Business news 31 December 2024
Some of the business news that we thought would interest our members.
James Salmon, Operations Director.
Sluggish economy may mean another tax raid
Experts argue that Rachel Reeves’ pledge to avoid further tax hikes is increasingly in doubt, saying the Chancellor may need to raise additional funds due to the economy flatlining and inflation rising. Carl Emmerson from the Institute for Fiscal Studies (IFS) has warned that “the outlook is uncertain,” highlighting the tight fiscal targets Ms Reeves faces, while Paul Johnson, also from the IFS, suggests that if economic conditions do not improve, Ms Reeves may have to seek more funds, telling Times Radio: “It’s not impossible the Chancellor will feel she needs to come back for yet more money.” Following a £40bn tax raid announced in the October Budget, which included £25bn in employer National Insurance hikes, business leaders have expressed concerns over potential job losses and rising prices.
Voters not sure Labour can fix cost-of-living crisis
A new poll shows that two-thirds of voters do not believe that the Government can help ease the cost-of-living crisis in the year ahead. This is despite the Prime Minister’s pre-election pledge to put more money into peoples’ pockets. The survey of 2,019 people saw just 26% say the Government will tackle the cost-of-living in 2025, while 62% said they did not believe ministers can deliver a positive change. The poll also shows that 75% of respondents are worried about further rises in food prices, while 74% have concerns over and energy bills ahead of next month’s 1.2% increase in Ofgem’s price cap. While 67% of voters are worried about having less disposable income, 63% said they are concerned about not being able to save any money.
Firms optimistic for 2025
Businesses in the UK are showing increased optimism for 2025, with 70% anticipating higher turnover in the first quarter compared to the previous year. A sentiment index from Lloyds indicates that nearly three-quarters of surveyed companies expect improved profitability, with a fifth projecting revenue increases of over 10%.
Services exports set to soar
Britain’s services exports are projected to exceed £500bn this year, driven by finance, law, and business advisory sectors, according to researchers at PwC. However, rapid economic growth in Eastern Europe, particularly in countries like Poland and Hungary, is expected to narrow the economic gap with the UK, with forecasts suggesting Poland’s GDP per person may surpass Britain’s in the coming years. Additionally, UK crude oil production is anticipated to fall below 30m tonnes, the lowest since 1977, while renewable energy production is set to increase significantly. Barret Kupelian, chief economist at PwC, commented: “Last year, we predicted 2024 would see the UK turn a page, and in many ways it did – inflation returned back to target levels, there was some progress on regional growth and real incomes grew. This year, our predictions show that the UK will undergo subtle yet significant transformation in both its internal and external environment.”
World economy set to double in size
Analysis by the Centre for Economics and Business Research (CEBR) suggests that the global economy is set to double in size to $221trn in nominal terms over the next 15 years. The study says this will be driven by rapid growth among Asian countries such as Indonesia, Bangladesh, the Philippines and Vietnam. The CEBR projects that Britain’s GDP is on course to be 25.2% larger than France’s by 2039, up from 13.7% now. While the UK economy is forecast to be 19.8% smaller than Germany’s in 2039, this is narrower that the current gap of 30.7%. The CEBR’s World Economic League Table says Britain will remain the world’s sixth largest economy until 2039.
More retailers in ‘critical financial distress’
Analysis by Begbies Traynor shows that the number of UK retailers with “critical” financial issues has surged since October’s Budget. Data shows that 2,124 UK retailers were in “critical financial distress” between the start of October and mid-December, compared to 1,696 in the previous quarter. Begbies says the increase stems from “compounding pressures” of seasonal demand, growing operational costs and consumer confidence falling after the Budget. Despite the quarter-on-quarter increase, Begbies found that the number of UK retail businesses in critical financial distress was down year-on-year, while the number in “significant” distress has fallen by 17%. Julie Palmer, partner at Begbies, said: “Clearly, some retailers have found ways to manage financial pressures effectively, but others, particularly in general retail, are struggling under the weight of rising operational costs and squeezed consumer spending.”
