new price cap which will see a typical household’s energy bill fall by £122 a year from July. A household using a typical amount of gas and electricity will pay £1,568 a year, with this down from the current typical bill of £1,690 and the lowest rate for two years. Simon Virley, head of energy and natural resources at KPMG, said the cut “will be welcomed by households who have been facing a cost-of-living crisis and struggling to pay their energy bills over the past few years,” adding: “But we should remember that the price cap was only ever supposed to be a temporary measure, while the retail energy market was reformed.”
What business wants after the election
The Sunday Times considered what businesses will want to see from the next government, with PwC’s Kevin Ellis saying: “Business is desperate for confidence, stability, investment.” Tech entrepreneur Brent Hoberman, chairman of Founders Forum, says Rishi Sunak’s government “has engaged with business and put some policies out there” but “haven’t had the runway to be as bold as business would have liked.” Matthew Beesley, chief executive of fund manager Jupiter, believes the election offers the opportunity to “create a fresh slate and have a government with a mandate which shows in their policies they are pro-business and keen to attract capital.” Dame Amanda Blanc, chief executive of insurer Aviva, says there is a need for political consistency and stability to drive investment in the UK, while Charlie Nunn, chief executive of Lloyds, sees the election as an “invaluable opportunity to re-focus and re-energise” the economy. Marks & Spencer chairman Archie Norman argues that a new government department could be created to focus on businesses and entrepreneurs, calling for a “ministry of micro-economics.”
Election rivals talk tax
With the Conservatives and Labour starting to campaign ahead of July’s election, tax has been on the agenda. Chancellor Jeremy Hunt has said he wants to cut National Insurance and described inheritance tax as “pernicious” and “profoundly anti-Conservative.” Mr Hunt also said “distortions in the tax system” on earnings between £50,000 and £125,000 “disincentivised people from doing what we need, which is to work, work harder.” The Tories, he added, would also seek to end the effective 60% rate on incomes between £100,000 and £125,000 as the tax-free personal allowance tapers off. Meanwhile Labour’s Rachel Reeves said she “wants taxes on working people to be lower” but would not make “promises about taxes I can’t keep.” The shadow Chancellor added: “I do not believe you can tax and spend your way to growth, and I didn’t come into politics to raise taxes on working people.” Ms Reeves also warned that the Conservatives have “put forward a number of uncosted, unfunded tax cuts.” Likening this to Liz Truss’ controversial mini-Budget, Ms Reeves suggested that the Tories “haven’t learned that lesson.”
IFS: Government may have to increase taxes or cut services
The Institute for Fiscal Studies (IFS) has warned that the next government may have to increase taxes or cut public services, warning that challenges around public finances hang over the election campaign “like a dark cloud.” The IFS says that without a surge in economic growth, the next government may have three choices: to squeeze spending on services; raise taxes; or increase annual borrowing, which could risk preventing total debt from falling. IFS director Paul Johnson said: “Money is tight. We could get miraculously lucky with growth and escape having to make these tough choices. But we might not.”
Reeves promises ‘most pro-growth Treasury in history’
Shadow Chancellor Rachel Reeves insists a Labour government will be both “pro-worker and pro-business,” vowing to lead “the most pro-growth Treasury in our country’s history.” In a speech later today, she will tell company bosses that Labour will “bring growth back to Britain,” saying: “If we can bring business back to Labour, we can bring growth back to Britain.” The former Bank of England economist is expected to say a Labour government will “build all its plans for the future on the bedrock of economic stability.” Laura Trott, chief secretary to the Treasury, hit back, warning that Labour would “tie businesses in red tape” and raise taxes.
Business leaders declare Labour support
In a letter to the Times, 121 business leaders have endorsed Labour’s economic plans ahead of the election. The founders, CEOs, and corporate leaders – including Charles Randell, the former chairman of the Financial Conduct Authority; JD Sports chairman Andrew Higginson; Wikipedia founder Jimmy Wales; and the former CEOs of Heathrow, JPMorgan and Aston Martin – say Labour has changed and “wants to work with business to achieve the UK’s full economic potential.” Warning that “for too long now, our economy has been beset by instability, stagnation, and a lack of long-term focus,” signatories urge voters to give Labour “the chance to change the country and lead Britain into the future.” The UK, they insist, has the potential “to be one of the strongest economies in the world” but argue it has been held back by a “lack of political stability and the absence of consistent economic strategy.”
