Marketing Newscast

Business leaders dismayed by the Budget are warning that yesterday’s fall in employment is just the start of an economic slowdown. According to the Office for National Statistics (ONS), the rate of UK unemployment rose to 4.3% in the three months to September, up from 4% in the three months to August, and the number of job vacancies fell to the lowest level in three years. Alexandra Hall-Chen, principal policy adviser for employment at the Institute for Directors (IoD), told City AM yesterday that the figures point to a “concerning trend” in the labour market, and one Government policies such as the employer national insurance contribution (NICs) increase, proposed new workers’ rights legislation, and a higher minimum wage, will all contribute to. According to an IoD survey, a higher proportion of business leaders are expecting to reduce their headcount than increase it for the first time since October 2020. “The cumulative effect of these changes will ultimately be to stifle job creation,” Hall-Chen said. Her concerns were echoed by Matthew Percival, future of work and skills director at the Confederation of British Industry (CBI), who also warned these polices would contribute to “spiralling employment costs” and impact growth. “When margins are squeezed too far, employers lose the headroom to pursue growth and a growing number are facing difficult decisions between cutting either investment or jobs,” he said. Meanwhile, Jane Gratton, deputy director of public policy at the British Chambers of Commerce, urged the government to “minimise the combined impact” of the policy changes. “We need urgent action to drive growth, tackle the skills crisis, boost workforce health and reduce inactivity in the labour market,” she said.   The government’s own estimates suggest that the new employment laws will place an additional £5bn cost burden on businesses. 

Sky News, meanwhile, has obtained a draft copy of a letter to Chancellor Rachel Reeves coordinated by the British Retail Consortium (BRC) which presents a stark analysis of the negative impact of her maiden Budget. "The sheer scale of new costs in the Autumn Budget and the speed with which they occur, together with costs from a raft of other regulation, create a cumulative burden that will make job losses inevitable, and higher prices a certainty," it reads. The letter goes on to point out that the BRC estimates the changes to employer NICs changes alone will increase retailers' tax burden by £2.3bn annually, three-quarters of which because Reeves lowered the earnings threshold at which it is paid on employee salaries from £9,100 to £5,000. Meanwhile, the BRC puts the cost of the National Living Wage (NLW) uplift at £2.7bn and the increase in business rates costs at an extra £140m. Reeves is reducing Business Rates Relief for eligible businesses from 75% to 40% from April 2025. "There will also be input cost pressures as our UK suppliers deal with the same changes,” the letter continues. "These costs are alongside other complex regulation, including Extended Producer Responsibility (EPR) and the deposit return scheme for drinks (DRS), which together will cost the industry some £2bn… and an estimated £300m - £800m in 2026 and beyond from the implementation of the Employment Rights Bill, based on data in the government's own impact assessment of the Bill." "Retail is a highly competitive industry and retailers' margins are low. Before the budget, the industry was paying 55% of profits in business taxes, the highest effective tax rate, along with hospitality, of all industry sectors. It will not be possible for businesses to absorb such a significant increase to their cost base over such a short timescale. The effect will be to increase inflation, reduce jobs and pay growth, especially at the entry level, and bring investment down. We are already starting to take difficult decisions about investment in our businesses and this will be true right across the industry and its supply chain,” it continued. The BRC's members consist of the major supermarkets, including Asda and Tesco, as well as hundreds of other well-known chains, including B&Q's parent company, Kingfisher.

Andrew Higginson, Chairman of both JD Sports and the British Retail Consortium, acknowledged the existence of the letter to Reeves on the BBC Radio 4 Today programme  this morning, and warned April’s tax rises will be “too much to bear” for businesses. Consumers face “significant inflation” unless the Chancellor agrees to gradually phase in her £40bn of tax increases, he said. “It is all very well giving people a 6.5% pay rise through the national minimum wage but if at the same time inflation goes through the roof, it’s not a real increase, is it?” he said. “I think it’s the scale of all of the increases that have come at once,” he added. “You’ve seen a bill for retail across National Insurance, minimum wage, the changes to [business] rates which means rates are going up despite the fact we were promised that rates would be coming down for retail, you’re seeing a £5bn a year hit and there’s only two ways to deal with that. One is to cut back on investment, cut back on recruitment, cut back on headcount, cut back on jobs. Secondly, to put up prices”. “The cumulative effect of all these changes is too much for industry to bear in the sense of them being able to get on and invest and grow”.

