Business news 30 September 2024
GDP, Business Confidence, Hidden fees, Retail, Property, Budget & Tax news, Back to Work, Brands, packaging, fraud, markets, insolvencies & more business news that we thought would interest our members.
James Salmon, Operations Director.
GDP
GDP was weaker than initially anticipated, data published by the Office for National Statistics showed this morning. UK’s gross domestic product expanded by 0.5% in the second quarter compared to the first, slower than the ONS’s first estimate of 0.6%. This also was slower than 0.7% in the first quarter. Year-on-year, UK’s GDP increased by 0.7% in the second quarter, weaker than market consensus, which anticipated annual growth of 0.9%.
Business confidence slips
UK business confidence has fallen to its lowest level since the general election, with the Lloyds Bank Business Barometer reporting a decline to 47%, down three points from the previous month. This drop follows a period of optimism earlier in the year, with confidence peaking at eight-year highs in July and August. Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking, stated: “Although overall confidence fell this month, that fall was from an eight-year high, and businesses remain positive about their own trading prospects.” Concerns about the upcoming Budget have contributed to the pessimism. Additionally, a KPMG survey revealed that three-quarters of financial services leaders anticipate a moderate impact from the Budget on their businesses.
Hidden fees threaten UK businesses
New research indicates that small to medium enterprises in the UK are incurring over £3,700 annually in hidden fees from financial institutions. A survey of 500 businesses revealed that 69% are concerned about potential closure due to rising costs, with 49% attributing this to increasing material expenses and 19% to concealed bank charges. Arun Tharmarajah, director of European payments at Wise, stated: “Small businesses don’t want to pass rising and unexpected costs onto their customers,” highlighting the difficult position many face. Despite efforts to cut costs, 56% have had to make redundancies, with 84% considering it a last resort. The research underscores the urgent need for transparency in banking fees, which collectively amount to £2.8bn annually.
Insolvency crisis hits estate agents
The UK property market is facing significant challenges, with nearly 300 estate agents declaring insolvency in the past year, marking a 32% increase from the previous year. According to the Insolvency Service, 286 estate agency firms went out of business, driven by the lowest home sales in over a decade. Rebecca Dacre, a partner at Forvis Mazars, stated: “Higher interest rates have proved to be a significant deterrent to virtually anyone moving up the housing ladder.” Despite these difficulties, Foxtons reports signs of recovery, with rising mortgage approvals and a 2.3% increase in average house prices over the last 11 months.
Retail sales grow at fastest pace since May
British retailers have seen the fastest growth in sales since May, according to the Confederation of British Industry. The CBI’s monthly retail sales balance rose to +4 in September from -27 in August. Looking ahead, retailers’ expectations for the coming month rose from -17 to +5, their strongest since April 2023. CBI economist Martin Sartorius said: “While some firms within the retail sector are beginning to see tailwinds from rising household incomes, others report that consumer spending habits are still being affected by the increase in prices over the last few years.”
Starmer: It’s more pylons or higher taxes
The Prime Minister has warned that burying electricity cables will drive up taxes as the costs compared to pylons is so high. Sir Keir Starmer has come under fire for backing enormous pylon projects that will spoil areas of considerable natural beauty. “If you want lower energy bills, we’re going to have to have pylons above the ground,” Sir Keir said.
Reeves could rework fiscal rules
Chancellor Rachel Reeves is considering changing the Government’s ‘fiscal rules’ which determine how much headroom ministers have for tax cuts ahead of the Budget. The key fiscal rule states that net debt as a percentage of GDP must start falling within five years and experts say the simplest way to bring that ratio down is to exclude the Bank of England’s debt from the Government’s balance sheet. Another option could be to scrap a scheme under which banks receive interest payments on reserves they have to hold at the Bank of England, a policy that costs taxpayers £40bn a year. A third option is to reclassify what is counted as investment as the current rules only take into account the immediate costs of investment, not the potential long-term gains.
