Business News 31st July 2017
CPA hopes to inform, with its daily bite-size business news on Monday 31st July 2017, filled with stories we think will interest our members and visitors.
Markets Round up
Markets continued their descent on Friday. The FTSE 100 fell 1% to 7368 and the 250 fell 0.8% to 19,728. In Europe the Euro stoxx 50 was down 0.7% to 3468. Tobacco stcks were hit by the US FDa announcing a new and ‘comprehensive plan for tobacco and nicotine regulation’. A whole range of stocks came in with disappointing results, most notably BT and Barclays and with the pound continuing to strengthen, pressure was felt across the UK indexes. The US markets were down marginally with the S&P500 down 3 points to 2472 and the Nasdaq down 8 points to 6375 with Amazon and Starbucks falling on results. Asian stocks were mixed as tension increased on the Korean penninsula. Overall the MSCI world index is down 0.16% to 1960. Oil continued to edge higher with WTI up to $49.9 and Brent at $52.7. Gold strengthened to £1267. The pound rose against the dollar to $1.312 and held pace with the Euro at €1.118
UK business insolvencies hit 17-year low
In good news for those who supply to businesses on credit, the underlying number of businesses insolvencies in England and Wales has fallen to a 17-year low, according to the Insolvency Service, which said total liquidations fell by 16.9% on the previous quarter and by 3.5% on the same period last year. However creditors should not be complacent. Although the upward pressure on the interest rate has, for now, eased, at some point interest rate hikes will impact both businesses and individuals and the number of corporate insolvencies is expected to climb. The total number of company liquidations actually increased by 14.6 in the second quarter, the Insolvency Service noted, caused by a one-off event of 1,131 connected personal service companies slipping into liquidation due to changes to claimable expenses rules. Continue to monitor your key business partners using the Credit Protection Association’s monitoring and credit report service to be warned as soon as possible of adverse information. Also in the Sunday Times, the ICAEW warned that rising household debt will likely lead to an increase in corporate insolvencies as businesses suffer the knock-on effects of struggling consumers. The Institute’s Clive Lewis suggests businesses conduct “regular checks on customers’ credit ratings and regularly chase up overdue debts.” The Credit Protection Association can help you do that with its Overdue Account Recovery Service.
Carney demands data on risk
Mark Carney is demanding high street banks provide detailed information on how they assess customer risk amid fears of a consumer debt bubble, writes the Sunday Times’ Aimee Donnellan. The move follows a warning from Alex Brazier, the Bank’s director of financial stability last week, that banks should avoid complacency over spiralling debt. He said the amount borrowed on personal loans, credit cards and car loans had jumped 10% over the past year, while wages had risen only 1.5%. The amount of disposable income put away into savings has sunk to a record low of 1.7%.
The Sunday Times, Business, Page: 1
Government needs to step up support for SMEs
In the Mail on Sunday Sarah Davidson talked to Mike Cherry about what hurdles are facing SMEs when it comes to improving their productivity and how they can overcome them. The FSB chair says digital and transport infrastructure are the chief obstacle, with these not fit for purpose in many parts if the country. A late payment culture adds to the difficulty of investing in productivity gains, he says. Mr Cherry states: “To tackle these issues the government has to deliver on its promise of an industrial strategy that puts small business productivity front and centre. We also need to see the swift appointment of a small business commissioner with the power to end late payments and a universal service obligation to help poorly connected rural firms.” The Credit Protection Association is passionate about tackling late payment. Become a supporter at www.payontime.co.uk.
The Mail on Sunday
US Growth
The US economy gathered speed in the second quarter of the year, growing at an annualised pace of 2.6%. The pick-up was helped by consumer spending in the quarter expanding at a pace of 2.8%, and businesses stepping up spending on equipment. The growth rate for the first quarter was cut to 1.2%, compared with the previous estimate of 1.4%. Earlier this week, the IMF revised down its US growth forecast for this year from 2.3% to 2.1%. President Trump has pledged to pursue policies to boost the US economy, including cutting corporate and individual taxes, but has faced a Washington impasse. He has set an ambitious 3% growth target for 2017. Consumer spending, which makes up more than two-thirds of the US economy, accelerated from the 1.9% growth figure from the first quarter.
