Marketing Newscast

(Edited 06 December 2024)

The Bank of England’s (BoE) latest monthly online survey of company leaders has found that more than half of them expect to raise prices in response to the Budget, with reductions in staff and pay also likely. 54% of the Bank’s Decision Maker Panel expect to put up the cost of their products and services in response to the changes to employer National Insurance contributions (NICs), the lowering of the NI salary hreshold, and the increase in the minimum wage, and the same proportion also expect to lower employment. 38% of firms expect to offer lower wages than they otherwise would have done, while 59% said they would absorb the extra costs in profit margins. Just 3% said the Budget would have no impact on their decisions. Firms also now expect prices to rise by 3.8% in the coming year, while their expectations for employment growth has turned negative for the first time since October 2020. “With lower wage growth the least common response, it seems likely that more of the payroll tax hike will feed into inflation than the MPC [the BoE Monetary Policy Committee] and the OBR [Office for Budget Responsibility] assumed, Rob Wood, chief UK economist at Pantheon Macroeconomics, commented to City AM. BoE Governor Andrew Bailey said yesterday the impact of the employer NICs hike was the “biggest issue” for the bank’s interest rate-setters in the immediate future. “How companies balance the mixture of prices, wages, the level of employment, what is taken on margin, is an important judgement for us,” he said in a broadcast interview. The BoE’s November forecasts suggested the Budget will push up inflation by around half a percentage point. The BoE decision maker survey panel gives a bellweather on businesses' expectations, uncertainty and topical policy issues. The BoE receives around 2500 responses a month from the panel, which only includes firms with more than 10 employees.

The Confederation of British Industry (CBI) has downgraded its forecasts for the UK economy from 1.9% growth next year to just 1.5% growth, saying the Chancellor’s maiden Budget will mean businesses face higher employment costs, and that the £70bn of additional public sector spending announced by Rachel Reeves in October will also crowd out private sector investment. In 2026, the lobby group expects there to be 2% – or £6bn – less business investment than it had predicted in June, mostly because of this. CBI chief economist Louise Hellem said: “Measures in the Autumn Budget will increase firms’ costs at a time when their profit margins have already been under pressure. Many businesses have told us that these measures will likely push up prices and weigh on their hiring and investment plans going forward.”

The Chartered Institute of Public Relations (CIPR) is lobbying the Government to replace the 2014 Lobbying Act with fresh legislation, arguing it is “so riddled with exemptions that it is basically more loophole than law.” The existing law established a register of external, third-party consultant lobbyists, but in-house lobbying from business, charities and trade unions, for example, is exempt, The current law also only covers communication with ministers and top civil servants; it excludes contact with MPs, special advisers, mayors and other political figures, a state of affairs CIPR CEO Alastair McCapra said left the “overwhelming majority of activity flying below the radar”. “These are not little loopholes, but giant chasms,” he said, adding: “The exemptions are so baked into the text of the Act that it is beyond repair, meaning we need a total overhaul. We need to replace the existing register of lobbyists – and a very small slice of lobbyists at that – with a register of lobbying activity”. According to research by Transparency International (TI), just 4% of lobbying activity that takes place in the UK is registered at the moment, a statistic borne out by the CIPR’s own research. McCapra told City AM while the Labour Party expressed “initial enthusiasm” prior to the election for the wider issue of lobbying reform, they have “gone quiet since taking office”. In its early days in office, Labour was hit by a series of scandals involving a significant number of ‘freebies’ to Ministers including free clothes, spectacles, and concert tickets.

The CEO’s of Gatwick, Edinburgh and Birmingham airports have hit out at changes introduced in the Budget which they say will harm their industry and force prices up for passengers. The bosses of Gatwich and Birmingham singled out the threat to their businesses from rising Business Rates bills in England: last week, a leaked letter to the Treasury from trade body AirportsUK claimed the industry would see increases of more than £1bn in the tax because of a re-evaluation of business premises, a fivefold increase on current levels. Speaking at the AirportsUK annual conference in London yesterday, Gatwick’s Stewart Wingate said the Government must address the issue “at the earliest opportunity,” as the changes are “just not acceptable.” “At Gatwick, we’re expecting an increase which is about six or seven times the amount of rates we pay today, which is about £40m,” he said. Meanwhile, Birmingham Airport boss Nick Barton said the airport was looking at a 400% increase in costs, which he described as a “huge issue.” Wider cost challenges faced by airports have also been fuelled by the changes to National Insurance, he added. The October Budget also put up Air Passenger Duty (APD), which Edinburgh Airport’s chief executive Gordon Dewar said was a “really strange place” to target and the “opposite of what we need.” Politicians need to “step back and get out of the way,” he added.