Labour mulls raid on employer pension contributions
Rachel Reeves is poised to unveil a £16bn tax raid on private sector pension contributions in Labour’s upcoming Budget, a report by pensions consultancy Lane Clark & Peacock (LCP) warns. The report says targeting tax relief on employer contributions, which are currently exempt from National Insurance (NI), could lead to reduced pay rises or increased prices for workers. The Treasury loses £23.8bn annually due to this exemption. LCP suggests that while public sector employers may be exempt, private employers would bear the brunt, potentially increasing costs and reducing pension contributions. The Chancellor may consider a new, lower NI rate on employer contributions, which could generate significant revenue without immediate impact on voters’ pay. However, this could lead to less favourable salary sacrifice packages for employees. Speculation mounts that Reeves will also target pensioners to address a £22bn public finance shortfall, with options including a pensions death tax or cutting tax-free lump sums.
Back to work mandates may boost office values
With large firms including Amazon, PwC and Santander urging or ordering staff to return to the office following a surge in remote working driven by the pandemic, Jane Croft in the Observer says the “flood” of workers returning to central London comes after a “brutal” two-year downturn for the UK office property market. Values for London office property fell by 20% between Q2 2022 and Q2 2024, according to research company MSCI. Meanwhile, data from CoStar shows that London’s vacancy rate stands at 10%, marking a 20-year high and an increase from around 5% before the pandemic. Some analysts argue that a rise in back-to-work mandates could see a rebound in office values. A KPMG poll saw 83% of UK chief executives say they expect a return to pre-pandemic ways of working within three years, up from 64% in 2023. More than 80% say they are likely to reward employees who come into the office, compared to 56% in 2023.
Badenoch under fire over maternity pay comments
Kemi Badenoch, Tory leadership contender and shadow communities secretary, has come under fire for comments she made on business regulation. Speaking on the first day of Conservative party conference, Badenoch was asked by Times Radio whether the UK had got “right level” of maternity pay. She responded by pointing out that statutory maternity pay was a “function of tax” explaining: “Tax comes from people who are working. We’re taking from one group of people and giving to another. This, in my view, is excessive. Businesses are closing. Businesses are not starting in the UK because they say that the burden of regulation is too high.” She went on to suggest women need to take more “personal responsibility” for their finances when they have children, leading to accusations that she was “picking a fight with new mothers” and was “simply not up to the job”. But Badenoch hit back, stating: “Of course maternity pay isn’t excessive. No mother of three kids thinks that. But we must talk about the burden of excessive business regulation otherwise we might as well be the Labour Party.”
ISG owner ‘devastated’ by firm’s collapse
William Harrison III, the owner of construction firm ISG, has spoken about the firm’s collapse for the first time. Mr Harrison, the construction company’s former chairman, said: “I am devastated for the thousands of people who have lost their jobs, the supply chain who have been impacted, and all of our clients and their critical services.” ISG, which was owned by owned by Cathexis Holdings – Mr Harrison’s family office, called in administrators from EY nine days ago. Data shows that Cathexis had built up a debt pile of more than $1bn with Goldman Sachs.
Brands see a future in the past
Consumer companies are increasingly reviving nostalgic brands to connect with older customers while offering something new to younger shoppers. Rob Reilly, chief creative officer at WPP, said nostalgia “is an incredibly powerful trigger,” while Richard Webster from Bain and Co suggested that relaunching an item can lead to “fantastic free advertising through media coverage.” Linda Ellett, UK head of consumer, retail and leisure at KPMG, warns: “Companies relaunching products need to be mindful that it will be judged by the standards of today’s consumers and current market regulations,” while Lisa Hooker, leader of industry for consumer markets at PwC, said: “Many relaunched products tend to be short-lived … but can be a successful marketing tool and generate social media buzz.”
Markets
Friday, the FTSE 100 closed at 8320 and the Euro Stoxx 50 closed at 5067. Overin the US the S&P 500 fell 0.13% to 5738 and the NASDAQ fell 0.39% to 18119.
Equities in China and Hong Kong jumped this morning with the CSI300 up over 8% after Beijing’s latest measures to tackle its property crisis, while European markets were set for an uninspiring start to the week after German and Italian carmakers issued downbeat forecasts.
