Business news 28 December 2023
James Salmon, Operations Director.
Insolvencies – Almost 30k firms will fail in 2024. Economy set to ‘turn a page’ in 2024. UK economy set to extend its lead over France. Brits plan to save more and spend less. And more business news that we thought would interest our members.
Insolvencies – Almost 30k firms will fail in 2024
Almost 30,000 businesses will fail next year, economists at PwC have warned, saying firms will be hit by high interest rates. Company insolvencies are predicted to climb by 15% over the next 12 months, with small businesses the most likely to go under. While PwC forecasts that 2024 will see nearly 30,000 insolvencies, it also estimates that 26,000 companies will have been declared insolvent by the end of 2023. Barret Kupelian, PwC’s chief economist, said a combination of high interest rates, low economic growth and high energy prices will make a number of businesses unviable. Caroline Sumner, chief executive of insolvency and restructuring trade body R3, commented: “What we appear to be looking at is sustained volatility for the foreseeable future, where it’s likely that insolvencies will remain relatively high.”
Economy set to ‘turn a page’ in 2024
A new report from PwC predicts that falling inflation and increased consumer confidence will see the economy “turn a page” next year. PwC expects Britain to be the fourth best-performing economy in the G7 in 2024, outdoing France, Germany and Japan but trailing the US, Canada and Italy. The report suggests that the economy will be 2.7% larger than pre-pandemic levels recorded in 2019. Barret Kupelian, PwC’s chief economist, said the “outlook is far rosier for 2024 than expected 12 months ago. Following the post-pandemic challenges, 2024 will be the year the UK turns a page. Inflation returning closer to normal levels, progress on regional growth and real incomes improving provide optimism for the year ahead.” However, he warned: “There remain many ‘known unknowns’ in 2024 that can change the trajectory of the UK, such as volatility in global energy prices due to the continued Middle Eastern conflict and the forthcoming general election.”
UK economy set to extend its lead over France
Britain’s economy is set to extend its lead over France in the coming years, according to analysis by the Centre for Economics and Business Research. The review forecasts that UK output will be 10.2% higher than that of France this year. While the countries were at the same level 15 years ago, Britain’s lead is forecast to increase to 19.9% by 2038. Germany is poised to remain Europe’s economy but its lead over the UK is set to narrow from 32.5% this year to 28.8% in 2038.
Brits plan to save more and spend less
A poll for wealth manager Hargreaves Lansdown shows that a third of Britons are planning to make a New Year’s resolution to tackle their finances in 2024, with boosting their savings at the top of the list. Around a quarter of those making a financial resolution plan to spend less, while 16% plan to pay off at least some of their debts. Other money-based resolutions include shopping around more to get better deals, starting to invest and paying more into a pension. While 29% of women are planning to spend less, the rate among men is 20% – and 37% of women want to save more compared with 28% of men. Men, however, are twice as likely to invest for the first time – at 18% compared with 9% of women. Sarah Coles, head of personal finance at Hargreaves Lansdown, says that while “rampant inflation and rising interest rates have put finances under more pressure than ever,” the fact that a third of people are making a financial New Year’s resolution “indicates that for many there is an opportunity to be more optimistic for the year ahead.”
More over-55s raid their pensions
More than a quarter of a million workers in the 55-64 age bracket have a taken a lump sum from their pension pots this year, according to data science company Outra. The study found a 44% increase in the number of people raiding their pension funds, with the total hitting 287,000. Around £2bn will have been taken from pension pots by the end of the year, the report shows. Peter Jackson, chief data and technology officer at Outra – and former head of data at The Pensions Regulator, said the increase suggests that more people were using their retirement pots to cover rising living costs or to cover one-off costs. He said: “This can seem like an attractive option for those struggling to make ends meet,” but warned: “However, the obvious impact will be less money left in their pension pot to cover retirement.”
Budget to be held on March 6
Chancellor Jeremy Hunt will deliver the spring Budget on March 6, the Treasury has said. Reports suggest that the Budget could see the Government cut taxes ahead of the general election, with sources saying that ministers are considering abolishing inheritance tax. Mr Hunt began to ease the historically high tax burden in his Autumn Statement, with measures including a reduction to the rate of National Insurance. The Chancellor has commissioned the Office for Budget Responsibility to prepare an economic and fiscal forecast to go alongside March’s Budget.
Boxing Day footfall climbs
Data from retail analysts MRI Software shows that footfall on UK high streets was up 8.8% year-on-year on Boxing Day. With data covering retail parks and shopping centres taken into account, footfall was up 4%. Compared with pre-pandemic 2019, Boxing Day footfall remained 14.9% lower. MRI Software’s Jenni Matthews said: “Many people may be tightening their purse strings given the cost-of-living status, or may still be spending time with their families on Boxing Day and not be heading out to stores.” Looking ahead, the British Independent Retailers Association has warned that 2024 is likely to be challenging for shopkeepers.
Boxing Day spending forecast to fall
Research for website VoucherCodes suggests that consumers will spend £3.7bn on Boxing Day, marking a 2.9% fall compared to last year. The analysis also says £13.5bn is expected to be spent between Christmas Day and New Year’s Eve, with this down 3.8% compared to the closing week of 2022. Meanwhile, separate data from Mastercard suggests that spending between November 1 and Christmas Eve was up 2.6% from a year earlier. Separately, analysts at Barclays suggest that the average person will spend £253 in the sales, up from £229 last year and £162 in 2020. Noting that retailers still have “a lot more stock on their hands,” Kien Tan, a senior retail adviser at PwC, comments: “The good news for you and me is there’ll be bigger discounts post-Christmas.” Retail expert Lisa Hooker, also of PwC, said retailers will offer “deep discounts” to shift the unsold stock.