Construction in the City of London has fallen by half in a decade, according to figures from the City Property Association (CPA), a fact it attributes to not only higher interest rates but also much more complex building regulations and other requirements. These include new well-being and building sustainability regulations, which make it more difficult for projects to achieve viability. Ross Sayers, chair of the CPA, said: “The complexity and length of time taken to deliver new major development, in addition to the challenging economic environment in which build costs have soared, is holding back the City’s ambitions”. The amount of office space under construction in the City has fallen to around 500,000 square meters, roughly half of the 1m square meters under construction ten years ago.

Car makers are discounting electric vehicle (EV) prices by an average of £11,000 per car to boost sales, The Society of Motor Manufacturers and Traders (SMMT) said yesterday, partly because of the Government’s ZEV mandate which requires 22% of all new car sales to be of EVs. The rush to meet these legally-binding targets, or face fines, means companies are resorting to “heavy discounting,” the SMMT says, adding that by the end of 2024 car manufacturers will have spent £4bn on discounting, double a previous estimate.

Insurer Direct Line has provisionally accepted a £3.6bn takeover offer from Aviva, after rejecting two earlier approaches, with the deal due to be formalised on or before Christmas Day. Direct Line and Aviva are the second and third largest motor insurers in the UK respectively.

Energy giants Equinor and Shell are combining their British offshore oil and gas assets to create what they say will be the UK North Sea's largest independent oil and gas producer. The Norwegian and UK firms will each own 50% of the new joint venture, which is expected to produce more than 140,000 barrels of oil equivalent per day in 2025. In the UK, the Norwegian operator currently produces around 38,000 barrels and Shell 100,000. Equinor employs around 300 people in oil and gas roles in the UK, while Shell employs approximately 1,000 in similar positions across the country. The merged company will be based in Aberdeen. "With the once prolific basin now maturing and production naturally declining, the combination of portfolios and expertise will allow continued economic recovery of this vital UK resource," they said in a joint statement.

Thames Water's largest creditor group has been unable to prevent the company from using a £3bn emergency loan to pay expected fines from Ofwat over the coming year, Sky News says. It is thought Thames may have to forfeit hundreds of millions of pounds for environmental and performance failings, yet a veto that was thought to give the water group's primary lenders – responsible for two-thirds of the company's £15bn debt pile - the ability to block payments of fines from the loan, appears to have been removed during early talks with the regulator.

Marks and Spencer has received approval from Angela Rayner, Secretary of State for Housing, Communities, and Local Government, to demolish and rebuilt its Marble Arch store on Oxford Street. This decision gives M&S the green light to go ahead after a series of earlier refusals by the planning authorities. Plans to knock down Orchard House, which dates to the 1930s, replacing it and two adjacent buildings with a new 10-storey mixed-use building comprising retail, café, restaurant, offices and a gym, were first submitted to and rejected by Westminster Council in 2021.They were also rejected by the former Secretary of State Michael Gove, and by the High Court, after M&S sought a Judicial Review of that decision. M&S CEO Stuart Machin said: “I am delighted that, after three unnecessary years of delays, obfuscation and political posturing at its worst, under the previous government, our plans for Marble Arch – the only retail-led regeneration proposal on Oxford Street – have finally been approved. We can now get on with the job of helping to rejuvenate the UK’s premier shopping street through a flagship M&S store and office space, which will support 2,000 jobs and act as a global standard-bearer for sustainability”.

Sky News’ Mark Kleinman is reporting that sources close to the Guardian newsroom say the board of the newspaper’s owner, the Scott Trust, signed off on the sale of The Observer to Tortoise Media last night. Observer staff have also been called to a meeting this morning with the chair of the Scott Trust and the Kath Viner, Guardian editor-in-chief, presumably, Kleinman says, to notify them that the sale will proceed. Tortoise Media is a start-up founded by former BBC News director and The Times editor James Harding, and Matthew Barzun, a former US ambassador to the UK.

Tullow Oil CEO Rahul Dhir is resigning from the company next year "to pursue other business, academic and family interests". The search for his successor has begun and Dhir will stay in his role until a date to be determined "to ensure a smooth transition," the London-listed company said.