Broadband Coverage
BT has offered to provide the infrastructure for 99% of premises in the UK to get broadband speeds of at least 10 megabits per second by 2020. If accepted, it would mean government-proposed rules, allowing those living in remote areas to demand broadband, were unnecessary. BT says it would invest up to £600m and coverage would be universal by 2022. About 1.4 million households currently cannot get speeds above 10Mbps, according to Ofcom. This figure is disputed by a group of MPs who say there are a further 5.3 million who have not chosen to take up faster broadband services, some of whom may also not be able to get 10Mbps speeds.
Hammond insists UK won’t undercut Europe
Philip Hammond has set out further policy ideas on Brexit by stating that he does not want to turn the UK into a deregulated, Singapore-style economy. The Chancellor told France’s Le Monde: “I often hear it said that Britain is considering participating in unfair competition in regulation and tax. That is neither our plan nor our vision for the future. The amount of tax we raise as a percentage of our GDP puts us right in the middle of the pack.” He argued that after Brexit the country would keep a “social, economic and cultural model that is recognisably European”. The Times notes that in January, Hammond said the UK could change its economic model to regain competitiveness if Britain didn’t secure a good Brexit deal. His latest comments come amid rising tensions within the Cabinet over Brexit policy.
The Times, Page: 1, 8 The Guardian, Page: 1
Brexit’s summer of harmony
While Theresa May is enjoying her summer holiday on European mainland, her Cabinet ministers appear to have clashed over Brexit once again – this time over whether to maintain freedom of movement during the transition period after the UK formally leaves the EU in March 2019. International Trade Secretary Liam Fox stated in an interview to the Sunday Times that continuing freedom of movement after the cut date would ‘not keep faith’ with the referendum result. Last week Chancellor Philip Hammond commented that there was ‘broad acceptance’ in the Cabinet that there would be a transition period lasting up to three years after Brexit. ‘It will be sometime before we are able to introduce full migration controls between the UK and the European Union,’ added Mr Hammond. However, Mr Fox stated that he has ‘not been party’ to any such agreements with his colleagues, ‘If there have been discussions on that, I have not been party to them. I have not been involved in any discussions on that.’. Tensions over the nature of the transitional agreement appear to be intensifying, as the Telegraph reported yesterday that allies of Mr Hammond had accused Mr Fox of living in ‘fantasy land’ about post-Brexit deal. Meanwhile, disagreements in the Labour party also appear to be deepening, as Jeremy Corbyn is reportedly under pressure from senior figures in the party to embrace softer Brexit.
HSBC
HSBC has reported a 5% rise in profits in the first half of 2017. Europe’s biggest bank reported a pre-tax profit of $10.2bn (£7.8bn) for the first six months, up by about $500m. As widely expected, the bank has also announced a share buyback of up to $2bn which it expects to complete by the end of 2017. HSBC’s share price has rallied in the past year, helped by the weak pound which makes profits earned abroad more valuable when repatriated to the UK.
Tax payment deadline looms
Taxpayers are being urged not to overlook a looming payment deadline owing to summer holidays, otherwise they face a fine. Nearly 5m self-employed people, company directors and those with more than one source of income may have to pay tax by 31 July. The major filing deadline for those in the self-assessment system is 31 January. However, those who make payments on account face a deadline on Monday. Chas Roy-Chowdhury, head of taxation at the ACCA, said that summer getaways often led to people forgetting about the deadline – but: “Ignorance and naivety are no excuse when it comes to tax filing.”
