Marketing Newscast

The car loan mis-selling scandal could blow a £5.5bn black hole in Britain’s public finances, according to Treasury officials, who say the lenders involved will naturally look to offset any compensation payments they need to make to those who were mis-sold loans against their corporate tax bills, meaning reduced revenue for the public purse. The £5.5bn is an estimate of the tax receipts that could be lost as a result. Last week, the Supreme Court blocked Chancellor Rachel Reeves’ attempt to intervene in its consideration of the Appeal Court case that ruled it was unlawful for lenders to pay commission to dealers without a customer’s full knowledge and consent. If the Supreme Court agrees with the lower court, analysts estimate the resulting fallout will be bigger than that of the Payment Protection Insurance (PPI) scandal, which cost around £50bn. However, in that case, the then Chancellor George Osborne stopped high street banks from deducting these payments from their tax bills, helping stem a plunge in corporation tax receipts in the 2010s.The Treasury is understood by the Telegraph to believe that this precedent means car finance firms that are bank-owned will not be able to offset payments against their corporation tax bills, but the Treasury will still be exposed to a potentially significant reduction in tax revenues from most of the 7m outstanding car loan agreements conducted by “non-bank” lenders.

On Friday, it was revealed that tax receipts were £4.6bn less than had been expected. The Office for National Statistics (ONS) said the government recorded a monthly surplus of £15.4bn, against expectations by the Office for Budget Responsibility (OBR) of £20.5bn. The amount received was, however, the highest monthly surplus since monthly records began in 1993. Meanwhile, borrowing was revealed to have hit £118.2bn in the financial year to date, nearly £13bn more than the OBR forecast in October and the fourth highest at this point in the year since records began, fuelling concerns that Chancellor Rachel Reeves will have to raise taxes again next month – despite promises in the last Budget that her hikes were a ‘one off’ - when the OBR puts forward its updated economic forecasts. She has promised to make sure public spending does not outweigh tax receipts, and changed the Government’s fiscal rules to give herself a ‘buffer’ of around £9bn to ensure this, but that is now believed to have been wiped out.

In another sign the economy is stalling, research by jobs website Adzuna reveals that fewer than 828,500 jobs were available in January, a drop of 1.9% compared with December and down by 4.5% on January 2024, marking the worst January for hiring since 2021, when Covid restrictions were ongoing. Of particular concern is the fact that hiring almost halved in the retail industry, with the number of vacancies down more than 42% compared with January 2024. Retail is most likely to be negatively impacted by The Chancellor’s decision to raise the minimum wage and increase National Insurance contributions (NICs) paid by employers on staff wages. However, Adzuna also found the average advertised annual salary has increased to almost £41,000, according to new research, outstripping inflation, and thereby raising the spectre of ‘stagflagtion,’ which is when the economy slumps but inflation rises. Adzuna said the salary rises were because of “significant” increases in sectors such as manufacturing and maintenance, as well as annual increases in logistics, customer services and domestic help and cleaning.

Meanwhile, jobs cuts are reportedly on the cards for Britain’s pubs, restaurants and hotels according to a survey by The British Beer and Pub Association, the British Institute of Innkeeping, Hospitality Ulster and UKHospitality which found 70% of their businesses expected to cut back on employment levels because of the higher costs announced in Reeves’ Autumn’s Budget. 60% also expect to cancel planned investment and 29% will reduce trading hours to save money. 25% said they had no cash reserves left, a rise of 6% from three months earlier. A sixth (15%) of respondents reported they would have to close at least one site in order to keep operating. All the trade bodies urged the Government to delay the plan to cut the threshold at which NICs are charged. Reeves announced a raise in employer NICs to 15%, while also lowering the threshold at which contributions are due to £5,000 from £9,100. In addition, the national minimum wage will rise by 6.7% to £12.21 an hour from April, decisions the trade bodies said “will have damaging impacts on businesses, jobs and communities”. “At a time when hospitality has been one of the top contributors to economic growth, the last thing the Government should be doing is piling on costs that will impact employment and cut off our ability to grow,” they added.