169k retail jobs lost in 2024
Analysis from the Centre for Retail Research (CRR) shows that 169,395 retail jobs were lost in 2024, with this up 49,990 – or 41.9% – on 2023’s total. The increase was driven by the collapse of major chains such as Homebase, Ted Baker, Lloyds Pharmacy, The Body Shop, and Carpetright. In total, 33% of the sector’s job losses in 2024 came from the collapse of a business. The figures also reveal that independent retailers shed 58,616 jobs in total during the year. Professor Joshua Bamfield, director of the CRR, said: “The problems of changed customer shopping habits, inflation, rising energy costs, rents and business rates have continued and forced many retailers to cut back even more strongly in 2024.” Looking ahead, experts have warned that retailers face new challenges in 2025, with an increase in National Insurance contributions and a reduction in business rates relief set to have an impact.
MPs urged to act over frozen pensions
Pensioners in their eighties and nineties are campaigning against major corporations after experiencing a 3% decline in their real retirement incomes over the past year. Former employees from firms including KPMG have formed the Pre-1997 Alliance to lobby the Government for action, as many pension benefits accrued before 1997 lack inflation protection. David Thomas, a member of the alliance, warns that some pensioners have faced an erosion of “approaching 60%.” The alliance has urged the Government to conduct comprehensive research into the impact of these freezes, highlighting that “the heaviest burden falls on the oldest and most vulnerable.” The employers maintain they are compliant with regulations, focusing on the financial stability of their pension schemes.
Farmers unite against tax hike
The National Farmers’ Union (NFU) has announced plans for a day of action in response to the inheritance tax hike set out in the Budget. Demonstrations, including tractor rallies, are set for January 25, aiming to raise awareness among rural Labour MPs. This comes after the Budget ended inheritance tax exemptions for farms valued over £1m, imposing a 20% levy on farming assets exceeding this threshold. NFU president Tom Bradshaw said: “There is too much at risk: our families, our future, our heritage.” Chancellor Rachel Reeves has defended the move and argues that the changes will help prevent the wealthy from evading inheritance tax through agricultural land purchases.
PM calls on regulators to boost growth
Prime Minister Sir Keir Starmer, Chancellor Rachel Reeves and Business Secretary Jonathan Reynolds have written to the UK’s regulators, calling on them to do more to prioritise growth. Watchdogs including the Financial Reporting Council, Financial Conduct Authority, Competition and Markets Authority, Environment Agency, Ofcom, Ofgem and Ofwat have been told to submit a range of pro-growth initiatives by the middle of January. The letter highlights that ministers believe collaboration is essential to ensure the regulatory environment becomes “more pro-growth and pro-investment.” The letter, which urges watchdogs to identify where regulatory objectives are either conflicting or confused, says: “Improving regulation in the UK – ensuring that it enables growth and does not unduly hold back investment – is an essential part of this government’s growth mission.” Recipients were told that the Government is “determined that every department and every regulator should prioritise growth.”
City watchdogs will oversee tech firms offering ‘critical’ services
The Bank of England, Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) are to be handed powers to regulate tech companies providing “critical” services to UK banks. The City watchdogs will oversee companies that are increasingly crucial to the digital banking and payments sector, with this coming amid concerns that issues involving tech giants could put the UK’s financial stability at risk. Once under the supervision of the financial services regulators, tech firms and other suppliers will have to undergo stress tests. They will also be forced to report major incidents such as cyber-attacks and power outages. A Treasury spokesperson said officials are working with the Bank, FCA and PRA “to regulate systemically critical third-party suppliers that support the UK financial sector.” Firms set to be involved include Amazon Web Services, whose clients include HSBC, Starling Bank, Nationwide, and Monzo. Google may be selected as it serves companies including Revolut, NatWest, GoCardless, and Atom Bank, while Microsoft is likely to be considered as it lists Investec, Virgin Money and Standard Chartered as customers.
