UK business confidence surges to 18-month high

Business confidence rose by 10 points to 41%, according to the Lloyds Bank Business Barometer for August. This reading is the highest level since February 2022 (44%), just before Russia’s invasion of Ukraine. The 10-point increase is the largest month-on-month rise since March 2023. Business sentiment was primarily driven by a more upbeat view of the wider economy after the latest increase in base rates of 25 basis points was lower than the 50 basis points increase some firms had expected. This led to an overall 15-point rise in economic optimism to 36%.

The rise in confidence followed a six-point dip in July to 31%, though this level was above the long-term average for the Barometer of 28%. However, the rise in economic optimism was not consistent among those surveyed last month. Smaller businesses and mid-sized firms (turnover between £250,000 and £3m, and £5m to £25m, respectively) expressed a more significant rise in optimism (smaller firms 37%, up 17 points, mid-sized firms 39%, up 17 points) in the economy than larger businesses (turnover of more than £25m) (37%, up six points), reflecting bigger companies’ exposure to global demand. 

Firms’ trading prospects rose for the third month in a row, with 57% (up two points) of firms anticipating stronger activity in the next 12 months, compared with 11% (down two points) expecting weaker outcomes. This results in the net balance increasing four points to 46%, the highest level since December 2017. However, manufacturers and large firms with turnover above £25 million were more pessimistic about their trading prospects. Manufacturers trading prospects fell 11 points to 35%, and large firms similarly decreased 10 points to 48%. 

The August survey was conducted between August 1 and August 15, with most responses taken after the Bank of England’s decision on August 3 to raise the base rate by 25 basis points to 5.25%. 

 

US labour data gives Fed food for thought

Total US non-farm payroll employment increased by 187,000 in August, coming in higher than the consensus expectations of 170,000. Data from the US Bureau of Labor Statistics also showed that the unemployment rate rose to 3.8%, beating expectations of 3.5%. Employment continued to trend up in health care, leisure and hospitality, social assistance, and construction but declined in transportation and warehousing. Average hourly earnings rose 0.2% in the month, coming in under consensus expectations of 0.3% and against 0.4% in July.

“This employment update will be welcome news to the Federal Reserve, because a more orderly employment market reduces the risk of inflation becoming more embedded through a wage-price spiral,” commented David Goebel CFA, Associate Director of Investment Strategy at wealth manager Evelyn Partners. “Although slightly higher than June and July readings, non-farm payrolls continued their broadly downward trajectory in August, when we considering the figure on the basis of its three-month moving average. The unemployment rate increased today to 3,8%, its highest since February 2022. The figure had looked quite sticky at low levels, but now looks to be reflecting some of the trends we have started to see on other data over the past few months.”

At the Jackson Hole Symposium, Fed Chair Jerome Powell said, “evidence that the tightness in the labour market is no longer easing could also call for a monetary policy response.”  The chances of a further increase in interest rates by the Fed at their November meeting had been hanging in the balance at around 50%, but Goebel noted that the latest figure has put downward pressure on that, which should prove supportive to both equities and bonds. 

“With the hiking cycle coming to an end, markets’ focus is turning instead to how long rates will remain at an elevated level before we see any cuts,” added Goebel. “Futures markets’ currently suggest this could be as soon as May 2024.”

The US unemployment rate, which could impact inflation, is watched closely by the Fed, according to Ryan Brandham, Head of Global Capital Markets, North America at Validus Risk Management.

“If unemployment begins to rise, this could help bring inflation down to 2% and would build a case for the Fed to hold off on further rate hikes,” stated Brandham. “More data is still to come before the September Fed meeting, which will help to paint the overall picture.”

 

9 in 10 UK small law firms optimistic about future despite financial headwinds

9 in 10 small to medium-sized law firms are optimistic about their financial performance in the coming year, a legal benchmarking survey commissioned by NatWest has found. The bank’s ninth Legal Report looks at the financial health of 68 SME law firms across England, Scotland and Wales with median annual fees of £5m. The report provides a reflective analysis of law firms’ financial results from 2022 and considers the current commercial and financial outlook affecting firms today.

While many small firms feel optimistic about their financial performance in 2023, the survey evidence suggests that firms’ fee rates will not rise enough to offset increased outgoings this year, placing pressure on margins. Over half of the firms surveyed expect to increase their charge-out rate by less than 5% this year, even though staffing costs could rise by 10% to 12% in many firms. Nearly half of firms (46%) identified attracting and retaining talent as their biggest concern for 2023 – above the economic outlook, cash flow or inflation.

The findings come after a period of strong finances for the legal sector, with 2021 being the most successful financial year for many firms for 25 years. Law firms achieved strong revenue growth of 8% in 2022, but profits dipped by 3% as the sector faced rising people costs and inflationary pressures.

“It’s good to see that, despite various headwinds, law firms are optimistic about their financial performance in the coming year,” said David Weaver, Head of Professional and Business Services at NatWest Group. “This optimism reflects the fact that many firms have demonstrated record profitability in recent years, despite the ever-present challenges they face. Looking ahead, with firms predicting high people costs and overheads for 2023, it’s essential that firms keep a close eye on their margins. No one can predict the future, but firms should be working to forecast the impact that rising interest rates will have and how best to mitigate that and maintain a steady cash flow.”

