Retail (1)
Business is steady with one month up and the next month down, but it could be much worse. We have been affected this year by a shortage of stock caused by moving production of some items from China to India, although some of these issues were internal, not allowing enough time for the new suppliers to build up production. It is a lesson learnt!
Going into next year stocks will be much better and hopefully retailers will have sold the overhang of stock they inherited from the Covid period. All we need is demand to hold up, unless of course the Chancellor kills it.
Freight rates are fairly steady but the sterling exchange rate is slipping against the dollar so that may push up our import costs.
We have been successful in securing two grants, one of £21,000 towards a new heating system we are installing and another of £25,000 towards the costs of exhibiting at a trade show in Germany in February.
A lot of time has been spent at our warehouse in the US. We are finding staffing a real problem here in New Hampshire. There seems to be pretty well full employment and people are very picky about the job they take. On the other hand the US staff we have do a good job. There seems to be quite an upbeat mood about the new President taking over in January although people are concerned about the imposition of tariffs which they seem fairly sure will happen.
What I am really concerned about are the proposed changes to IHT for business owners. There is such a lot of noise about farmers and I fully back their protests, but there seems to be very little noise from the business community. Why aren’t there more protests from the business community?
Retail (2)
Trading from shows are up. Retail is strong, predominately online. Although very weather dependant in this business.
Regarding the political changes, the press has a large part to play.
Transformational year for retail in general – preorders, paying with phones, click collect. Those who have done well are those that been agile, adapted and moved with the technology. AI will be next and this will help with internationalisation. The introduction of chat bot has been good for when resource is not around, alongside using semi-automated email replies using human knowledge base. Voice activated AI customer services will also be next. These changes enable resource to be used on more proactive, fulfilling, value add roles. Innovation key to future.
Education (1)
Budget
The UK Government announced in its recent Autumn budget that Day to day spending on the NHS and education in England is set to rise by 4.7% in real terms this year, before a smaller rise in the following year. When you delve into the small print of the 170 page accompanying budget report, you see that spend on education is actually predicted to grow by 3.4%. The report include plans: “To raise school standards for every child, the core schools budget will increase by an additional £2.3 billion next year, increasing per pupil funding in real terms. This further supports delivery of the government’s pledge to recruit 6,500 teachers.”
Other announcements included:
expanding the government’s commitment to skills by providing an additional £300 million for further education to ensure young people are developing the skills they need to succeed. In addition, the government is:
- investing £40 million to help deliver new foundation and shorter apprenticeships in key sectors, as part of initial steps towards a reformed Growth and Skills Levy.
- committing to delivering the Lifelong Learning Entitlement (LLE), with a revised launch date of January 2027. The LLE will expand access to high-quality, flexible education and training for adults throughout their working lives.
There was also confirmation that the first new nursery places in primary schools in England will be rolled out from next year, along with breakfast clubs.
The government also announced further changes including new report cards on schools and a new mix of subjects to be taught in England’s schools.
Following announcements at September’s Labour Party conference that VAT will be added to private school fees within 100 days despite some opposition from families arguing they will be penalised, it was later confirmed in the budget that starting January 1, 2025, private school fees will be subject to a 20% VAT rate. Early responses to the Budget include an announcement of legal action by private schools to challenge the government’s plans for VAT on private tuition fees.
Apprenticeships
The government’s focus on a revised skills levy and a focus on new foundation and shorter apprenticeships in key sectors, looks to be offset by reducing support for higher level apprenticeships including most Level 7 apprenticeships. FE week reported earlier this month that the axing of level 7 apprenticeships from levy funding will be “pretty widespread”, according to Jacqui Smith, the skills minister in a warning to the sector at the AELP Autumn Conference. She suggested a blanket ban on public subsidy for the programmes is coming and argued that “we’ll be asking more employers to step forward and to fund level 7 apprenticeships outside of the levy.”
This has raised significant concerns for training providers, universities and employers who fear that removing all level 7 apprenticeships from the levy will disproportionately hit the NHS, schools, councils and the civil service which often spend their levy on these apprenticeships. The Chartered association of Business Schools, CBI, UUK and CMI have collectively lobbied government on the wisdom of this claiming that there were 17,490 Level 7 business and management apprenticeship starts in 2022-23. According to the CMI 60% of Level 7 management apprentices are in public services such as the NHS, social care and local government.
Very recent plans at the University of Worcester to develop customised pathways for the Level 7 senior leadership apprenticeship to provide developmental opportunities in education and healthcare have now been shelved.
