Business news 29 January 2024
Soaring costs drive high street closures. Construction hardest hit by bankruptcies. But the economy on path to recovery, says think-tank & more business news that we thought would interest our members.
James Salmon, Operations Director.
Soaring costs drive high street closures
Britain’s small businesses are being hit by soaring costs, with hospitality and retail businesses among the hardest hit. Data shows that almost 5,000 shops, pubs and restaurants on UK high streets shut down last year. A net total of 4,415 retail businesses and 555 accommodation and food firms disappeared in the first nine months of 2023. Tina McKenzie, policy and advocacy chair at the Federation of Small Businesses (FSB), said these sectors “repeatedly report an increasingly gloomy outlook.” She added that the FSB’s Small Business Index survey for Q4 2023 showed that hospitality had the lowest confidence levels “by far,” with a reading of -73.0 points. This was down from -31.1 points in Q3. The report also saw confidence among retail firms fall from -22.8 points in Q3 to -29.8 points in Q4. Suggestions to support small businesses include extending business rates relief, lifting the VAT threshold, and increasing the employment allowance.
Construction hardest hit by bankruptcies
A dozen construction firms are going bust every day!
The construction sector has seen the highest number of bankruptcies of any industry in the UK for the past three years, according to Mazars, with 4,370 going bust over the past year. This compares to 4,086 in 2021/22 and 2,481 in 2020/21. Mark Boughey, a partner at Mazars, said: “This is an immensely difficult period for the construction sector.”
Economy on path to recovery, says think-tank
The Centre for Economics and Business Research (CEBR) predicts that the UK economy likely experienced a mild recession in the second half of last year. However, the think-tank believes that the country is now on the path to recovery, thanks to higher disposable household income and increased spending. The Office for National Statistics recently revised down its estimates for third-quarter GDP, indicating a 0.1% contraction, the first decline in 12 months. Sam Miley, lead forecaster at the CEBR, said that while recent data paints “a pessimistic picture,” the figures “do bring the mild silver lining that the worst may well have passed.”
BoE set to upgrade growth forecast
The Bank of England’s quarterly update on the economy, due on Thursday, is expected to upgrade the Bank’s growth outlook for this year from zero to about 0.5%. The Monetary Policy Report will also downgrade expectations for inflation from 3.1% to about 2.5%. Hamish McRae in the Mail says the predicted decline in inflation will not be enough to prompt a cut in interest rates. He predicts that inflation could, however, slip below 2% in April. This, he adds, would be “the trigger” for the Bank’s rate-setting Monetary Policy Committee to start cutting rates in May.
Confidence climbs but remains low
Analysis by the ICAEW shows that business confidence remains below pre-pandemic levels, although the 4.2 score on the index in Q4 marks an improvement on a reading of 2.9 in the third quarter. The sentiment tracker found customer demand to be the biggest challenge, with 35% of businesses citing it as a growing concern.
Small exporters struggle to rebuild trade
SMEs are facing challenges in rebuilding their export trade after Brexit and the pandemic, with overseas sales failing to match their domestic performance. A British Chambers of Commerce (BCC) trade survey found that while a third of SMEs saw an increase in UK trade in the final quarter of 2022, only one in four saw an improvement in export performance. The proportion of businesses reporting decreased overseas sales has remained higher since the run-up to Brexit. William Bain, head of trade policy at the BCC, said: “The reality is if we want to remain one of the world’s largest economies, then we need to get more firms selling goods and services internationally. This is not easily done in the aftermath of a pandemic, supply chain disruption, Brexit, increased non-tariff trade barriers and further global headwinds.” Separate research by Bibby Financial Services found that small exporters cited the impact of Brexit as the second biggest factor hampering their growth, behind inflation.
Small business owners prioritise savings over pensions
Small business owners are saving money in bank accounts at the expense of their retirement pot, according to a survey by Workwell and the Association of Independent Professionals and the Self-Employed. The poll shows that 51% put money into their pension each month, while three in four save regularly into cash accounts. While they might not have large pension pots, nearly half of the self-employed people surveyed were debt-free and had cleared any mortgages, credit cards or loans. Around a third owed less than £100,000 in total. Among those who do invest in pensions, the average monthly contribution is around £218. While £215 a month goes into cash accounts, £237 goes toward Isas and £184 a month is placed into other investment products.
Two in 10 unsure over how to invest
A poll of 2,000 adults for saving and investing app Moneybox shows that 31% want to build up savings in 2024, while 12% say they would like to start investing. The research shows that over the last 12 months, just 26% opted to invest rather than putting money into a regular savings account or a cash ISA. While 36% said they could not afford to invest, 26% feared losing their money and 22% said they opted to save instead due to interest rates available. It was also shown that 19% of those polled do not feel confident when it comes to knowing how to invest. Of those who did invest in 2023, half did so to build wealth for the future. Four in 10 said they felt more confident investing last year than ever before.