Thwaites is also saying the hike in employer National Insurance contributions (NICs) and the NLW increase will place a “significant burden” on the historic brewer, pub and hotel owner, saying the increases will “make it less attractive to employ people and reduce investment”. One way or another, the brewer argues, the burden of the tax rises will hit “working people through either lower pay awards or reduced employment”. The business also said that the Government’s decision to reduce business rates relief for hospitality from 75% to 40% hits what has been a “lifeline for pubs that are already overtaxed, which for some will be the final straw”. The 1p reduction in the price of a pint is “irrelevant against the context of these new measures,” it added in a statement accompanying presentation of its full-year results: Thwaites posted turnover of £115.5m and a pre-tax profit of £9.1m in the year to 30^th September.

Entrepreneur Ranjit Singh Boparan, who owns Bernard Matthews, Gourmet Burger Kitchen and Carluccio’s, has also labelled Rachel Reeves’ Budget a “disaster for business,” and one that will “deliver a final fatal blow to the thousands of small family-owned farms”. The “inheritance tax raid” on farms “risks supply being severely compromised,” he warned, adding “food inflation and food insecurity” will result and there will be “less people investing in food production in the UK”. “Farmers have been hit with massive inflationary rise in costs in recent years like feed, energy, labour, then we had a couple of particularly challenging years with high levels of Avian Influenza and the war in Ukraine,” he said. “This instability in the supply chain means we’re always vulnerable to geopolitical events.” He also said the move “does not align with the Labour government’s aspiration to adopt policies to ensure food security in the UK” and “makes a mockery of the government claiming to want a self-sustaining farming sector that champions British-made food. This tax rise does the exact opposite of that – it kills the sector; stifles supply and ultimately prices will rise.”

The Court of Appeal has refused an application by banks Close Brothers and Firstrand to take a case brought against them by motorists in receipt of motor finance to the Supreme Court. The Court of Appeal ruled last month that the lenders had broken the law by receiving commissions on motor finance deals without obtaining their customer’s informed consent. When the original ruling was made, Close Brothers – which could be on the hook for some £640m in total compensation payments to motorists - saw its share price plummet; over the last month its value on the London Stock exchange has fallen by almost 45%. The bank said it intended to appeal the Appeal Court ruling, but now it will have to approach the Supreme Court directly, to ask whether it will hear the case. Unusually, the Appeal Court provided clarification on why the application had been refused, saying it was of the view that “there are no arguable grounds for appeal in the present case, which was the clearest possible example of payment of a secret commission to a fiduciary.” “The law in this area is well settled and in no need of any further clarification,” the court added. The Appeal Court also awarded nearly £65,000 in costs to the claimants, with an initial interim payment due by 15^th November. UPDATE: It has just been revealed that The Financial Conduct Authority is to write to the Supreme Court asking it to make a quick decision on whether it will allow lenders to appeal this ruling, which triggered the motor finance mis-selling scandal. The FCA also said it would consult on extending the time that companies have to respond to consumer complaints. “Motor finance firms are likely to receive a high volume of complaints in response to the recent Court of Appeal judgment. Any complaint extension would allow them time to consider how these might be efficiently and effectively handled. This would help prevent disorderly, inconsistent and inefficient outcomes for consumers making complaints, motor finance firms and the market,” it said earlier.

City AM reports that The Chancellor will, in her maiden Mansion House speech to city bigwigs tomorrow, set out its plans for a “world first” private stock market, a regulated stock exchange system called Pisces, where investors can trade shares in private companies. Pisces – the Private Intermittent Securities and Capital Exchange System – was dreamt up by the previous government as part of efforts to revive UK equity markets and is designed to act as a “stepping stone” for firms mulling a public float and offering investors an opportunity to sell their stakes in companies. “This is a significant step for our capital markets, giving investors the chance to get in on the ground floor of some of the most exciting companies around and supporting those businesses to grow,” a Treasury source told the newspaper. While an initial consultation on the market closed under the previous government in April, the Treasury’s response was shelved until after the election. Reeves is now expected to publish a formal response to the consultation this week, City AM reports. Labour ministers are said to have thrown their support behind the idea, and Reeves confirmed in her Budget last month that shares traded on the exchange will be exempt from stamp duty.

The Post Office is expected to announce up to 1,000 HQ job losses and close 115 loss-making branches it wholly owns to cut costs. It will also seek enhanced remuneration terms for its franchisees who run 9,000 post office branches independently. A Post Office spokesperson told Sky News it will today “set out a ‘New Deal’ for postmasters and the future of the Post Office as an organisation. It will dramatically increase postmasters’ share of revenues, strengthen our branch network and make it work better for local communities, independent postmasters and our partners who own and operate branches.” The Communication Workers Union (CWU) told the BBC that for the company to propose such plans as the public inquiry into the Horizon IT scandal continues was "immoral" and "tone deaf". "We call on the Post Office to immediately halt these planned closures," General Secretary Dave Ward said.

