Marketing Newscast

(Edited 29 October 2024)

Chancellor Rachel Reeves is raising the compulsory National Living Wage (NLW) by more than triple the current 1.7% rate of inflation, from £11.44 to £12.10. The move will, according to Capital economics, add £1,100 to the annual salary of a typical minimum wage worker, but will also heap another £6bn in costs on employers. Reeves is also expected to end what has been called the “discriminatory” gap in the minimum wage rate for workers aged between 18 and 20 and older workers, to achieve a single adult rate, meaning a wage rise of nearly 8% for younger workers and even more additional costs to businesses. This is on top of an expected hike in employer National Insurance (NI) and the additional costs to business of Deputy Prime Minister Angela Rayner’s workers’ rights reforms. Tina McKenzie, of the Federation of Small Businesses, said: “Any increase to the NLW must be accompanied with powerful government measures to help small businesses create and sustain jobs,” she said, citing the need to increase significantly the Employment Allowance [1] “to help small businesses keep staff and build confidence when hiring new team members”. “Our research shows small employers face difficult choices as they adapt to increases in the tax they pay, including for workers on the NLW,” she said. Almost four in five (79%) of small business employers say the Employment Allowance should rise in line with the NLW every year.” Eduin Latimer, research economist at the Institute for Fiscal Studies (IFS), told The Telegraph that the higher costs to business would inevitably lead them to increase prices.

PolicyEngine has concluded that workers face losing hundreds of pounds from their payslips if the Chancellor does increase employers’ National Insurance (NI) contributions, as she is widely expected to do in tomorrow’s Budget. Giving the example of a worker on a £30,000 salary, PolicyEngine explains that an employer currently pays NI contributions of £2,884, bring the total basic cost of that employee to £32,884 per year.  If the Government raises the employer NI contribution by 1%, from 13.8% to 14.8%, and the employer does not change the salary, then the total NI cost rises to £3,093. To keep the total cost of employment fixed at £32,884, the employer would have to lower their salary to £29,818, which they may do, the think-tank argues. Nikhil Woodruff, chief technology officer at PolicyEngine, said: “Our analysis reveals that reforms to employer-side NI could generate billions in revenue, but the actual amount depends on how employers pass on the costs – with full pass-through to employees lowering the revenue impacts by up to 50%.”

If the Chancellor levies a wealth tax on Brits, the UK could take a near £100bn hit to GDP within a decade, according to a report published today by yhink tank The Taxpayers’ Alliance (TPA). A 2% tax applied to those with a net wealth of £10m or more has been mooted by several left-wing MPs and think-tanks. 30 predominantly Labour, Green and Liberal Democrat MPs have written to Rachel Reeves demanding she introduce a wealth tax to compensate for any departmental spending cuts she makes, and campaigners including Greenpeace and Thomas Piketty, author of Capital in the Twenty-First Century, want a wealth tax to fund climate change initiatives. However, the TPA warns the UK is especially likely to see an exodus of the wealthy if they face taxes on their individual net wealth. Because of the dominance of the UK’s services sector, there is a lower proportion of non-fixed assets such as would be found in an economy powered by agriculture, mining and manufacturing, so businesses would find it far easier to emigrate, the TPA says.  It estimates a 2% wealth tax levied on the top 1%, assuming a threshold of £1m in tax payments, would result in a £260bn reduction in taxable wealth; a 0.4% or £100bn reduction in UK growth; and a £1,107 hit to wages. The Conservative MP and former City Minster Andrew Griffith backed the report saying: “This important research by the TPA confirms that a wealth tax would do immense damage to the UK. Wealthy Brits already pay top whack with the top 1% of earners paying around 30% of all income tax and in general we have too many rather than too few taxes.”

Migration consultancy firm Henley and Partners, meanwhile, suggests that 6,000 millionaires are set to flee Britain for the European Union by the end of December. Wealthy entrepreneurs and high-net-worth individuals are “panicking” amid fears of a steep rise in the rate of Capital Gains tax and changes to Inheritance tax, the consultancy says.

Somerset tea shop owner Steve Corrick is urging the Chancellor to change the rules on VAT in her Budget, because as it stands, he says, the current threshold for paying VAT is forcing him to shut up shop one day a week, so he doesn’t “make too much money”. The former accountant calculates that opening every day means the business would take just enough money to pay VAT, but that he would then be worse off than if he earnt less. "If we take £90,000, we pay no tax. But if we take one more pound over that, we have to pay £15,000 VAT on the whole lot,” he said, so we will “actually be worse off”. "They call it 'the cliff edge', and it's just crazy," he added, noting too that it "means we're not employing people today, not serving the local community”.