 

Yes Bank goes live with UPI interoperability on CBDC

Yes Bank has announced that it has gone live with Unified Payments Interface (UPI) Interoperability on the Reserve Bank of India (RBI) Central Bank Digital Currency (CBDC) app. With this move, users can now scan any UPI QR code through the Yes Bank Digital Rupee app and seamlessly undertake transactions. This move is set to significantly expand the reach of the Digital Rupee (e₹). 

The RBI introduced the e₹ in Q3 FY23, and Yes Bank was one of the initial four banks in the pilot phase. This initiative introduced a digital currency system built on a unique QR code mechanism for conducting transactions. As digital transactions evolve, the need for flexibility and universal adaptability becomes very important. By integrating CBDC with UPI QR codes, the e₹ gains a broader platform, with the goal of becoming a staple in daily transactions. This strategic move enhances not only the strengths of the e₹ but also seamlessly integrates with the widely adopted UPI system, presently having an overall merchant base of 150 million. This integration is designed to offer users exceptional flexibility, ensuring a smooth and seamless transactional experience without switching between multiple digital platforms.

“The transition to an interoperable CBDC platform holds the promise of seamless, efficient, and broader transactional capabilities for Yes Bank customers, across individuals and merchants, including MSMEs,” said Ajay Rajan, Country Head – Digital & Transaction Banking, Yes Bank. “This transformational enabler will facilitate a quantum leap in CBDC usage, driven by the enhanced convenience and accessibility. Our aim is to ensure that the e₹ transcends its role as just another type of currency to become a seamless transactional experience for every user.”

 

IRA Capital selects TreasurySpace’s cash management technology

TreasurySpace has announced its selection by IRA Capital for commercial cash management technology. Through the partnership, IRA Capital’s operations, finance, and executive teams will gain access to TreasurySpace’s platform to manage, optimise, and grow their working capital across multiple banking relationships, currencies, and strategies. 

IRA Capital’s operations teams can use the technology to reduce manual effort in collections, payments, and remittance workflow and reconciliation. Finance teams should be able to improve visibility, accelerate reforecasting, and enhance compliance. In addition, the technology offers executive teams the chance to take strategic command of working capital to increase yield, manage allocation, and reduce risk.

“With a unified golden record of our banking data, operations, and relationships, TreasurySpace positions us to optimise our working capital, increase yield, and reduce risk,” said Amer Malas, a founding partner and Chief Compliance Officer of IRA Capital.

 

Sohar International and PayMate target Oman businesses with B2B payments solution

Sohar International has partnered with PayMate India SPC, a B2B payments and solutions provider, to digitise, automate, and streamline business-to-business (B2B) payments using bank-issued corporate credit cards in Oman. By using PayMate's full-stack proprietary B2B payment automation solutions, Sohar International can offer corporate and SME clients the ability to use bank-issued Visa corporate credit cards for supplier payouts. This should enable clients to maximise their assigned credit limits, allowing them to make supplier payouts before the due dates without depleting their cash reserves. Furthermore, clients can extend their days’ payables outstanding, using the funds for strategic business growth.

The collaboration aims to facilitate the seamless settlement of corporate card payments directly into suppliers’ bank accounts. It provides detailed reports, prompt reconciliation, and visibility into cash flows. Moreover, the PayMate platform gives complete control with configurable approval workflows and APIs for ERP integration with existing legacy systems. All payouts can be made ad hoc or via a bulk upload option, allowing for processing multiple payments in a single transaction making the process efficient and flexible. Payment collections from retailers, distributors, and suppliers will also be made easy with the platform's link-based collections feature, with corporate credit cards as a payment instrument option.

“There is a massive opportunity to digitise payments in Oman through cards, and with our corporate credit card offering in place, we continue to work towards introducing platforms on which our cards can be used,” said Khalil Salim Al Hedaifi, Chief Government and Private Banking Officer at Sohar International. “This partnership will help us achieve that goal and enable us to route supplier payouts, collections, and other corporate expenses through the card rails, ultimately contributing significantly to B2B payment volume growth in the country."

 

Experlogix B2B commerce solutions arrive in North America

Experlogix has expanded its Digital Commerce offering to the North American market. The solution is designed to help organisations thrive in the face of ever-increasing demand for seamless online shopping and commerce experiences.

The platform includes a suite of B2B commerce solutions designed to give organisations tools to streamline back-end processes and create more engaging customer experiences as they expand their omnichannel presence. This includes e-commerce solutions, inventory management systems, and analytics tools that provide insights to support informed decisions. The software features out-of-the-box integration with ERP systems, including SAP Business One, Microsoft Dynamics and Sage.

“With investment in B2B e-commerce technology continuing to grow, there is more pressure than ever to deliver exceptional, personalised experiences throughout the entire customer journey,” says Experlogix CEO Bill Fox. “Our Digital Commerce platform equips organisations with the tools and data they need to surpass customers’ expectations and to optimise their sales strategies for an increasingly omnichannel world.”