BBC News
Tory MPs issue warning over raiding middle-classes
Conservative MPs have warned the PM and the Chancellor not to raise taxes on middle-class families following reports the Treasury officials had been discussing an increase tax on fuel, homes and income. They warned the Tories would pay a “heavy price” if Philip Hammond raids the middle-classes to plug a public finance black hole. Jacob Rees Mogg, a Tory MP who has served on the Treasury select committee, said: They don’t seem to get the point that lower rates increase revenue if you focus on the right taxes. They are hitting the people who have already made a big contribution and don’t have the broadest shoulders. To put a burden on those who have seen very little improvement in their standard of living would be a mistake in economic policy.”
The Daily Telegraph, Page: 4 The Sun, Page: 8
China
China’s private sector expanded at a slower pace in July, official survey data from the National Bureau of Statistics revealed. The manufacturing Purchasing Managers’ Index dropped more-than-expected to 51.4 in July from 51.7 in June. The expected score was 51.5. Nonetheless, a score above 50 indicates expansion. The production sub-index came in at 53.5 versus 54.4 in previous month. Likewise, the new orders index slid to 52.8 in July from 53.1 and the new export orders indicator declined to 50.9 from 52 in June. At the same time, the non-manufacturing PMI fell to 54.5 in July from 54.9 a month ago. On the other hand, infrastructure investment helped the construction sector to strengthen further. The PMI for the construction sector climbed to 62.5 from 61.4 in June. PMI readings suggest that China’s growth momentum may have waned at the start of third quarter as foreign demand cooled, Julian Evans-Pritchard at Capital Economics, said. The economist anticipates further weakness ahead as the crackdown on financial risks weighs on credit expansion and economic growth.
Inheritance tax take hits record high
The Treasury raked in a record £4.84bn in death duties in the 2016/17 tax year, driven up by rising house prices, while the IHT threshold held at £325,000. The total tax free allowance will rise to £500,000 by 2020-21, at which point the threshold is due to be pegged to inflation and rising asset prices. Danny Cox, head of financial planning at Hargreaves Lansdown, said: “There is a long time between now and 2020 for things to be changed. It is unreasonable for people to be taxed on indexed gains, it is just unfair.” The Telegraph illustrates how the inheritance tax burden is shared across the UK, with large areas having no estates expected to pay it at all. For instance, Northern Ireland has just 300 estates that will pay IHT, compared with the London borough of Barnet which in itself has 360 estates expected to pay. Overall, 23,300 estates will pay IHT across the UK, of which England accounts for 20,900 – or 90%.
The Daily Telegraph
10,000 get stamp duty refunds
HMRC has had to refund 10,700 people who paid the 3% stamp duty surcharge for second properties when moving from one home to another. Those who did not sell their original property first had to pay the extra tax and claim it back once it had been sold. A total of £127m was refunded, averaging £11,869 per refund. Lucy Brennan, a partner at Saffery Champness, said making such payments upfront could prevent families from moving, while Blick Rothenberg’s Nimesh Shah described the system as unfair. He said. “There’s a case for the Government to change that mechanism. The rule should be that if you do not in future sell the original property, then HMRC can come knocking.” Elsewhere, the Times reports that stamp duty changes have not affected the sales of £1m-plus homes as much as thought. Once distortions relating to the rush to buy before changes took effect are taken account of, the change on 2014 sales is only 1% down in the year to June.
The Daily Telegraph
Mortgage bubble fears
Analysis of Bank of England lending figures shows a 15% rise in the number of people with home loan of more than 4.5 times their income this year, raising fears of a “risky mortgage bubble”. Borrowers might be becoming too comfortable with low interest rates. Some are stretched even with rates at their current record low, so an increase of just half a percentage point would represent a significant relative jump in mortgage repayments. Too many homeowners ignore the possibility of a decline in house prices or that their salaries will not rise faster than inflation.