Help to Grow
Surprisingly, Help to Grow, the DBT-funded mini-MBA programme that was the brain child of Rishi Sunak (whilst Chancellor), has received a small mention in the budget and looks set to survive the anticipated cull of previous government’s ventures. Worcester has been surprised to welcome agreement of an additional funded allowance by DBT to run a 4th Help to Grow programme next year commencing Feb 2025. There are more than 50 Herefordshire and Worcestershire SME business leaders represented in recent alumni from this programme some of whom have subsequently progressed onto the Worcester exec MBA programme. If we are successfully in having confirmed fourth cohort allocations for financial year 25-26, then we will be looking to co-develop a Help to Grow programme with our friends here at NMITE for a Herefordshire based programme.
Education (2)
HEI is still a tough gig. Student recruitment is a primary focus, juggling this against the changes to international student recruitment. Initially circa 40% HEI’s were forecasting a deficit, this has now increased to over 70% of Universities are expected to be in deficit in 2025.
Increased costs: energy, Salary, Increase NI – all impacts the sector.
NMITE continues to focus on portfolio development and commercial growth to mitigate some of these challenges. Increase in collaboration with local businesses and organisations.
Flooding – Holmer Yazor Brook. Jesse has written to Secretary of State for education and I am meeting with the leader of the Council.
Education (3)
c.50% of school leavers got to vocational roles. The college has had a rising number of vocational students for a number of years, including plumbers, construction, electricians. But these are space hungry qualifications to run. There has also been a steading increase in HND/HNC technical areas, levels 6 and 7.
New space has been dedicated to Sustainability qualifications to ensure the current are qualified in modern sustainable technology.
The apprenticeship levy should be able to be used for all training, including higher level qualifications.
More recently there has been a greater requirement for those with special needs, which does increase costs and resources.
Increases from the budget will be a big impact as 2/3 of the Colleges costs are staff costs.
Food, Drink and Agriculture (1)
Hospitality now coming into the seasonal busy pre-Christmas and Christmas period and currently trade remains reasonably positive and buoyant. However, serious issues for the sector came out of the recent budget namely business NI increases, minimum wage increase, further duty increases and a reduction in business rates relief – which could have significant implications for the sector. The changes will almost certainly lead to price rises across the sector as with slim margins already being experienced there is little if any room to absorb further costs. Growth across the sector both in investment and labour may be somewhat curtailed at least during the first half of 2025 as businesses adjust to the new tax regimes etc.
As no doubt everyone has seen the agricultural sector is in turmoil mainly due to the change in IHT announced in the last budget coupled with continual cost pressures in a sector that also operates on thin margins. The underlying atmosphere is one of betrayal, mis-understanding of the sector and militancy – the farmers’ disappointment will no doubt lead to further protests and demonstrations. Coupled with this is the significant wet weather conditions of late, which again has caused issues.
So both sectors both hospitality and farming will continue to have significant ongoing challenges as the year draws to an end and budget changes start to bite in the first half of 2025.
Agriculture, Horticulture, Farming, Tourism (2)
The Three Counties is a Showground used to promote agriculture, farming, rural skills and crafts via fundraising shows and showground hire This year over 850 businesses have exhibited and the year has been outstanding.
The business is driving higher volume ticket sales, whilst holding prices. They have been oversubscribed on trade stands. The venue has been hired for 63 events, most weekends of the year. Costs have increased but these have been pushed back where over and above inflation. Employers NI is a huge challenge.
In terms of agriculture – the farmers union have responded directly to the budget, trying to debunk some of myths around changes. In horticulture, the Royal Horticulture Society are pushing peat free at shows in 2026 which will have an impact on nurseries and their desire to participate in shows.
Defence
Defence is a mixed bag. Exports are good for those offering niche capabilities (such as night vision, specialist munitions, and drones) or commodity capabilities that are in short supply/high demand (such as medical kits) – with the destination being one of the many global conflict hotspots. Domestic defence procurement remains frustrating, inefficient and inconsistent. By my calculation MOD has had a spending freeze imposed upon it for about 50% of the FY – whilst the larger companies will survive, expect several small companies, or those still trying to manage debt from the COVID period, to disappear over the next 12 months.
Trump won convincingly, as predicted, and this will affect the Defence industry over the next few years. If he does what he says, then he will force a settlement between Russia and Ukraine, which will obviously have an impact on UK Defence exports to that region. However, he will also put pressure on NATO countries to commit appropriate GDP allocations to their defence budgets – and this will create demand for local defence companies, particularly in those areas where UK leads or excels.