This morning on currencies, the pound is currently worth $1.340 and €1.985. On Commodities, Oil (Brent) is at $72.38 & Gold is at $2652. On the stock markets, the FTSE 100 is currently down 0.18% at 8305 and the Eurostoxx 50 is down 0.48% at 5043.
City flags concern over non-dom reforms
City figures have urged the Government to reconsider planned reforms to the non-dom tax regime amid concerns that the mooted changes may not raise any money. While Labour has promised to scrap the regime which allows wealthy foreign nationals to only pay tax on income and asset gains earned in the UK, it has been suggested that an exodus of non-doms mean the tax reforms might not cover the losses caused by the departures. This has led to calls for a rethink, with Chancellor Rachel Reeves said to be ready to water down the plans if the numbers do not add up. Analysis by Oxford Economics suggests that the possible reforms could cost the Government up to £1bn. Leslie MacLeod-Miller, chief executive of industry body Foreign Investors for Britain said: “While the centuries old non-dom regime may be in need of urgent reform, the Government’s current proposals stand counterproductive to the wider growth agenda.” Arun Advani, director of the Centre for the Analysis of Taxation, said plans to water down some of the measures appeared “sensible and pragmatic,” while Rachel de Souza, a tax partner at RSM, said it’s “really good news” that the Treasury is considering adjusting its plans, adding that Labour’s current manifesto plans give people “no incentive to remain in the UK.”
Billionaire investor exits UK over tax hike fear
Christian Angermayer, a billionaire investor, has relocated from London to Switzerland amid concerns over potential tax increases for non-doms in the UK. With Labour aiming to scrap rules allowing non-doms to avoid taxes on overseas income, Mr Angermayer said: “Every non-dom I know has left or is about to leave.”
Landlords risk losing thousands in quick sales
The Telegraph details how landlords are racing to sell off their properties ahead of the Budget amid widespread fears of a hike in taxes and onerous new regulations. However, experts are warning owners not to make impulse sales. Property sales company Upstix, which claims to help customers sell homes in seven days for 85% of their market value, said it had seen inquiries jump 41% from August. The mood is reflected in research by the National Residential Landlords Association, whose campaigns and policy director, Chris Norris, said: “Every circumstance is different, but our advice to landlords is to keep a calm head. There is a lot to consider from the point of return on investment and the risk profile of being a landlord, but there are also still opportunities presented by high tenant demand.”
House Prices.
House Prices rose at their fastest annual pace for two years in September, in a sign of the impact of falling mortgage rates on the property market. House prices have climbed 0.7% since last month and 3.2% since last year, according to data from Nationwide, up from an annual rate of 2.4% in August and the fastest rate of growth since November 2022. House prices, which now average £266,094, are now around 2% below the all-time highs reached in summer 2022.
Property market boosted as transactions rise
HMRC data shows that UK residential property transactions hit 90,210 in August, with this a 5% increase on August 2023. Non-seasonally adjusted transactions were up 8% on July, hitting a provisional estimate of 104,330. Seasonally adjusted transactions dipped 1% month-on-month, marking the third consecutive monthly dip. Non-residential transactions fell by 8% on a non-seasonally adjusted basis from July, with this a 4% decline on a year earlier. On a seasonally adjusted basis, non-residential transactions were down 1% month-on-month. Jason Tebb, president of OnTheMarket, said: “It is encouraging to see transaction numbers improve year on year, as they are a far better indicator of the health of the housing market than house price movements”.
Nationwide
Nationwide Building Society’s £2.9 billion takeover of Virgin Money UK has been given the go-ahead by a specialist companies court in London. Judge Anthony Mann ruled on Friday that the acquisition could go ahead after being “satisfied” legal requirements over the deal had been met.
