Business news 29 July 2024
Executive optimism soars. Britain needs a joined-up strategy for growth. Tories covered up the state of public finances. Bosses demand tax certainty. Brace for funding gap. HMRC, economic inactivity, markets, insolvencies & more business news that we thought would interest our members.
James Salmon, Operations Director.
Executive optimism soars
Optimism among senior executives at some of Britain’s biggest businesses has increased after Labour’s landslide general election, according to Deloitte’s latest survey of chief financial officers. The study shows that risk appetite is up, fears about uncertainty have retreated sharply, and revenue growth predictions are rising. The survey found that a net 23% of respondents were more positive about the outlook for their businesses now than they had been in the spring. Finance chiefs’ expectations for revenue growth have risen to the highest level in two and a half years, with a net 64% expecting an increase in their top lines over the next 12 months. The main priorities for most CFOs are cost reduction and increasing cashflow. The majority also want to see industrial policy and planning reform prioritised by the new government. The poll also revealed that the UK is now perceived as more stable than many other developed nations. Richard Houston, senior partner and CEO of Deloitte UK, says the election result will have a “mildly positive effect” on investment, dealmaking, and hiring in the next 12 months.
Britain needs a joined-up strategy for growth
Andy Haldane, the former chief executive of the Bank of England, has warned that growth is too “sulky” in the UK. Despite this, Mr Haldane, chief executive of Royal Society Arts, said he is “very optimistic about the UK,” arguing that there are “clusters of innovative brilliance across the UK, among our universities, among our businesses and among our people.” Calling for the “crucible of creativity” to be nurtured, he urged policymakers to “back brilliance.” “We need to get behind our sectors of strength. We haven’t really had a durable, long-term, full-throated industrial strategy, in the same way that many of our competitors have over the past few decades,” he added.
Reeves: Tories covered up the state of public finances
Chancellor Rachel Reeves is set to outline approximately £20bn of unfunded spending pressures in the wake of a formal audit of public finances. This is expected to lead to tax increases and with Labour having ruled out rises in income tax, VAT, National Insurance and corporation tax, experts say ministers could look at increasing capital gains or inheritance taxes and cutting other tax reliefs. Ms Reeves is expected to accuse former Prime Minister Rishi Sunak and his Chancellor, Jeremy Hunt, of a “cover-up” of the “dire state” of public finances. Speaking before her upcoming statement to the Commons, Ms Reeves said: “I’m going to be open with the country about the seriousness of our situation; the previous government spent money like there was no tomorrow because they knew someone else would have to pick up the bill.” Accusing the Tories of making “commitment after commitment without saying where the money was going to come from,” she added: “I am cleaning up their mess and I am fixing what they broke.”
Bosses demand tax certainty from new government
Clarity on tax is the thing corporate leaders most want from the new government, according to a survey of C-suite executives. A survey commissioned by BDO saw 70% of respondents say they want more certainty over taxes, either through a complete freeze on any business tax changes or a business tax roadmap over the next five years. The poll also found that bosses believe corporation tax is most likely to be hiked by the new government. Over a quarter of respondents also expect taxes on energy profits or electricity generators to rise, while 26% anticipate higher environmental taxes. Paul Falvey, a tax partner at BDO, says businesses desperately want stability and certainty after the repeated changes to tax rates in the previous administration. Many hope that the promised business tax roadmap will provide long-term visibility for future planning.
Taxpayers brace for funding gap in public finances
With Chancellor Rachel Reeves expected to reveal a £20bn funding gap in the public finances, tax increases may be on the horizon as the Government tries to balance the books. While Labour has pledged not to raise income tax, National Insurance, or VAT, proposals for a flat 30% rate of pension tax relief have been drawn up. Labour may also target the tax-free lump sum that pensioners can withdraw. The Chancellor is being lobbied to align the rates of capital gains tax with income tax rates. Another option being considered is charging capital gains on assets passed on after death, in addition to inheritance tax.
Economists: Taxes on wealth could fill fiscal hole
Rachel Reeves could find around £10bn a year to plug some of the £20bn gap in public finances if she were to raise taxes on soaring levels of unearned wealth, according to leading economists. New research by the Resolution Foundation suggests that Britain is a country of “booming wealth” but “busted wealth taxes,” meaning the Chancellor has the option of raising funds by increasing taxes on the richest. The report finds that levels of wealth have risen from four times the national income when Labour was last in power to six times the national income today. It says Britain is a country of huge “wealth gaps” in which a family in the top 10th of the wealth distribution has £1.3m more wealth per adult than someone in the middle of the distribution. Stuart Adam, senior economist at the Institute for Fiscal Studies, notes: “It would certainly be possible for the Government to raise a few billion pounds from reforms to capital gains tax and inheritance tax.”