The labour government is unlikely to prioritise defence over other more ‘left voter leaning’ departments, and the recent budget did nothing to help MOD. Yet, Labour realises that they need to maintain a defence industrial base – remembering that the first role of government is to protect its people! It seems to want to do this by driving exports, and I expect the UK Industrial Strategy paper (due Apr 25) to articulate guidance. There is logic to this – UK is home to 7 million businesses but only 132K of them export anything (across all sectors). Additionally, there are countries that are investing in defence and attempting to move away from a reliance on Russian military technology (as the supply chain is no longer viable) – these include Vietnam, Korea and Thailand. This creates export opportunities and the Government is trying to sign agreements with other friendly nations to smooth the export process (a recent example being a G2G agreement with Singapore).
Geo-politics will shape everything. Expect Trump to ‘back’ Israel in the short term, most likely telling Netanyahu to ‘get it done quick’ – that will bring its own issues and undoubtedly create problems between the West and the Arab nations. China’s activities in the South China Sea are causing issues for ASEAN countries, and whilst China is the dominant regional power, Indonesia and Japan are significant players. The Taiwan situation is not getting better, and it is reasonable to assume an inward-looking Trump government is not going to commit forces to protect sovereignty issues in Asia. Russian and Ukrainian activity is showing signs of escalation, and neighbouring states are nervous about what happens next, noting that Ukrainian forces are an ideologically disparate group.
Building and Construction (1)
As of Nov 2024, residential construction-starts rose 1% on the preceding three months but fell back 8% on 2023 figures. Private housing is performing well, and social housing has stabilised. Non-residential project-starts grew by 2% against the preceding three months and stood 1% up on a year ago. Hotel & Leisure was the vertical that was the strongest growing 50% against the preceding three months and almost doubling (+93%) compared to the same time a year ago. Material prices fell by –0.7 between September 2023 and September 2024. Changes to the planning system, along with increased funding and making local housing targets mandatory, will improve the number of construction starts, according to the government.
The UK manufacturing PMI (PDF) in October 2024 was 49.9, down from 51.5 in September. This is the first time the PMI has fallen below the neutral mark of 50.0 since April. Although manufacturing output increased in October, the increase was slight, with reduced intakes of new work, owing to a lack of market optimism, slower economic growth, stretched supply chains and concerns at the time about the impacts of possible announcements in the UK Budget.
Overall the level of orders remain steady. Our industry as others, are however considering how to tackle the increases in living wage and NI contributions.
Glenigan Index of construction starts to end of October 2024 | Glenigan
Manufacturing: Key Economic Indicators – House of Commons Library
London affordable homes: Construction of new properties down 88%.
Building and Construction (2)
Lots contact with farmers recently around the latest budget Farm Inheritance Tax changes. Numbers from Government are different so it’s difficult to see what the true extent of this issue is, but it is absolutely desperate for some, possibly manageable for others. The Government should focus on investors and not on small farms who barely make a living. The imposition of IHT on farmers represents a complete lack of understanding of the detail or lack of proper consultation.
Flooding in Ewyas Harold 4 times in 5 years. This is a combination of the floods and the Environment Agency’s unwillingness to dredge rivers.
The local Planning Authority seems challenged at present to cope with the many layers of bureaucracy imposed on it and their over cautious systems.
Transport
National insurance – ouch! £58k impact
Increase in minimum wage an issue due to the narrowing of the gap
Haulage company insolvencies: 2023 = 494, 2024 (six months) = 170. Average fleet size has increased 36% over ten years.
People with HGV licences decreased by 5% between 2023 and 2022
Currently 33% of companies considered at maximum risk
81% of domestic freight is moved by road by tonne-kilometres (175 billion). 12% water and 7% rail.
Now over 1.1m zero emission vehicles (all types) but still a relatively small take up with HGVs
32 million empty seats in vehicles on the morning commute, apparently.
Despite the conflict in the Middle East, fuel costs seem relatively stable with national average around the 107ppl mark. A strengthening of the $ will affect this, however.
Snow, ice and floods has been a challenge and added to our costs over the last couple of weeks.
Locally, discussions have recently taken place with MHDC regarding parking and access to the businesses on Spring Lane, Malvern, following two accidents. They have responded, promptly, and are discussing internally.
Life Sciences
The long-term demand environment remains strong, with trends starting to stabilise after a prolonged period of slower demand. Contract Research Organisations (CROs) are still observing a strategic shift as clients focus on reprioritising pipelines and optimising budgets. Larger clients are channelling more resources toward commercialising late-stage programs.
Gross book-to-bill performance remains robust, supported by steady new business awards. While net book-to-bill has continued to be softer due to some cancellations, this reflects an industry-wide effort toward budget optimisation and focused pipeline development.
Although IPOs and new biotech company formations have slowed, venture capitalists remain committed to investing, taking a more targeted and phased approach; this slowing the development and timelines of new products.
Overall, the budget highlighted the government’s recognition of life sciences as a critical sector for economic growth, signalling stability and long-term investment. However, concerns remain about whether tax increases and a lack of additional investor incentives might hinder progress in an innovative industry with significant risks.
