Foreign buyers in £7.8bn raid on UK firms

Figures from the Office for National Statistics show that foreign buyers targeted UK companies in Q3, launching deals worth £7.8bn. While foreign spending on UK companies rose by 16% between July and September, there was a downturn in M&A activity between UK companies, with British firms spending just £2.1bn acquiring domestic targets across 191 deals. This was down by £3bn on Q2 and the lowest level since the opening quarter of 2023. Overall, the total number of M&A transactions fell to 435 between July and September, down from 479 in the previous quarter. Meanwhile, data from investment bank Peel Hunt shows that the value of takeover bids for firms listed on the London Stock Exchange has hit £52bn in 2024, with 45 London-listed firms approached over, agreeing to or completing acquisitions since January.

British firms struggle in China

British companies operating in China are finding it increasingly difficult to conduct business, according to the British Chamber of Commerce in China’s annual sentiment survey. The survey saw 58% of firms report a decline in business conditions over the past year, with 86% attributing this to economic factors. Despite recent stimulus measures aimed at revitalising the $19trn economy, optimism for 2025 remains low, with only 41% of members expecting improvements. The survey highlights ongoing challenges, including potential trade tensions with the US and the EU, as British firms navigate a complex economic landscape. The Chamber said: “British businesses continue to face significant headwinds, from China’s economic slowdown to regulatory hurdles.”

City rents rise as prime demand increases

With City businesses increasingly bringing staff back into the office following the pandemic-era shift to remote and hybrid work patterns, availability across City of London offices has fallen. Data from property consultancy Knight Frank shows that availability in newly constructed office buildings has fallen to 0.3% in the West End and 0.5% in the City of London. By comparison, vacancy rates across all London office stock currently stands at 9%. The analysis shows that prime rents in the City have risen 16% over the past 12 months to £90 per sq ft, while prime West End rents are up 7% to £150 per sq ft. Knight Frank said London’s “robust occupier market reflects the city’s business resilience despite wider macroeconomic volatility over the past few years.”

Reeves refuses to guarantee end of tax rises

Chancellor Rachel Reeves has refused to commit to her recent pledge to not raise taxes further. Speaking at the Confederation of British Industry conference in November, the Chancellor told business leaders there would be no repeat of the £40bn tax hikes announced in October’s Budget, saying: “I’m really clear, I’m not coming back with more borrowing or more taxes.” However, when asked to re-commit to no more borrowing or taxes in the Commons, Ms Reeves would only say that the Government will “never have to repeat a Budget like that.” Shadow Chancellor Mel Stride asked if Ms Reeves “spoke without thinking” when she said there would be no more hikes. He went on to argue that there is a risk of future tax increases, “given how tight the Chancellor’s fiscal headroom is.” John O’Connell, chief executive of the TaxPayers’ Alliance, said taxpayers will be “genuinely fearing” a fresh tax raid next year.

Goldman Sachs says tax hikes will hit employment and inflation

Analysts at investment bank Goldman Sachs have warned that tax hikes introduced in the Budget could have a bigger impact on employment and inflation than official estimates suggest. Chancellor Rachel Reeves increased employer National Insurance to 15% and lowered the threshold at which firms start paying it to £5,000. Office for Budget Responsibility (OBR) forecasts suggest that workers will be hit by the changes as firms cut wages and increase prices. Analysts at Goldman Sachs have warned that the risks to employment are “skewed to the upside,” saying that in the short term, unemployment will rise by around 0.2% as a result of the Budget, peaking at 4.6% at the end of 2025. On inflation, Goldman Sachs believes consumer prices will increase by 0.3% due to the tax increase, whereas the OBR expects a 0.2% increase.

Hospitality faces tax hike hit

Celebrity chef Tom Kerridge says the Government’s tax hikes could have a “catastrophic” impact on the hospitality sector. Mr Kerridge estimates that the increase in employers’ National Insurance could cost businesses an additional £800-850 per employee annually, a significant burden for smaller firms. Over 200 major hospitality businesses have warned that the tax hike could lead to job cuts and reduced investment, while Andrew Higginson, chair of the British Retail Consortium, said the increased costs would be “too much for the industry to bear.”