Financial services firms optimistic over Labour plans
Finance leaders are optimistic about Labour’s plans to reduce regulations, with a KPMG survey revealing that over 70% believe these policies will attract foreign investment. Chancellor Rachel Reeves has committed to dismantling excessive financial red tape, saying that regulatory changes post-2008 have “gone too far.” The poll saw 94% of financial services firms say they expect to turn a profit in the first quarter, up from 83% in the first quarter of 2024. While 55% said they plan to increase hiring in 2025, 17% are planning a “significant” recruitment drive. Despite this optimism, concerns linger regarding the impact of increased taxes and National Insurance contributions on hiring. Karim Haji, global and UK head of financial services at KPMG, said: “Financial services is the backbone of the UK economy, so it’s encouraging to see leaders go into the new year with optimism about the Government’s growth plans for the sector.”
AI set to ‘reshape the business landscape’ – Dell boss
Steve Young, Dell Technologies’ UK senior vice president and managing director, says AI will “reshape the UK business landscape” in 2025. He says that while 2024 was a “year of discovery” as firms experimented with generative AI tools, 2025 will be the year the technology “shifts from exploration to execution.” Suggesting that for many firms, “the test-and-learn phase is already starting to pay off,” Mr Young argues that to see a true return on investment, “businesses must apply AI technology only to the most impactful processes in their most important functions.” He went on to warn: “Organisations that fail to adopt the right AI strategy and architecture will be at a disadvantage.”
London stock market set for revival
London is gearing up for a promising year in the stock market, following a lack of initial public offerings (IPOs) in 2024, according to PwC. The firm highlighted several significant listings on the horizon, including Greek metals and energy company Metlen, which aims for a valuation of up to £5bn, and Chinese retailer Shein, targeting £50bn. Despite a challenging year with more firms exiting the market than entering, Vhernie Manickavasagar from PwC said: “Preparations for a number of significant IPOs are already underway, providing momentum for what is hoped to be a big year for the UK markets in 2025.” Recent changes to listing rules by the Financial Conduct Authority and a recent uptick in UK equity fund inflows have further bolstered optimism for the London market.
Public sector jobs set to soar
According to a report by the Resolution Foundation, nearly one in five workers will be employed within the public sector by 2030, increasing from 16% in 2018 to 18.3%. This growth is primarily attributed to rising employment in health and social care, which now accounts for 37% of government jobs. The Resolution Foundation said a projected rise in public sector employment would be driven by the increased government spending and investment announced in October’s Budget. Day-to-day public service spending is due to be 4.8% higher this year than last.
Civil servants to strike over office attendance
The Public and Commercial Services union (PCS) has announced that 3,800 of its members working in the Land Registry have voted to strike after bosses ordered them back to the office for three days a week. PCS general secretary Fran Heathcote said: “The Government doesn’t seem to learn that applying arbitrary targets on office attendance doesn’t increase productivity and is unpopular with staff members,” adding: “If they want a motivated, hard-working workforce, ministers should trust their own employees to have some say over their working conditions.” PCS members working at the Office of National Statistics have already voted for strike action over compulsory office attendance.
Self-employed struggle with mortgage rejections
New research from Together reveals that 22% of mortgage applicants are rejected due to self-employment, highlighting a “broken” mortgage system. The Residential Property Market Report indicates that 7% of applicants still struggle to secure a mortgage, with age, employment type, and credit history being significant factors. The report also notes that 39% of rejected borrowers sought Shared Ownership, while 29% faced issues with credit histories.
Boxing Day footfall slides
Boxing Day saw a significant decline in consumer footfall, with UK retailers experiencing an 8.9% drop compared to 2023 by 3pm yesterday, according to MRI Software. High streets were particularly affected, with a 10.9% decrease, while Wales recorded the largest drop at 16.9%. Overall, shoppers are expected to have spent £3.7bn on Boxing Day. Jenni Matthews, marketing and insights director at MRI Software, noted that “the decline in Boxing Day activity may reflect a shift in consumer behaviour, influenced by the ongoing cost of living crisis.” Despite the downturn, Kien Tan, a senior retail adviser at PwC, suggests that “many retailers have had a decent Christmas,” attributing some of the decline to changing shopping habits and closures of major retailers.
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!
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.