The UK is at risk of recession after revised figures showed the economy shrank between July and September, according to data from the Office for National Statistics (ONS).

Gross domestic product, which measures the health of the economy, contracted by 0.1% after previous estimates suggested growth has been flat.

Meanwhile, there was zero growth between April and June, after it was first calculated to have risen by 0.2%.

A recession is typically defined as when the economy shrinks for two three-month periods – or quarters – in a row.

Meanwhile, the UK’s inflation rate fell to 3.9% in the year to November, the ONS confirmed.

The fall was bigger than the ONS had anticipated with lower petrol prices contributing to the reduction in the inflation rate.

Price increases for bread and cakes are also easing, according to the ONS.

David Bharier, Head of Research at the British Chambers of Commerce (BCC), said:

‘Today’s data showing the CPI rate grew at 3.9% in November, a greater slowdown than expected, is welcome confirmation that the headline rate of inflation is continuing to ease. However, prices are still rising from a very high base following multiple economic shocks and core CPI remains stubborn at 5.1%.

‘Persistent inflation and high interest rates are likely to remain a barrier to business growth for some time to come. Businesses are desperate for a clear, long-term plan for growth which sets out a vision for infrastructure, skills and green innovation.’

The fall in inflation followed the Bank of England’s decision to hold interest rates at 5.25%, marking the third time in a row that the Bank has left the rate unchanged.

Bharier said:

‘While a cut in the interest rate could have provided some relief for firms ahead of Christmas, [the] decision to hold at 5.25% was expected and allays fears of further rises.

‘UK businesses have been faced with the twin shock of an inflation crisis and increased borrowing costs.

‘The BCC’s latest Economic Forecast expects only a 0.25% point cut in the interest rate for the whole of 2024, although businesses need to be prepared for any unexpected changes given the uncertain policy landscape.’

Internet link: ONS website ONS website BCC website Bank of England website BCC website

HMRC recently updated its guidance on off payroll working compliance for employers.

The new guidance sets out ‘practical steps’ for organisations to follow. It affects employers who are responsible for operating off payroll working rules and who engage workers who provide their services through their own intermediary.

The guidance states that organisations should apply the new guidelines to ‘reflect the complexity and scale of their own off payroll working engagements‘. It said that the guidelines should be used to ‘help make informed decisions based on individual circumstances’.

The guidance also outlines a change in policy that could affect organisations with an open compliance check as part of the reformed IR35 rules. This was initially announced at the Autumn Statement on 22 November last year.

From 6 April 2024, HMRC will take into account the taxes a worker or their intermediary have already paid against the amount the deemed employer owes. This change applies to income tax and National Insurance contributions (NICs) assessed by HMRC on or after 6 April 2024 from off-payroll working errors in payments since 6 April 2017.

Internet links: GOV.UK

The changes to National Insurance contributions (NICs) announced by Chancellor Jeremy Hunt in the Autumn Statement will help to ‘ease the burden on strivers up and down the country‘, according to the Federation of Small Businesses (FSB).

Mr Hunt used his Autumn Statement speech to cut the main rate of employee NICs from 12% to 10% for 27 million workers across the UK. This is set to take effect from 6 January 2024. The Chancellor said that, for the average employee earning £35,400 per year, the change amounts to a £450 annual tax cut. 

For the self-employed, the Chancellor also abolished Class 2 NICs and cut Class 4 NICs from 9% to 8%, effective from 6 April 2024.

Tina McKenzie, Policy Chair at the FSB, said:

‘The Chancellor’s decision to reduce the rate of self-employed NICs and abolish the Class 2 element is extremely welcome, easing the burden on strivers up and down the country.

‘The FSB has long campaigned for the abolition of the Class 2 element of NICs and the reduction of Class 4, and we are therefore pleased that the Chancellor has acted.’

Internet link: GOV.UK FSB website

The changes to National Insurance contributions (NICs) announced by Chancellor Jeremy Hunt in the Autumn Statement will help to ‘ease the burden on strivers up and down the country‘, according to the Federation of Small Businesses (FSB).

Mr Hunt used his Autumn Statement speech to cut the main rate of employee NICs from 12% to 10% for 27 million workers across the UK. This is set to take effect from 6 January 2024. The Chancellor said that, for the average employee earning £35,400 per year, the change amounts to a £450 annual tax cut. 

For the self-employed, the Chancellor also abolished Class 2 NICs and cut Class 4 NICs from 9% to 8%, effective from 6 April 2024.

Tina McKenzie, Policy Chair at the FSB, said:

‘The Chancellor’s decision to reduce the rate of self-employed NICs and abolish the Class 2 element is extremely welcome, easing the burden on strivers up and down the country.

‘The FSB has long campaigned for the abolition of the Class 2 element of NICs and the reduction of Class 4, and we are therefore pleased that the Chancellor has acted.’

Internet link: GOV.UK FSB website

The tax cuts announced in the 2023 Autumn Statement won’t prevent tax revenues rising to their highest ever levels, the Institute for Fiscal Studies (IFS) has warned.

The IFS stated that announcing tax cuts in response to ‘highly uncertain’ changes in assumptions about the UK’s medium-term economic prospects ‘does not feel like a recipe for good management of the public finances‘.

It also acknowledged that the Chancellor’s cuts to the rates of National Insurance contributions (NICs) put money back into the pockets of 27 million workers. However, it said the bigger picture means that the changes give backless than £1 of every £4 that has been taken away from households through changes to NICs and income tax announced since March 2021.

However, the business group did welcome the Chancellor’s decision to make Full Expensing permanent but noted that the move indicates that the Autumn Statement was an event focused on medium-term growth.

Paul Johnson, Director of the IFS, said:

‘The growth outlook has weakened. Inflation is expected to stay higher for longer. Higher inflation pushes up tax receipts by more than it pushes up spending on debt interest or social security benefits.

‘His immediate cut to national insurance will put more money into workers’ pockets when it comes in but won’t be enough to prevent this from being the biggest tax-raising parliament in modern times. These cuts will also not stop tax revenues rising to their highest ever levels.’

Internet link: IFS website