FSB platform to tackle funding concerns
Research from the Federation of Small Businesses (FSB) shows that SMEs have been hit by a slump in successful credit applications. While 53% of applications were approved in the final quarter of 2023, this is down from 62% in Q3. Of those successful, a third were offered an interest rate over 11%, which is nearly 2% higher than previously. In response to the decline in approvals, the FSB has launched its Funding Platform to give SMEs easier access to over lenders. Paul Surtees, chief executive of Capitalise – which is providing the platform, said it will be a “game changer” for SMEs looking for finance. Caroline Lavelle, the FSB’s chief commercial officer, noted: “It’s clear that access to affordable finance has become harder recently,” adding that the platform will provide a “comprehensive solution.”
Adecco chief warns of ‘soft-skills crisis’ caused by home working
Christophe Catoir, global president of staffing business Adecco, has claimed the world is facing a “soft-skills crisis” as home working leaves millions of workers struggling to interact with colleagues. Mr Catoir said: “Social skills are more important than ever. Empathy, the ability to create a warm relationship, trust, creativity, those things will be more leveraged by companies than ever before.” Noting the negative impact the pandemic has had on “the human skills of people,” he added: “For young people joining a company, you need to have mentorship. And if you don’t have this appetite for people and you don’t create the ability to learn from each other, you can really damage the potential of a candidate.”
1 in 4 staff subject to non-compete clauses
More than a quarter of employees in the UK are subject to non-compete clauses that make it harder to switch jobs, according to a report from the Competition and Markets Authority’s (CMA) microeconomics research unit. The competition regulator found that around 26% of employees thought they had a non-compete clause in their contract, while another 23% were unsure if they did. The report notes that the clauses are becoming prevalent even in sectors where there is no apparent need to protect intellectual property, such as retail and education. “Non-competes are typically justified on the basis of enabling investment in workers through training or sharing confidential information, that employers may be less willing to do if employees might take these skills straight to a competitor,” the CMA said. “On this basis we might expect to see non-competes only in particular industries or groups of workers where this sort of investment is happening. However, we have found that they are prevalent across the economy in all industries and across the whole income distribution. This includes some of the lowest-paid workers, who might be less likely to receive this sort of training or investment.”
Disposable income hits two year high
The level of disposable income across UK households has hit a two year high due to wage growth and easing inflation, with Asda’s Income Tracker showing that the weekly average was £224 in Q4 2023. While this is the biggest amount since the start of 2022, it is 9% down on the peak of £246 recorded in the first quarter of 2021. The report, which was compiled by the Centre for Economics and Business Research, shows that the average household in London saw its disposable income rise by 10.1% to £301 per week in the final three months of last year. The North East of England saw the strongest growth at 11.3% but the region has the second lowest value at £146 per week.
Bank set to leave interest rates unchanged
The Bank of England is expected to keep interest rates on hold for the fourth consecutive meeting when rate-setters vote this week. City analysts predict that the Bank’s Monetary Policy Committee (MPC) will vote 8-1 in favour of leaving borrowing costs at a 15-year high of 5.25%. Analysts at Pantheon Macroeconomics said: “The MPC will slash its near-term forecasts for inflation and will alter its guidance to suggest that it is more likely to reduce bank rate than increase it further this year.” Analysts at investment bank BNP Paribas, meanwhile, said: “Policymakers have a difficult needle to thread as, in our view, the MPC will want to change tack and deliver a more dovish tone but stop short of signalling rate cuts or endorsing current market pricing.”
Union to challenge minimum service law
The Public and Commercial Services (PCS) union is planning to launch a judicial review against a new law designed to stop strike action. The new law allows employers to order staff to come into work during strike action to ensure minimum service levels are met. The PCS argues that this contravenes the right to strike enshrined in the European Convention on Human Rights. PCS general secretary Mark Serwotka said: “It is a fundamental human right of any worker to withdraw their labour to protect their terms and one we shall defend on behalf of our members in the Border Force.” TUC general secretary Paul Nowak said the TUC – “and the whole union movement” – will support PCS “every step of the way with this legal challenge.” Neil Todd of Thompsons Solicitors, the law firm representing the PCS, said minimum service levels are “very difficult to justify in a legal regime which is already so restrictive when it comes to trade union rights.”
Russian-born billionaire the UK’s top taxpayer
A ranking of the UK’s 100 biggest tax payers shows that Russian-born billionaire Alex Gerko, a financial trader, paid an estimated £664.5m in tax for the 2023 financial year. This puts him top of the ranking by the Sunday Times. Former Formula 1 chief executive Bernie Ecclestone was in second, having paid £652.6m in tax. He also faced HMRC penalties, having failed to declare more than £400m held in a trust in 2015. Denise Coates, boss of gambling firm Bet365, ranked third with a tax bill of £375.9m. The rankings looked at estimated tax paid on business profits, share sales, dividends, house purchases and personal income. Overall, it is calculated that the 100 contributors added £5.35bn to public finances last year. It was also found that two-thirds of the list paid less tax in 2023 than in the year before. Construction was the best represented sector of the economy, accounting for 12 of the entries. More than a quarter of the entries were London-based and a further eight were from the South East of England.
Ryanair
Ryanair said profit after tax in the three months to December 31 fell 93% to €15 million from €211 million a year before, as higher fuel costs offset revenue gains. While traffic and fares were higher than a year ago, Ryanair said loads and yields during the festive period were “softer than previously expected”.It was also hit by a squabble with sites like Booking.com which lead to being removed from their sites.
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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!
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.