Small firms hit out over business support contracts
Citation, a company that provides support services for small businesses, is facing backlash over its long-term contracts. Some customers claim they were pressured or misled into signing contracts of up to ten years, which automatically roll over into another contract of the same length. This leaves them locked into unwanted services and facing difficulties in terminating the contracts. Regulators have raised concerns about automatic contract rollovers. While long-term contracts and autorenewal clauses are not prohibited, experts recommend keeping initial contract durations short.
ECB poised to cut interest rates
While the Bank of England and US Federal Reserve are not expected to cut interest rates until later in the year, the European Central Bank (ECB) is set to reduce rates in early June. Analysts expect ECB policymakers to lower the benchmark deposit rate by 25 basis points from a record high of 4% at its next meeting. This comes with key officials saying it is time for the ECB to lower borrowing costs. Olli Rehn, an ECB governing council member and head of Finland’s central bank, said the time is “ripe” to “ease the monetary policy stance” as inflation in the eurozone is falling in a “sustained way.” Meanwhile, the ECB’s chief economist Philip Lane, suggested it is time to “remove the top level of restriction.” ECB president Christine Lagarde last week said there was a “strong likelihood” of a cut if data pointed to inflation remaining under control in the medium term.
Markets
On Friday London markets headed into the weekend mostly flat as softer-than-expected UK retail sales capped off a busy week of news-flow. The FTSE 100 closed down 0.22% at 8321.16 and the Euro Stoxx 50 closed flat, down just 0.03% at 5036.11. Over in the US the S&P 500 rose 0.7% to 5304.72, the Nasdaq rose 1.1% to 16920.79.
This morning the pound is currently worth $1.277 and €1.175. Brent is at $83.12, Gold is at $2345. The FTSE 100 is down 0.06% at 8312 and the Eurostoxx 50 is up 0.24% at 5071.
Brexit has stifled UK dealmaking, says Docusign CEO
Allan Thygesen, the chief executive of contract management company Docusign, says leaving the EU and British red tape has slowed dealmaking in the UK. He warned that Brexit and the resulting regulatory and compliance issues “just adds burden” to operating in the UK.
Ofwat
Ofwat on Friday said the publication of the consultation on its draft price control determinations for the water sector will be delayed until after the upcoming UK general election. The announcement had been expected on June 12 but will now be made on July 11, one week after the general election.
Nvidia
NVIDIA has reduced prices on some of its high-end AI chips in China by up to 20%, according to an exclusive report by Reuters. This move is seen as a strategic effort to remain competitive against Huawei, a major Chinese tech company.
Royal Mail reports £348m operating loss
The owner of Royal Mail, International Distributions Services, reported a £348m operating loss for the year to the end of March. The results were published a day later than expected as KPMG, the group’s auditor, asked for more time to sign off the accounts.
Reforms increase corporate criminal liability for fraud
Tom Stocker, Pinsent Masons’ head of global investigations and corporate crime, looks at how the Economic Crime and Corporate Transparency Act 2023 has overhauled rules around corporate criminal liability. Previously, companies could only be prosecuted for fraud if leaders such as the CEO or managing director were directly involved. Under the new regime, businesses face prosecution if any senior manager commits fraud. Nick Ephgrave, director of the Serious Fraud Office, says the Act is “the most significant boost to the SFO’s ability to investigate and prosecute serious economic crime in over ten years.”
Think-tank calls for £395bn wealth fund
The Sovereign Wealth Fund Institute (SWFI) think-tank has suggested that political parties should commit to setting up a sovereign wealth fund in their election manifestos. SWFI chair Lakshmi Narayanan says it is “high time” for the UK to announce a sovereign wealth fund, saying the country could “easily” have a £395bn fund within three to five years. He added that a fund could unlock between 8% and 10% of wealth in capital markets to create £40bn of liquidity.
Workplace equality ‘going backwards’
Women are less likely to be top earners in the City since the pandemic, with men more than four times as likely as women to have very high incomes, according to research by the London School of Economics and Political Science. Data shows that the gender pay gap in the UK grew from 14.3% to 14.5% in 2022, exceeding the global average of 13.5%. It was also shown that among the top 1% of earners, just 19.4% are women. Before the pandemic, the rate was 19.7%. The UN warned during the pandemic that Covid-19 would set gender equality back by decades, with women more likely to be in lower paid work, head single parent households, and take on unpaid domestic work. Meanwhile, analysis from PwC has highlighted a “motherhood penalty” and a failure to support women going through menopause as factors contributing to the setback in gender equality.
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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 last one was particularly deadly for suppliers fand we are still seeing elevated insolvencies as businesses struggle.
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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.
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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
Have you been paid late by business customers in the last six years?
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Claim late payment compensation (LPC) from former business customers who paid you late in the last six years!
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collection