As the festive season approaches, the business news continues to be dominated by reverberations from the Budget. There has been a stream of grim warnings about job cuts and closures from prominent business leaders in the sectors, which will be most seriously affected.
UKHospitality predicts a £3bn annual hit from next April, while the British Retail Consortium is forecasting an even bigger blow of around £7bn from the National Insurance hikes, increased National Minimum Wage and a doubling of Business Rates for many smaller businesses.
Consumer confidence and spending
The incoming economic data is doing little to raise the mood, although the respected GfK consumer confidence index has reported an improvement from -21 to -18 in November as pre-Budget anxieties have eased. It also showed a positive move from -21 to -16 on its major purchase intentions measure.
This flies in the face of research published in mid-November by Go.Compare suggesting that 35% of people have taken the tough decision to cut their Christmas spending budget this year. In monetary terms, respondents reported that spending will be down by a third to an average of £434 each, compared to £658 in last year’s survey.
Corporate insolvency
The corporate insolvency statistics for October fell back, dropping by 5% compared to September 2024 and by a startling 19% against October 2023. This is the second successive month where the news on this front has been positive, so it could be that we saw peak insolvency in the summer. However, the spectre of a new surge in company collapses both before and after the Budget tax rises bite next April is exciting pessimists and worrying optimists.
An exception to this trend is Scotland, where insolvencies for October showed a dramatically different picture to the national outcome. Scottish corporate insolvencies jumped a huge 59% compared to September 2024 and by 18% against October 2023.
Latest economic data
Looking at other aspects of the economy:
Inflation
Inflation has climbed back above the Bank of England’s target rate of 2%. After dipping to 1.7% in September, energy prices rises and higher air fares pushed it up to 2.3% in October. Market expectations had been a little lower at 2.2%.
GDP
GDP growth has all but stalled, coming in at only +0.1% for Q3 2024. This compares poorly with growth of +0.5% in Q2 and +0.7% in Q1. The vital service sector saw +0.1% growth, production fell by -0.2% (although within this manufacturing was up +0.2%) but the star performer was construction with a rise of +0.8%.
Growth may still be just about happening in absolute terms, but on the more realistic measure of growth per capita, GDP fell back -0.1% in Q3 2024, suggesting that there is little productivity or efficiency improvement happening.
Government borrowing
Government borrowing rose to £17.4bn, the second highest October figure since monthly records began in 1993 and despite a rise in inheritance tax receipts. City economists had expected a smaller figure of about £12.3bn after borrowings of more than £16bn in September.
Employment statistics
The Office for National Statistics finally admitted that its labour market data is too unreliable to be taken seriously after responses to its latest monthly survey fell to only 13%. The pre-pandemic rate averaged 39%. The Resolution Foundation believes that around 1m people are missing from the employment numbers and that the economic inactivity figures, which have been causing such anxiety, are seriously exaggerated.
Will the Budget be a blow to business investment?
The media are reporting escalating numbers of high profile companies announcing pauses or cuts to their investment plans. This will not be what the Chancellor wants to hear as the government strives to generate meaningful growth, but it reflects a sensible degree of caution.
How should businesses react?
The swift decisions by major companies to rein in their ambitions as business conditions deteriorate is a recognition of the difficult times ahead for large swathes of the UK economy and is something that should be heeded by the wider business community.
If you are seeking professional advice for your business, Opus is here to help. You can speak to one of our Partners, who can discuss options with you. We have offices nationwide and by contacting us on 020 3326 6454, you will be able to get immediate assistance from our Partner-led team.