Record number of women starting businesses
A record number of women in the UK are starting their own businesses, with more than 150,000 female-led firms launched in 2022. All female-led companies now represent more than 20.5% of all UK businesses, up from 16.7% in 2018. The Guardian says many women have launched businesses as doing so offered freedoms they felt were not available to them in traditional workplaces. A Fawcett Society report from this year shows that women in the UK aged 40 and older will not see the gender pay gap closed until after they reach state pension age, while separate analysis shows that women hold only one in five commercial roles on the boards of Britain’s 350 largest listed companies. Entrepreneur Ameena Hamid says the statistics “exemplify the outdated attitudes and glass ceilings that exist in mainstream workplaces,” adding that many women “don’t want to wait for their workplace to catch up with modern attitudes.” Katrina Sale, head of the Female Founders Forum, believes that efforts to encourage women to start their own ventures should target younger people, saying: “Still too many girls grow up thinking that entrepreneurship isn’t something for them.” It is noted that the Treasury estimates 1.1m new businesses, and up to £250bn of new value, could be added to the British economy if women started and scaled new ventures at the same rate as men do.
Value of UK deals falls by a third
Data from the London Stock Exchange Group shows that the total value of UK deals dropped by a third to $265.4m in 2023, with this the lowest level since 2009. The total number of deals involving British companies slipped by 19% to 5,508. The drop-off in deals in the City has been driven by rising interest rates, with private equity firms finding it harder to justify large, debt-fuelled deals as the cost of borrowing rises. Buyers have been carrying out more detailed due diligence due to the uncertain economic environment. Meanwhile, sellers have been reluctant to offload assets at knockdown prices.
Office values have further to fall
While high interest rates have prompted a slide in the value of Britain’s offices, Fraser Greenshields, a partner at EY’s corporate finance division, predicts that prices have further to fall. Noting that debt has been cheap “for a pretty long time,” he said: “We’ve had over ten years of cheap money, including the last two. And interest rates rising the way they did was a shock to everyone.” The value of commercial property – a bracket covering offices, shops and factories – has fallen by 3.7% over the last year but there has been a much sharper downturn for offices, where average values have declined by nearly 20%. While interest rates are forecast to fall to 4% by the end of the year, easing downward pressure on prices, experts say new net zero rules intended to boost the eco-credentials of office blocks will have an impact, as will the continued trend of working from home.
Property prices predicted to fall
BBC News looks at what 2024 may hold for the housing market. While the Office for Budget Responsibility, the Government’s official forecaster, recently said it expects house prices to drop by 4.7% in 2024, Halifax has forecast a fall of between 2% and 4% and Nationwide has predicted that prices will remain unchanged or fall by up to 2%. Meanwhile, UK Finance, which represents banks and other lenders, expects mortgage lending to fall in the year ahead, saying that lending for house purchases will decline by 8% in 2024.
VAT checks on businesses and wealthy stepped up
HMRC has increased its scrutiny of VAT avoidance, opening 23% more cases in 2022/23 compared to the previous year. The tax office opened 109,413 VAT cases in the 12 months to March 31.
Increased VAT investigations bring in £11.4bn
Increased tax compliance measures have yielded £11.4bn in unpaid tax, with HMRC increasing the number of investigations into wealthy individuals and mid-size businesses. The tax office opened 23% more inquiries into unpaid VAT, with 109,400 in the last financial year compared to 88,700 the year before. Cases opened into individuals and small businesses were up 22%, while cases into large businesses rose 17%. The biggest increase from VAT compliance investigations came from the large businesses section, with an additional £5bn pulled in. The gap between what HMRC estimates it is owed in VAT and what it collected stood at £8.8bn in the 2022/23 tax year, up from £7.6bn in 2021/22.
Over 4,000 tax returns submitted on Christmas Day
HMRC data shows that 4,757 people submitted a self-assessment tax return on Christmas Day. With the January 31 deadline on the horizon, the tax office also saw 8,876 returns submitted on Christmas Eve and 12,136 on Boxing Day. The peak time was between noon and 12.59pm on Boxing Day, when 1,121 returns were logged. Myrtle Lloyd, HMRC’s director general for customer services, said: “Our Christmas Day filers proved that there is no time like the present to get started on self-assessment.”
Friday before Christmas the busiest day for ATM withdrawals
The Friday before Christmas Day was the busiest day of 2023 for cash machine withdrawals, according to cash access and ATM network Link. Around £460m was withdrawn on December 22, with the average withdrawal just under £105. December 22 was the highest total recorded by Link since February 28, 2020, when £471m was withdrawn.
Users should not share private information with chatbots
Michael Wooldridge, a professor of computer science at Oxford University, has warned users of chatbots and ChatGPT they should avoid sharing their private information with the technology, suggesting that doing so was “extremely unwise.” Prof Wooldridge said users should assume that any information typed into ChatGPT or similar technology is “just going to be fed directly into future versions.”
Apple
Apple will resume selling its latest smartwatches in the US after an appeals court temporarily paused a ban on the import and sale of the devices. Apple was accused of infringing the copyright of Masimo, a medical-technology company.
AI & Copyright
The New York Times is suing Microsoft and OpenAI, the company behind ChatGPT, for copyright infringement. They claim that millions of the publication’s articles were used unlawfully to train chatbots, amounting to “billions of dollars in statutory and actual damages”.
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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.
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!
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Check our compensation calculator to see how much your business could be owed!
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.