Tenants in London are on average paying between one and two-thirds of their incomes on rent, significantly more than the rest of England and Wales, according to data from the Office for National Statistics (ONS). Average rents in the capital have consistently represented between 57.2% and 39.8% of household incomes since 2015, the ONS says, in contrast with other regions where rent as a percentage of income rarely surpasses 35%.

The Bank of England is forging ahead with plans to develop a retail central bank digital currency (CBDC), the so-called ‘digital pound,’ or ‘Britcoin,’ because of a lack of innovation in commercial banks, Governor Andrew Bailey said while speaking at the 39th Annual International Banking Seminar in Washington on Saturday. There was a “strong need” to modernise payments practices, he said, and that the BoE had to act as commercial banks were not innovating. Last year, the BoE said a CBDC, known as the digital pound, is “likely to be needed in future” as digital payments become ever more important in the economy. In response to fears the digital pound will end up replacing cash, Bailey confirmed the BoE will “supply cash for as long as the public want it”. Over 50,000 people responded to the consultation on the introduction of the digital pound, many of which focused on privacy concerns. with the Bank noting that there were widespread concerns about the possible consequences for privacy. But Bailey argued ‘Britcoin’ could help improve the payments system by preventing late payments and fighting fraud. A decision on whether or not to develop a digital pound is expected in 2025 or 2026.

Santander UK was supposed to release its quarterly results today but, because of Friday’s Appeal Court ruling in favour of consumers in the landmark case involving motor finance commissions, reported here yesterday, it is delaying that publication. Santander UK’s exposure to risk in having to potentially make compensation payments to those affected has been estimated at between £1.1bn and £1.7bn.

BAE Systems is planning to invest £220m to transform its Rochester base into an “advanced technology” factory, City AM reports. The site, which specialises in aerospace technologies and electronic systems, will be revamped into a “state-of-the-art” 32,000sqm facility, the defence company says, creating 300 more jobs over the next five years, in addition to the current Rochester-based staff of 1,600.

The Financial Conduct Authority (FCA) has fined Wise CEO Kristo Kaarman £350,000 fine to settle an investigation into regulatory disclosures related to his personal tax matters. Kaarmann failed to notify the FCA when he was fined by HMRC in February 2021, and added to the public tax defaulters list in September the same year, having failed to notify it of a capital gains liability following the sale of £10m worth of shares in 2017. This, the FCA said, was "careless as opposed to deliberate or reckless" hence he received a 30% discount on his fine, which would otherwise have been £500,000, and because he agreed to resolve the matter.

BT Group is said by The Financial Times to be looking to sell its Radianz unit as part of CEO Allison Kirkby's plan to simplify the telecoms group. Radianz, a service used by financial institutions to connect banks, brokers, exchanges and clearing houses to each other, was bought by BT from Reuters for $175m in 2005, along with a $3bn contract to supply the media and financial information group with all its network services. According to FT sources, the unit generates earnings of about £60m to £70m a year. BT and Citi, which is said to be working with BT on the disposal, declined to comment to the newspaper.

Evri has been named the UK’s worst parcel distribution company for the second year running by its customers, nearly one in two of whom reported a problem with its service. In an Ofcom review of the sector, the regulator found only 32% of customers were satisfied with Evri’s service for resolving customer complaints.

Odey Wealth Management has filed for voluntary liquidation after beginning to wind its business up a year ago. Its eponymous founder, Crispin Odey, was accused last year in a Financial Times investigation of sexually assaulting or harassing 13 women, throwing the hedge fund into crisis and leading to its ultimate demise. The FCA is still investigating Odey, who has denied the allegations.

Volkswagen is shutting at least three of its factories in Germany, potentially laying off tens of thousands of employees, and cutting pay by 10% for those who remain. The German car-making giant did not say which plants would be affected or how many staff could be laid off but told employees: “Management is absolutely serious about all this. This is not sabre-rattling in the collective bargaining round. This is the plan of Germany’s largest industrial group to start the sell-off in its home country of Germany.” Daniela Cavallo, head of VW's works council, also said VW's remaining plants would be downsized. The firm has been negotiating with unions over cost-cutting plans it deems necessary because of rising labour and energy costs, and it is struggling to remain competitive amid weaker demand from China and Europe. It is also struggling to fund the shift to electric vehicles, where it is also lagging behind competitors in China. As well as the Volkswagen brand, the group owns Skoda, Seat, Audi, Lamborghini and Bentley – as well as much of Porsche.