Insurance
Regulation is becoming an increasing burden in the insurance sector with it now taking up a significant operating cost. The government have stated they want to look at pricing of car and home insurance. The FCA are unhappy with how some providers are charging inflated amounts for instalments, disproportionately high commissions and conflicts of interest in the supply chain – the clamping down on bad practice is welcomed but needs to be targeted, proportionate and without detriment to smaller policyholders.
Premiums for home & Car remain high but commercial insurance premiums are softening with some, such as professional indemnity, coming down.
Cyber insurance continues to be a focus, ransomware and fraud being the main areas of claim. Cyber Essentials is now 10 years old and statistics show policyholders with cyber essentials are 92% less likely to make a claim. All organisations should therefore look at achieving Cyber Essentials.
Climatic and weather events are having a tangible impact. More properties in the region are becoming difficult to insure against flooding. Globally 2024 looks like being the most expensive year for claims on record due to the numerous devastating weather and climate related events.
Real Estate
Year dominated by general inertia, it’s been sluggish with many transactions being delayed as parties waited, first for the general election and then, the budget. This was followed by a spike in activity during October as transactions were undertaken in advance of the budget at the end of the month.
Whilst the recent cut to the base rate was expected and helpful, the upshot of the budget would appear to be that the changes made will be inflationary and it seems to be widely expected that there may be limited, if any, further cuts for the time being. That being said, there is arguably stability now in terms of a newly elected government where the ‘rules of play’ are now known (if not necessarily agreed with!) and as such businesses in particular can start to plan for the future (to a greater extent than they have been able to in recent years). We hope that this will stabilise the market and deliver confidence such that transactional activity picks up across all sectors of the market.
There is a significant amount of money (in particular from the Middle East and North America) wanting to deploy in UK real estate and, in particular, into Industrial and Warehouse stock where there continues to be perceived rental and capital growth potential. Availability of buildings within this sector at a local and regional level remains constrained despite availability of space increasing nationally with retailers and 3rd party logistics providers relinquishing space taken up during and after the Pandemic. Speculative development has reduced in line with falling economic confidence so available space is principally limited to existing buildings.
Planning – waiting for government to confirm changes to the National Planning Policy Framework (NPPF). Huge issues persist in local planning departments (lack of staff), not helped by issues for the large house builders in terms of higher construction costs, increased building regulations (particularly for higher buildings post Grenfell) and a reduced appetite from Registered Social Landlords to take on affordable housing due to reduced funding. These factors have combined to substantially reduce the volume of new homes being delivered nationally. We expect much activity in this space in 2025 as the trajectory for local plans is set through the implementation of the new NPPF which will, in turn, put pressure on most local authorities to identify more land to deliver housing.
IT Tech
A further continuation to the positive growth since the start of the year with a steady number of new logos added to the business taking Managed IT solutions and cyber security-protection.
Decision making and sales cycle timelines has improved significantly. Price based decisions making appears to be the main discussion points currently vs the opportunity to attain a better, future proofed solution.
Recently doubled our sales force and some of the support functions to grow the business. Recruitment and staffing very buoyant.
Microsoft Windows 10 – 11 Oct ’25 upgrade – get in quick as process are escalating by the month from vendors (HP & Dell).
Cyber remains a key focus in the industry…..yet another AIM listed midland company got compromised with 550 employees down and non-operational.
Recent survey from McKinsey / Garner suggested that IT and Telecom sector will see strong and continued investment from businesses with 80% companies overwhelmingly agreeing that better technology would help their employees do their jobs better and increase productivity.
Summary – still lots of demand for good technology, reliable services and faster networking , office moves still quite prevalent – and a good book of business through qtr 1 / 2.
Legal
The recent budget caused a significant amount of consternation for clients both before and after it was announced.
The expected changes to CGT and other tax implications resulted in a significant increase in transactions being undertaken or expedited in order to ensure matters completed before 29 October 2024. That resulted in an extremely busy period for the legal sector and other related professional services between the general election and the 29 October 2024.
By comparison, the sector now feels quite calm and quiet. That said, during its first 100 days, the Government has announced a significant amount of legislative changes which will affect businesses and which are due to come into force over the next 18 months, with one of those changes – the duty on employers to take all reasonable steps to prevent sexual harassment I the work place, including third party harassment having already taken effect. The scope of the impending changes to employment legislation in particular, is the widest in a generation and, coupled with the intended increase in employer national insurance contributions, many businesses are concerned and are understandably in a period of review and reflection in order to plan for the changes. Likewise the changes to IHT and agricultural property relief have caused significant concern, particularly for smaller local agricultural clients.