The Times
Britain told to lower trade deficit
The IMF has advised Britain to reduce its trade deficit, having discovered that among the world’s 28 leading economies, the UK has the largest deficit at 4.4% of GDP. The IMF is concerned that significant imbalances between economies could lead to dangerous corrections in future, as well as political pressure to reduce imports. The organisation says Britain must save more, provide workers with extra skills and make its economy more competitive to reduce the deficit.
The Daily Telegraph
Brexit customs chaos looms, consultancy predicts
The Observer reports on an assessment of Britain’s border controls post-Brexit by Oxera. The Europe-wide consultancy predicts at least £1bn a year in economic damage due to costs associated with extra staff, motorway queues and the relocation of companies abroad. Oxera also highlighted the risk that HMRC’s customs clearance system, CHIEF, would not be replaced by March 2019 and currently has “no understanding yet of what the customs deal with the EU looks like.” An HMRC spokesman said the new system was “on track for delivery by January 2019”.
The Observer, Page: 1, 9
Treasury mulls tax hikes to bolster budget
Chancellor Philip Hammond is considering tax hikes on fuel, homes, pensions, incomes and business as part of efforts to plug the public finances black hole, Tory sources have told the Sunday Times. Officials are also modelling the effects of cuts to higher-rate pension tax relief and delaying a cut to corporation tax for a year.
The Sunday Times, Page: 4
Government intervenes with rates relief
In a bid to speed up the business rate relief promised to thousands of small companies across England, Local Government Minister Marcus Jones has held a meeting with the main software providers to councils to ensure the necessary updates are in place to automate the process. The Chancellor said in March that millions of pounds of relief would be available, but many are still waiting for their bills to be adjusted. Capita, Civica and Northgate Public Services now have a 21 August deadline to provide local authorities with updated software to help them issue new bills to the affected businesses.
BBC News
Savers overtaxed on pension withdrawals
The Express picks up on news that savers are being overcharged when they make withdrawals from their pensions. More than 200,000 people are thought to have been overtaxed to the tune of £26m on one-off withdrawals using new pension freedom rules. The costly errors have arisen because the one-off withdrawals are being treated as if they were the first of regular, monthly pension payments which would leave them paying income tax at standard rates. Experts warned that the issue highlighted the need for an overhaul of the system.
Daily Express, Page: 1, 2
Construction workers “exploited”
The Unite union has warned that almost half of construction industry staff are now employed through agencies or payroll firms as self-employed, denying them workers’ rights and leaving them “exploited via the government’s own tax scheme”.
Daily Mirror, Page: 4
UK to start using VAT returns to measure GDP
The ONS plans to start using data from VAT returns following work with HMRC to resolve different performance messages they receive from tax records and business surveys.
Financial Times, Page: 3
A fifth of estate agents could go out of business
Research suggests the growth of online rivals could leave one in five estate agents at risk of going out of business, with almost 5,000 agents showing signs of financial distress. It warns that with higher staff and property costs, traditional agents are struggling to compete with online challengers. Traditional high street estate agents’ profit margins are being squeezed from both sides, from cut-price online competitors to their larger counterparts on the high street who are forcing them to up their spending or give up the race.
Daily Mail, Page: 30 The Guardian, Page: 20
British firms join in global deal spree
Figures show total global M&A activity rose to $109bn in the first half of the year, a rise of 60% on the year. British firms spent $42bn (£32bn) on other UK firms, more than double the outlay in the same period of 2016, while cross-border deals totalled $67bn. “The UK’s involvement in global M&A points to companies continuing to look abroad for deals and being attractive for inbound acquirers,” said Steve Ivermee. “The outlook for the UK economy and UK’s trading relationships may be uncertain, but many UK companies possess qualities, such as a focus on innovation and global presence, that will continue to make them attractive.”
The Daily Telegraph, Business, Page: 29
Previous News pages
Business News 28th July 2017
Business News 27th July 2017
Business News 26th July 2017
Business News 25th July 2017
Business News 24th July 2017
Business News 21st July 2017
Business News 20th July 2017