Meanwhile, Paul Patterson, who heads up Fujitsu Europe, admitted to the Post Office Horizon inquiry yesterday that he "does not know" if the IT system at the heart of hundreds of sub-postmasters' wrongful convictions – which is still being used in post offices - is reliable. There have been “bugs errors and defects" in the accountancy system and it is clear "that there is a level of unreliability," he told the inquiry. He also said he did not know whether Fujitsu had done an independent report into the software system, but that he would welcome a third-party investigation. Fujitsu's Horizon contract is up for renewal early next year and could be extended for a further five years, something Patterson said he was "very worried" about, given Horizon’s unreliability. "In my experience... if you don’t keep [IT systems] upgraded, I cannot determine what will or will not happen, which is part of my nervousness of it being extended," he said. He also said Fujitsu was committed to paying out compensation to the victims of the scandal, calling it a “moral obligation”, but that the firm would wait until the end of the inquiry to do so. Earlier, Conservative Party leader Kemi Badenoch gave evidence in her role as the former business secretary; the government-owned Post Office came under her remit then. She admitted it was "extremely disappointing" that it took an ITV drama to escalate compensation payments related to the scandal, and that work done on the issue by the previous government, was "too slow". On Monday, current Business Secretary Jonathan Reynolds said ownership of the Post Office could be handed over to its thousands of sub-postmasters across the UK. "Nothing should be off the table for the future of the Post Office," he said, adding that the organisation's future will be set out in the first half of next year. After more than two and a half years, this is the final week of evidence being heard by the inquiry.

Thames Water has got support from three-quarters of its creditors – the legal requirement - for an emergency funding deal which offers the debt-riddled utility a £3bn lifeline. The plan would see Thames Water get an initial £1.5bn at an annual interest rate of 9.75%. This, the company says, will tide it over until October 2025. However, the deal will need to be approved by the High Court. Thames is aiming for a 17^th December hearing date

Metro Bank has been fined over £16.7m by The Financial Conduct Authority (FCA) for failing to adequately monitor over 60m transactions for money laundering risks between June 2016 and December 2020. “Metro automated the monitoring of customer transactions for potential financial crime in June 2016. However, its system did not work as intended,” the regulator said. It added the transactions had a total value of £51bn.

The Chartered Institute of Environmental Health (CIEH) is urging the Government to scrap the 24-hour notice requirement Local Authorities must give to landlords before entering a property. In a letter sent to the Renters’ Rights Bill Committee of MPs, the CIEH wrote: “It gives the landlord 24 hours’ notice that the tenant has complained. The landlord can then appear at the inspection, which can be an intimidating experience for a tenant.” Megan Eighteen, president elect at landlord trade body Propertymark, said it was “only fair” that property owners were allowed to attend inspections – especially as they are responsible for any works. She told The Telegraph: “Often when we talk about rogue landlords, or landlords who are behaving in an unacceptable way, we are talking about the exception, not the rule.  The problem we have at the moment is that legislation is being continuously written for the exception, the unusual case, not for your day-to-day landlords.” The Renters’ Rights Bill, which is currently making its way through Parliament, is set to abolish so-called “no fault” evictions, introduce a new ombudsman for the private rental sector and make enforcement against rogue landlords stronger.  Tenants will also be able to demand to have pets, and be able to challenge “unreasonable” rent increases.

Cycling brand ASSOS of Switzerland has launched legal action at the High Court against UK fast-fashion giant Asos, City AM reveals. The Swiss brand filed a breach of contact claim last Friday, with Asos Plc, Asos.com and Asos France named as defendants. It is not yet clear, however, why Assos is suing the online fashion retailer.

And finally… Grocery sales hit a four-year high in October, according to the latest data from market researcher Kantar. The number of shopping trips made by households rose to 480m, their highest level since March 2020, before the first national Covid lockdown. In total, take-home sales generated £11.6bn in the four weeks to 3^rd November, up 2% over the same period last year. Halloween played a part in that, as 3.2m households bought at least one pumpkin, and confectionary spending accounted for £525m, nearly 5% of total sales. Purchases of chocolates and sweets rose 13% and 7%, respectively, Kantar says. Households also appear to have begun their Christmas shopping early: 14.4% of all households bought mince pies and 648,000 shoppers picked up a Christmas cake during the period. Overall, grocery prices were up 2.3% year-on-year during the period. , Ocado saw the strongest year-on-year growth in sales during the period at 9.5%, followed by Lidl at 7.4% and Tesco at 4.6%. Sales at Asda dropped 5.5% and at the Co-op, sales were 2.1% down. Meanwhile, Marks & Spencer has overtaken Waitrose as ‘Middle England’s’ grocer for the first time, according to unpublished Kantar data seen by The Telegraph.  While M&S’s share of the market has risen to 4.03%, Waitrose’s has fallen to 3.91%.