Talks with India about a free trade deal have been relaunched. Business Secretary Jonathan Reynolds is in New Delhi today, meeting with his Indian counterpart commerce minister Piyush Goyal in the latest negotiations; there have already been more than a dozen rounds of talk but key sticking points are said to include visa rules for Indian students and professionals, as well as access for British service firms. The Indian economy is set to be the world’s third largest by 2028, and the country has already been the UK’s second largest foreign direct investor by volume for five years, with the trade relationship between the two countries worth £41bn and supporting 600,000 jobs across both, according to the ONS.

Ministers are considering whether to abolish the Payment Systems Regulator (PSR) and amalgamate it into the Financial Conduct Authority (FCA), according to Sky News.

A major US investor with close links to President Donald Trump has said he would avoid investing in “backwards” Britain under Sir Keir Starmer, The Telegraph reports.29-year old James Fishback, who launched his “anti-woke” investment fund Azoria Meritocracy at Trump’s Mar-a-Lago resort in December, said he would only ever trade shares in British companies in order to ‘short’ them, meaning he would bet against them rising in value. “You guys [the UK] are a totally backward country. We don’t want to be involved in that market one way or another,” he said.

Greater Manchester Mayor Andy Burnham has come under fire from hospitality businesses for backing plans for a new tourist tax to be introduced in the city. Burnham wants a “proper” mandatory “tourist levy” to replace a current voluntary scheme which urges guests at city centre hotels to pay £1-per-night to help fund the Accommodation Business Improvement District (ABID) initiative, which promotes Manchester and pays to clean the streets around hotels. However, Kate Nicholls, the CEO of UKHospitality slammed the proposal, saying: “It’s really disappointing that the mayor of Greater Manchester doesn’t seem to appreciate the damage a mandatory tourist tax would have on the city as a destination, which modelling shows would reduce visitor numbers and spending.” She added in response to Burnham’s claim that other cities have tourist taxes: “It’s frustrating to see the oft-used comparison to other major tourist destinations charging visitors a tax used yet again, without recognition that those cities have a significantly lower rate of VAT – often half the 20 per cent charged in the UK. Our visitors are already taxed considerably more compared to other countries in Europe – we shouldn’t be adding to that burden”.

The taxpayer has lost £5m on what The Telegraph refers to as a doomed attempt to create a £3.5bn Disneyland rival on the Thames Estuary. The £1.1bn Future Fund, launched by former Prime Minister Rishi Sunak to invest in firms to protect them from bankruptcy during Covid, has lost its whole investment in the resort after the company behind it was wound up last month. The Future Fund lent money to 1,192 companies and latest figures published by the British Business Bank (BBB) show it has seen cash returns from 86, and retains a stake in 680 companies. 309 have gone insolvent and 117 still have loans outstanding. Figures from the Department of Business and Trade dating to last April show that the fund has made a paper loss of almost £250m, the newspaper says.

Hong Kong's CK Infrastructure is said by The Financial Times to have made a preliminary £7bn bid to take a majority stake in Thames Water. CKI, which is part of CK Hutchison group, submitted the non-binding offer earlier this month, the newspaper said on Friday, adding that the deal was conditional on bondholders in Thames Water's near-£20bn debt pile agreeing to take significant writedowns. Last week, Thames Water received a £4bn bid from US private equity firm KKR.

BMW has scrapped plans to invest £600m in an overhaul of its Oxford Mini factory because of sluggish electric vehicle (EV) sales and what the German carmaker called “multiple uncertainties facing the automotive industry”. The plan had been to produce electric versions of the iconic British marque. The factory, which has operated for over a century and employs 3,100 people, currently makes only combustion engine cars, which will be banned from sale in the UK by 2030 under Government plans, hence BMW’s announcement has led to concerns for the future of the plant.