Introduction: Business confidence tumbles
Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.
Confidence among UK small businesses has tumbled as bosses fret about the health of the economy, the tax burden and rising wages.
The Small Business Index (SBI) calculated by the Federation of Small Business shows that optimism slumped at the end of last year.
The SBI hit its lowest recorded point outside the Covid-19 pandemic in the October-December quarter, dropping from -24.4 points in Q3 to -64.5 points in Q4.
The survey covers the period when companies were awaiting, and then digesting, Rachel Reeves’s budget at the end of October which included increases to employers national insurance contributions.
The FSB reports that accommodation and food services was the least optimistic major sector, followed by the wholesale and retail sector. Construction saw the largest decline in confidence between Q3 and Q4, going from -26.6 points to -76.8 points.
Tina McKenzie, FSB’s policy chair, says small businesses ae worried:
“The fourth quarter blues reported by small firms underline how urgently the Government’s growth push is needed.
“Small firms are understandably nervous about their prospects as 2025 gets underway.
“The upcoming Employment Rights Bill is a major source of stress for small firms, with nine in ten business owners saying they are concerned about its introduction, and this is undoubtedly a major cause of the very subdued confidence levels seen in our research.
A separate survey this morning, from the Chartered Institute of Personnel and Development (CIPD), is also grim reading. It found that UK employers are preparing for the biggest redundancy round in a decade – with those budget tax rises being blamed.
The CIPD survey, which was carried out in the second half of January, found that most employers cited the rise in employer national insurance contributions and a 6.7% increase in the “national living wage”.
The agenda
Key events
Bloomberg are reporting that China’s fast fashion retailer Shein is under pressure to cut its valuation to about $30bn, ahead of a float on the London stock market.
Shein shareholders are apparently suggesting that an adjustment is needed to help get its potential initial public offering in the UK over the line.
That’s quite a reduction on Shein’s previous valuations – in 2022 it was tagged at $100bn.
Uncertainty over its value has risen as Donald Trump has escalated trade tensions, including briefly suspending the ‘de minimis’ rules which allow duty-free entry for cheap Chinese goods.
Jack Ma’s presence at today’s meeting with Xi suggests authorities are finally moving past its crackdown on Alibaba, suggests Angela Huyue Zhang, a law professor at the University of Southern California.
She told CNN:
“With the domestic economy slowing and geopolitical pressures escalating, the government is making it clear that it values and relies on the private sector to drive innovation and stimulate growth.”
China’s Xi holds rare meeting with business leaders
Over in Beijing, Chinese President Xi Jinping has held a rare meeting with some of the country’s top business leaders.
Xi spoke at a symposium attended by business leaders including Huawei founder Ren Zhengfei, Xiaomi’s Lei Jun, BYD’s Wang Chuanfu, Unitree’s Wang Xingxing, and CATL’s Robin Zeng.
And intriguingly, Alibaba co-founder Jack Ma was also there, state media reported. Ma has been keeping a low profile since Xi’s government forced Alibaba to drop the stock market floatation of its Ant Group, after Ma made a speech criticising Chinese regulators.
That spat was the start of a campaign to tighten state control over private companies in the world’s second-largest economy.
Today’s meeting may be a sign that Xi’s administration are gearing up to work more closely with China’s major companies as it tries to cushion the economy from the impact of a trade war with the US.
Christopher Beddor, deputy China research director at Gavekal Dragonomics in Hong Kong, has said:
“It’s a tacit acknowledgement that the Chinese government needs private-sector firms for its tech rivalry with the US.
“The government has no choice but to support them if it wants to compete with the U.S.”
Introduction: Business confidence tumbles
Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.
Confidence among UK small businesses has tumbled as bosses fret about the health of the economy, the tax burden and rising wages.
The Small Business Index (SBI) calculated by the Federation of Small Business shows that optimism slumped at the end of last year.
The SBI hit its lowest recorded point outside the Covid-19 pandemic in the October-December quarter, dropping from -24.4 points in Q3 to -64.5 points in Q4.
The survey covers the period when companies were awaiting, and then digesting, Rachel Reeves’s budget at the end of October which included increases to employers national insurance contributions.
The FSB reports that accommodation and food services was the least optimistic major sector, followed by the wholesale and retail sector. Construction saw the largest decline in confidence between Q3 and Q4, going from -26.6 points to -76.8 points.
Tina McKenzie, FSB’s policy chair, says small businesses ae worried:
“The fourth quarter blues reported by small firms underline how urgently the Government’s growth push is needed.
“Small firms are understandably nervous about their prospects as 2025 gets underway.
“The upcoming Employment Rights Bill is a major source of stress for small firms, with nine in ten business owners saying they are concerned about its introduction, and this is undoubtedly a major cause of the very subdued confidence levels seen in our research.
A separate survey this morning, from the Chartered Institute of Personnel and Development (CIPD), is also grim reading. It found that UK employers are preparing for the biggest redundancy round in a decade – with those budget tax rises being blamed.
The CIPD survey, which was carried out in the second half of January, found that most employers cited the rise in employer national insurance contributions and a 6.7% increase in the “national living wage”.
