Business news 28 June 2024
GDP, Public debt, Foreign investment, Car industry support, Markets, the BOE financial stability report, mortgages, tax, insolvencies & more business news that we thought would interest our members.
James Salmon, Operations Director.
GDP
The UK Economy grew by more than initially estimated in the first three months of 2024 as the UK emerged from recession, revised official figures show. Between January and March, the economy grew by 0.7% the Office for National Statistics said. Figures released last month initially estimated growth had been 0.6%.
Growth in the services sector, helped to push it higher, the ONS said. But while services growth was revised upwards, increases in manufacturing were revised down.
The ONS said there was increased spending on recreation and culture, as well as housing and food, but added household disposable incomes had continued to rise in early 2024 as workers secured wage increases.
However, interest rates are currently at their highest for 16 years at 5.25%, so although savers are benefiting, households with mortgages and businesses with debt will continue to be under pressure.
Public debt limits government’s ability to invest
The chief executive of Lloyds Banking Group, Charlie Nunn, has warned that the next government will not be able to fuel growth by increasing borrowing. Warning that the UK’s national debt had been forced higher due to “massive shocks” – such as the financial crisis and the pandemic – he said this would limit the next government’s ability to invest. Mr Nunn told Sky News: “We have increased the government debt ratio for the UK. And … we should just accept the government can’t pay its way out of this next stage.” Saying ministers need to find a way of getting private money, international and domestic, “that is excited about investing in the UK to invest alongside government,” he expressed a belief that “we can create that positive momentum for investment in jobs and business growth.”
Foreign investment projects down 6%
Figures from the Department of Business and Trade show that there were 1,555 overseas investment projects in the UK in 2024, with this marking a 6% fall on the 1,654 recorded the year before. Of the 1,555 projects, 944 were funded by existing investors in the UK while 611 were by new investors. Software and computer services received the most overseas investment, with 263 foreign direct investment (FDI) projects in the sector, while financial services came in second, with 199 projects. On a regional basis, London led the way with 503 FDI projects. The South East and the West Midlands each saw 133 projects, while Scotland recorded 125.
Car industry calls for tax cuts
Carmakers have called for support for the industry, with the Society of Motor Manufacturers and Traders urging the next government to provide tax cuts and regulatory changes to boost consumer adoption of electric cars. The lobby group warns that “maintaining the status quo is not an option” and argues that the UK risks being “outcompeted” by the US, China, and the EU in competition for investment in electric vehicles, factories, and supply chains.
Markets
Yesterday, markets were fairly mixed as investors reacted to the revised US GDP figures (1.4% Q1) and the latest political moves as the election edges closer. The FTSE 100 closed down 0.56% yesterday at 8179.68 and the Euro Stoxx 50 closed down 0.27% at 4902.60. Overnight in the US the S&P 500 rose 0.09% to 5482.87, the Nasdaq rose 0.3% to 17858.68.
This morning the pound is currently worth $1.264 and €1.181. Brent is at $87, Gold is at $23330. The FTSE 100 is up 0.39% at 8212 and the Eurostoxx 50 is up 0.1% at 4907.
BOE latest financial stability report
The Bank of England has issued its latest financial stability report, where it says risks to the UK financial system are “broadly unchanged” since the first quarter. But it noted that some asset prices have continued to rise, while there remains a risk of a sharp correction in markets.
Mortgage costs to rise for 3m
Around 3m households are set to see their mortgage payments rise in the next two years, according to the Bank of England’s latest Financial Stability Report, with around 400,000 mortgage holders facing some “very large” payment increases. The Bank found that around a third of mortgage holders in the UK are still paying rates of less than 3%, having agreed deals before base rates started to climb in December 2021, but the majority of fixed rate deals will finish before end of 2026. While the typical household is forecast to see a 28% increase in monthly mortgage repayments, around 400,000 households could see monthly payments jump by 50% or more.
Lloyds: Mortgage rates of 4.5% ‘the new normal’
Charlie Nunn, the chief executive of Lloyds Banking Group, expects mortgage rates to see a “new normal” of up to 4.5%. He said that while rates have been between 1.5% and 2.5% for a decade, markets do not expect the rate to fall below 3.5%. Pointing to market expectations that interest rates “probably won’t get below 3.5%,” he said this means “mortgages, or the new normal for mortgages, will be in that 3.5%-4.5% range, not 1.5%-2.5%.
Threshold freeze creates 4.4m more taxpayers
The number of people paying income tax has increased by 4.4m in three years due to the freeze on thresholds, according to HMRC data. The figures also show that the decision to freeze the personal threshold at £12,570 has pulled an additional 1.77m pensioners into the income tax bracket. There are currently an estimated 37.4m income tax payers, including 8.5m who are over state pension age. Sarah Coles, head of personal finance at investment firm Hargreaves Lansdown, said: “The agonising pain inflicted by fiscal drag and cuts to dividend allowances has been laid bare, with millions more people paying tax, and billions of pounds more being raked in.” Rachael Griffin, tax and financial planning expert at wealth management firm Quilter, said the statistics from HMRC reveal the “continued impact of the Conservative government’s stealth tax agenda.” Nimesh Shah of Blick Rothenberg commented: “The more recent freezing of allowances and tax thresholds has had an exponential effect – the impact is only going to get worse as three million people will be pulled into the higher and additional rates of income tax over the next five years as wages rise.”
BP
BP has halted new offshore wind projects as its new Chief Executive Officer Murray Auchincloss for now puts a focus on oil and gas and not energy transition measures, Reuters reported on Thursday. Reuters citing, sources at the company, said the measures are part of an effort by Auchincloss to trim down investments in expensive low-carbon projects. Reuters reported BP has imposed a largely company-wide hiring freeze, with the exception of frontline and safety workers.
Swift could sway Bank’s rate decision
Analysts from investment bank TD Securities say the boost Taylor Swift’s latest tour is giving the economy could see the Bank of England delay cutting interest rates until September. London alone is set to see a £300m boost from the pop star’s dates in the capital and Barclays has calculated that the tour will provide a £997m boost to the UK economy. While they say this could have an impact of the Bank’s thinking, TD Securities’ Lucas Krishan and James Rossiter still anticipate a rate cut in August. The Bank last week opted to keep interest rates unchanged at a 16-year high of 5.25% for the seventh consecutive meeting.
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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.
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.
Unlike other credit management companies, we offer our members a fixed annual subscription regardless of how high the debt value maybe!
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.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
Do you have a commercial late payer that is causing you grief? Use CPA’s no-win, no-fee, commercial debt recovery service!
If you have a particular business customer who is late paying and causing you sleepless nights, why not offer it to CPA for purchase on recourse?
CPA’s collection department will then pursue the debt. We will be liable for any costs incurred and then when we have recovered the debt, we will pay you the net principle debt recovered less our percentage.
Once you have enjoyed that success then you can consider the more cost effective membership which includes our Overdue Account Recovery service and Status/Credit reports as well as a range of other complimentary services.
Just call 020 8846 0000 and ask for Godfrey Nelson or Cris Shirley (business hours) or email debtpurchase@cpa.co.uk today.
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?
Maybe you no longer work with them. Under legislation, you are entitled to compensation you for those late payments you have suffered.
You put up with the PAIN – now claim the GAIN!
Claim late payment compensation (LPC) from former business customers who paid you late in the last six years!
CPA (LPC) Recoveries is using our bespoke software and decades of experience to do just that for our clients
Check our compensation calculator to see how much your business could be owed!
Discover NOW the potential value of late payment compensation hidden in your sales ledger!
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.