FCA to cut red tape to boost Britain’s competitiveness
The Financial Conduct Authority (FCA) is set to unveil reforms that will make it easier for consumers to access investment services and improve Britain’s competitiveness with rival markets. FCA chief executive Nikhil Rathi says plans that will see red tape cut and reduce box ticking will remove barriers that have made it harder for UK firms to do international deals and raise funds on secondary markets. Mr Rathi said: “We are moving to a more disclosure-based system. That will allow investors to decide whether they wish to support founders and companies which is the predominant approach in other markets.” He added: “There will be more onus on the stewardship of investors and their engagement with investors and boards.”
Interest Rates
No one can tell what the Bank of England will decide on Thursday regarding interest rates. The decision whether to cut or not seems finely balanced. Economists seem to think now is the time with inflation falling and unemployment up but noises from the Central bank are far less decided with the services sector and wage rises still running hot.
HMRC could land extra powers
The Chancellor is considering giving more powers to HMRC in a tax crackdown on savers, investors, and the self-employed. An expert panel is advising Rachel Reeves on how the tax office could more efficiently harvest data on dividends, savings income, and eventually capital gains to recover billions lost to the tax gap each year. The proposals include making it mandatory for banks and other financial service companies to directly share data on clients’ investments with HMRC. Ministers are also considering expanding HMRC’s use of third-party data and launching a Single Customer Account to simplify the tax system.
Ministers expected to approve public sector pay rises
The Government is expected to agree to above-inflation pay rises for public sector workers. Independent pay review bodies have recommended above-inflation increases for teachers and nurses of about 5.5%, with this in line with increases in the private sector. The Institute for Fiscal Studies has warned that such a rise could cost an extra £10bn on top of the 3% rise ministers are said to have budgeted for.
Markets
On Friday, the FTSE 100 closed up 1.21% at 8285.71 and the Euro Stoxx 50 closed up 1.06% at 4862.50 and over in the US the S&P 500 rose 1.11% to 5459.10 and the NASDAQ rose 1.03% to 17357.88.
This morning on currencies, the pound is currently worth $1.2816 and €1.183. On Commodities, Oil (Brent) is at $81.27 & Gold is at $2391. With stock markets, the FTSE 100 is up 0.9% at 8359 and the Eurostoxx 50 is down 0.1% at 4857.
Investors bullish on private equity
High net worth UK investors are more positive on private equity than every other asset class, despite fears that tax changes could scupper positive returns, according to a new survey. The poll for Connection Capital saw 80% of UK high net worth individuals say they planned to allocate to private equity and other alternative assets over the next year. The survey also revealed signs of optimism for the UK economy, with a third of investors feeling more confident about putting money into British companies, compared to a fifth who feel less confident about it. However, investors were most worried about political change, along with potential changes to capital gains tax and business asset relief, giving it as their main justification as to why they were feeling less confident on prospects for UK companies. When asked about the impact of a potential increase in capital gains tax, half of all respondents suggested they would invest less in equities than they had otherwise planned, with 7% stating they would consider stopping investment in equities altogether.
Economic inactivity due to ill health soars
Official statistics show that economic inactivity due to long-term sickness has soared since the pandemic. Government estimates suggest that 2.8m people are currently off work ill. This is up by around 700,000 since before the Covid-19 outbreak. Office for National Statistics figures show that total economic inactivity in Britain now exceeds 9.5m, having been at around 8.4m before the pandemic. Nearly 30% of the total is attributed to long-term sickness, up from 25% before the coronavirus crisis. Of those economically inactive due to long-term illness, the most common primary or secondary cause is depression, bad nerves or anxiety. Louise Murphy, senior economist at the Resolution Foundation, commented: “Mental health problems are driving much of the recent rise in inactivity and are concentrated among young people, who are now just as likely to be out of work due to long-term sickness as people in their 40s.”
US inflation
US Inflation eased slightly from a year ago in June, helping to open the way for a widely anticipated September interest rate cut. The personal consumption expenditures price index increased 0.1% on the month and was up 2.5% from a year ago, in line with Dow Jones estimates, the Commerce Department reported Friday. The year-over-year gain in May was 2.6%, while the monthly measure was unchanged.