Regulator growth focus a risk to consumers

Helen Charlton, chair of the Financial Services Consumer Panel (FSCP), has warned that making financial watchdogs prioritise economic growth poses a risk to consumers. The Financial Conduct Authority (FCA) has been urged to impose fewer rules on firms – and make those it does impose less strict, while Chancellor Rachel Reeves has vowed to cut financial red tape amid concerns that tighter rules set out after the financial crisis have “gone too far.” Ms Charlton told the Treasury Select Committee that the FSCP is “constantly” telling the FCA “to remember that consumer protection is a primary objective.” She added that “loose language around balancing and trade-offs” between consumer protection and encouraging investment is “really very damaging.” Mick McAteer, co-director of consumer group the Financial Inclusion Centre, added that prioritising growth, which is currently a secondary goal of the FCA, is now “in danger of becoming almost like a de facto primary objective.” “This secondary growth objective is really starting to impinge on the freedom of the supposedly objective financial regulator,” he added.

Lord Mayor calls for rule reform to boost the City

Alastair King, the Lord Mayor of the City of London, has urged ministers to accelerate reform of City rules, arguing that a more supportive tax and regulatory environment will help boost investment into London-listed firms. Calling for a rethink over the stamp duty of 0.5% levied on UK share trading, he said rectifying this “misalignment” would provide a “shot in the arm for homegrown companies looking to scale-up.” Mr King has also called for measures to encourage more retail investors into stocks and shares ISAs, as well as suggesting that the Chancellor should look at further reform of pension funds.

Paragon reports BTL boom

Paragon Bank has reported a 4.4% increase in its buy-to-let mortgage loan book, reaching £13.3bn, driven by strong retention and new lending. The bank’s new lending for the year totalled £1.49bn, with a new business pipeline 48.2% higher than the previous year at £881.4m. The bank also noted a rise in lending for properties with EPC ratings A to C, which accounted for 53.4% of completions. Overall, operating profits increased by 5.4% to £292.7m, with a net loan book growth of 5.6% to £15.7bn. Louisa Sedgwick, managing director of mortgages at Paragon Bank, said: “We are delighted to announce a 4.4% increase in our buy-to-let mortgages loan book in challenging market conditions.” Chief executive Nigel Terrington said: “We have seen accelerating momentum throughout the year, with new lending levels reaching the upper range of our expectations and strong customer retention. Improving customer sentiment, robust year-end pipelines, and our strategic focus on specialist markets, gives us confidence as we enter the new financial year.”

MPs support NI hike for employers

The Government is moving forward with an increase in employer National Insurance contributions (NICs) after the House of Commons voted 332 to 189 in favour of the Bill which aims to raise NICs by 1.2 percentage points to 15% as of April. The shake-up will also lower the threshold at which liability starts to £5,000 from the current £9,100. The Treasury estimates this policy could generate £25.7bn annually, although the Office for Budget Responsibility predicts a more conservative £16.1bn by 2029/30. While Treasury Minister Tulip Siddiq emphasised the need for these measures to restore economic stability and support long-term growth, shadow Chancellor Mel Stride has voiced concerns over potential job losses and wage reductions.

Households cut back on spending

Data from Barclays shows that households cut back on essential spending at the fastest pace in five years in November. Essential spending fell by 3.1%, with this the sharpest monthly fall since 2019, while non-essential spending was up 0.8% on November 2023. The analysis shows that card spending fell by 0.5% year-on-year, marking the first decline since July. Jack Meaning, chief UK economist at Barclays, said: “A number of factors weighed on consumer spending in November, notably easing consumer confidence post-summer, and expectations that post-budget, inflation and interest rates will stay higher in the coming months.” The report also highlighted a decline in consumer confidence in the economy, which dipped to 25% in November from 31% in October.