Tip-sharing law could push up prices
Restaurants are considering whether to put up prices as new legislation comes into force that bans businesses from withholding tips and service charge payments from workers. The law is designed to boost the earnings of about 2m waiting staff and hospitality workers amid concerns that some businesses are using the optional payment from clients to boost their profits. A 2022 survey by industry body UK Hospitality found that up to a fifth of businesses were keeping a share of the service charge to help cover their costs. Saxon Moseley, head of leisure and hospitality at RSM, says that for firms that have been using the service charge to pay staff or offset their wage bill, the new rules could hit margins, “in some cases fairly drastically.”
Government softens £1bn packaging tax
The Government is set to revise a £1bn “packaging tax” following significant pushback from the food and drink sector. Starting April next year, businesses involved in packaging will incur charges for waste collection, recycling, and disposal. However, after industry lobbying, ministers plan to reduce fees across nearly all categories, including plastic and glass. The Department for Environment, Food & Rural Affairs says it has acknowledged the concerns of businesses, insisting that officials had “listened to business voices.”
HMRC under fire for tax fraud
HMRC has been accused of enabling fraud by processing fictitious tax rebate claims submitted by third-party agents on behalf of unsuspecting taxpayers. Since 2020, tax relief scams have cost the Treasury billions, with inadequate checks potentially leaving innocent taxpayers liable for fraudulent claims. Jim Mackie, a former police officer, reported that HMRC failed to investigate a £5,000 claim made in his wife’s name, stating: “HMRC is happy to sit back, let it happen, then blame us, the public.” The Low Incomes Tax Reform Group (LITRG) has highlighted that unregulated tax claims agents may be misusing personal information to file claims without consent. Joanne Walker from LITRG noted: “HMRC continue to operate on a ‘process now, check later’ basis.” Although HMRC has tightened its processes for PPI tax relief claims, issues persist, and Waltonbridge, a firm involved in the scandal, has since shut down its website.
Vodafone
Vodafone has put out a statement to confirm that the merger between its UK telecoms arm and Three will no longer need a shareholder vote, under new UK listing rules. The new listing rules, which came into force at the end of July, state that a significant transition can be completed without shareholder approval, provided the companies comply with enhanced disclosure requirements. Vodafone told investors that the transaction is indeed classified as a significant transaction and that “shareholder approval will no longer be required”.
Titanic shipbuilder enters administration
Belfast-based shipbuilder Harland and Wolff has formally entered administration for the second time in five years, a week after the firm’s board warned that the move was inevitable. Gavin Park and Matt Cowlishaw of Teneo Financial Advisory have been appointed as joint administrators. Harland and Wolff’s executive chairman, Russell Downs, is optimistic that a new owner or owners will be found for the company’s yards but noted that the administrators will have to reduce the firm’s headcount. The firm’s audited annual accounts revealed losses of around £70m, with its auditor warning of a “material uncertainty” about the firm’s ability to continue as a going concern. Unaudited accounts for 2023 saw a loss of £43m
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Why you should become a member of CPA!
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.
Unlike other credit management and debt collection companies, we offer a range of services to our members that are all included as part of a fixed annual subscription, tailored to your needs.
Under your annual subscription you will have access to our main services:
- Our Creditcare credit reports provide credit ratings and limits along with a host of detailed information on your potential customers to enable you to trade with confidence and set appropriate credit policies for new customers.
- Our monitoring service will alert you to any significant changes in the status of those customers.
- Our Overdue account recovery service can be used to chase up payment on any invoices to those customers that have not been paid on time. Unlike other debt collection companies, this service directs your customer to pay direct to you and allows you to maintain your goodwill with them, rather than inserting ourselves into your relationship with you customer and insisting they pay CPA instead. Our Overdue account recovery service resolves over 80% of accounts referred to us.
All of the above services and other complimentary services such address verification, are included in your subscription!
And for the small minority of debts not resolved through our Overdue account recovery service, you can refer the debt to our collections department to escalate the late payment collections process.
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. 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.
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 borrowing more money to improve your cashflow, CPA suggests that business owners tackle the problem at its source. If late payments are a strain on your cashflow, then talk to CPA about how we can help you reduce those late payments.
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’s collection department 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.