Natwest
On Friday NatWest reported net interest margin rose 0.05% to 2.1% and impairments fell to £48m from £223m helping Q2 profits reach £1.7bn against £1.26bn forecasts. The board disclosed £21m had been wasted on public advertising / advisory services in relation to the aborted retail offer proposed by the last government. The new Chancellor Rachel Reeves according to Bloomberg is leaning towards an institutional placing of the UK government’s remaining c.20% stake in NatWest which if sold in small blocks would be unlikely to damage the share price as much as a retail offer.
Rightmove
Rightmove reported higher revenue and profit, and increased its interim dividend. The property portal owner said that for the first six months of 2024, pretax profit rose 1.8% to £132.7 million from £130.3 million the year before. Rightmove also said revenue increased by 7.1% to £192.1 million from £179.5 million ‘as both agents and new homes developers renewed contracts, upgraded their packages and invested in additional products’.
Babcock
Babcock Intl said it is making progress towards its medium-term ambitions as the global push towards rearmament boosts profit in financial 2024. In the year that ended March 31, Babcock said pretax profit increased to £216.7 million from £6.2 million the previous year. This was driven by improved performance in its Nuclear, Land, and Aviation sectors.
Drax
Drax reported strong double-digit growth in the first half as the company prepares to become a key player in the UK’s future energy strategy. The Selby-based power generation and carbon capture technology company said in the first half that ended June 30, pretax profit rose 37% to £463.2 million from £338.1 million the previous year.
Apple
Apple has dropped out of China’s top five phones as users switch to local handsets.
Penalties force key workers to quit
A report by Carers UK has found that teachers, NHS staff, and other key workers who balance part-time work with caring for loved ones are quitting their jobs to avoid being hit with huge cash penalties for breaching carer’s allowance rules. The Guardian details how strict earnings limits and penalties associated with carer’s allowance have forced many carers to give up work or work fewer hours, while the impact of penalties has taken a toll on the mental health and well-being of carers, with some experiencing breakdowns and high levels of stress. The carer’s allowance system has been criticised for its lack of understanding and support for unpaid carers, who save the UK about £160bn a year.
UN talks look to regulate tax havens
More than 190 UN member states are set to thrash out draft terms of reference for a convention that would deliver the biggest overhaul of global tax rules for a century. If enacted, multinational corporations will be required to pay tax where they employ staff and do real work, instead of in tax havens where they hide profits. Analysis by the EU Tax Observatory shows that corporations shifted $1tn – 35% of the profits they earned outside their home countries – to tax havens in 2022, with governments losing out between $240bn and $600bn annually. Alex Cobham, chief executive of the Tax Justice Network, has praised Labour ministers for their tough rhetoric against tax-dodging and asks whether they will “mark out a new course for the UK on the world stage and support international efforts to curb tax abuse.”
Gifts increase as people look to beat IHT
Families are increasingly giving cash gifts to their loved ones in order to reduce their inheritance tax bills. Analysis shows that Britons are now giving over £2bn per year in cash gifts, a 40% increase in the past five years. This trend is expected to continue as IHT thresholds remain frozen while property and stock market values rise. Chancellor Rachel Reeves is considering tightening rules on gifting and removing allowances, which is likely to prompt more families to accelerate their gifting strategies. Laura Hayward, a tax partner at Evelyn Partners, notes that the “great wealth transfer” is underway as older generations make lifetime gifts to their families.
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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 supported our members through all sorts of difficult trading environments. With high interest rates and a struggling economy and elevated insolvencies, our services can help your business navigate these difficult waters.
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 and be warned of any potential risks.
Unlike other credit management companies, we offer our members a fixed annual subscription regardless of how high the value of their debts maybe!
Rather than to turning to more debt, CPA suggests that business owners tackle the problem at its source. If late payments are a strain on your cash flow, then talk to CPA about how we can help you reduce those late payments.
CPA has been improving business cash flow for over 100 years, by tackling late payers and campaigning against the late payment culture in the UK. CPA’s overdue account recovery service is a polite, efficient service designed to encourage prompter payments while maintaining goodwill. We direct your customers to pay directly to you, not to us and want to support and reinstate your direct relationship with your customer, not take it over, destroying goodwill.
Unlike other credit management companies, our overdue account recovery service is available to our members on a fixed annual subscription so you can pass any overdue accounts to this service and it is included in your subscription!
Our Overdue account recovery service resolves over 80% of accounts referred to us although our collections department is there to escalate the collections process on the remaining few if you require it.
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!
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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.