Latest Regional Growth Tracker survey data from NatWest signalled only a slight upturn in business activity across the East Midlands private sector in November. The headline NatWest East Midlands Business Activity Index dropped to 50.1 in November, down from 50.4 at the start of the fourth quarter. The latest data indicated a broad stagnation in output across the region’s private sector, with the headline figure well below the series average. Growth in output was linked by firms to orders for specialised products and stockbuilding. Weighing on the expansion, however, was economic uncertainty which dampened customer demand, according to panellists. East Midlands firms indicated a further contraction in employment midway through the fourth quarter. Although companies noted that planned redundancies and cost management solutions drove the decline in workforce numbers, the pace of decrease was only fractional. Average cost burdens increased at a steeper rate during November. Moreover, the rate of inflation was the joint-fastest since July (equal with September). Despite subdued demand conditions, East Midlands businesses increased their selling prices again. Output charge inflation was reportedly driven by the pass-through of higher costs to customers. Lisa Phillips, Regional Managing Director, Midlands and East, Commercial Mid Markets, said: “East Midlands firms signalled sustained efforts to expand business activity in November, despite demand conditions weakening. “Efforts to support output and hopes of growth in activity in the coming year led to a much slower pace of decline in employment. Moreover, the pace of job shedding was the softest in 2024 so far. “Encouragingly, firms were able to raise their selling prices again, and at a solid pace. Although margins were squeezed by a faster uptick in costs while output charges increased at a softer rate, companies were able to partially pass-through higher input prices to customers.” Performance in relation to UK Of the 12 monitored UK regions and areas, only six signalled a Business Activity Index reading above 50.0 in November. Of these six, the East Midlands recorded the slowest upturn. Nevertheless, the UK average only indicated a marginal expansion in output at the national level. November data indicated a second successive monthly fall in new orders at East Midlands firms. The pace of decline quickened to the fastest since June, but was only marginal overall. Anecdotal evidence suggested that the decrease in new business was due to weaker domestic and foreign client demand, and economic uncertainty. The fall in new orders contrasted with the UK average, with only Wales and Northern Ireland recording sharper declines. Nonetheless, East Midlands companies continued to anticipate an increase in output over the coming year in November. Panellists hope for stronger demand conditions over the next 12 months, although the degree of confidence dipped to the lowest in 2024 to date. As has been the case since October 2022, East Midlands firms recorded a decrease in backlogs of work in November. The pace of decline quickened to the joint-fastest since September 2023 (alongside June 2024). That said, the rate of job shedding was the slowest in 11 months and weaker than the UK average. Meanwhile, the pace of input cost inflation was quicker than the UK average, as companies noted that greater input prices were due to higher material, wage and utility costs. The rise in selling prices was slower than the series average and the UK trend, however.

A company has been fined after it failed to manage the risk of legionella bacteria in the hot and cold water systems at HMP Lincoln. The Health and Safety Executive (HSE) investigation followed the death of an inmate. Amey Community Limited has now been fined £600,000 after pleading guilty to a health and safety offence. Graham Butterworth died on 5 December 2017 after contracting Legionnaires’ disease while serving a prison sentence at HMP Lincoln. Water samples from Mr Butterworth’s cell and nearby shower blocks tested positive for legionella days after the 71-year-old died. HSE guidance states any risks of exposure to legionella needs to be identified and managed. The investigation, carried out by HSE inspector Aaron Rashad, found Amey Community Limited, which provided facilities management services at HMP Lincoln, failed to act on a risk assessment carried out in 2016, failed to put in place a written scheme for preventing and controlling legionella risks, failed to ensure that appropriate water temperatures were maintained and failed to monitor water temperatures in the water system in October and November 2017. This allowed legionella bacteria to multiply rapidly. Amey Community Limited pleaded guilty to breaching Section 3(1) of the Health and Safety at Work etc. Act 1974. The company was fined £600,000 and ordered to pay £15,186.85 in costs at Lincoln Magistrates’ Court on 3 December 2024. HSE inspector Stacey Gamwell said: “There is a legal duty to keep workers and inmates safe in prisons. The occupants of HMP Lincoln had been put at risk of legionella bacteria and developing Legionnaires’ disease because of Amey Community Limited’s failures. “Companies such as Amey Community Limited need to ensure they have identified any risk of legionella and have suitable and sufficient arrangements in place for managing the risk and control measures they have implemented.” This HSE prosecution was brought by HSE enforcement lawyer Andy Siddall and supported by HSE paralegal officer Helen Jacob.

Capacity of the East Midlands Railway cleaning facility in Derby has been more than doubled in a £5m project competed by a company from Hull. The capacity of the train company’s Under Frame Cleaning centre at the Etches Park Depot has ben more than doubled, with capacity up for two cars to five. As part of the £5m project, employees of Hull-based Spencer Group also built a two-storey, 30 sq m staff welfare facility housing a canteen, locker rooms, changing rooms, meeting rooms and office space. Tony Cairnes, Spencer Group Site Agent said: “Working on a live depot is always challenging and access is very restricted, so collaboration between all parties is essential for a project like this. “Having more than two decades of experience in the rail engineering sector, Spencer Group is highly experienced in working in tightly-restricted environments such as this and we are trusted by clients to work efficiently with other teams, suppliers and contractors to deliver projects to the highest quality, on time, and with as little disruption as possible to the wider site operations. “Throughout the project we’ve worked closely with the client to adapt to their needs and we’ve been on a design journey with them to implement changes to ensure the facility meets the needs of the team members who will be working there.”  

Michael Ball, tax partner at Streets Chartered Accountants, considers the impact of upcoming changes to National Insurance contributions and minimum wage. The first Labour Budget in 14 years was supposedly billed as being one to drive growth, though it is hard to see how this will come about as from next April, businesses face increased costs of employing people with the rise in the national minimum wage to £12.21 an hour and employers’ National Insurance from 13.8% to 15%. Furthermore, the threshold at which employees’ earnings are liable for employers’ NIC will drop from £9,100 to £5,000. Whilst employers are set to benefit from the change in the amount of employers’ allowance that they can deduct from their bill from £5,000 to £10,000, the overall cost for most is set to rise significantly. By way of an illustration, a business employing 100 workers working 40-hour weeks at minimum wage, from next year will face an extra £103,000 in NI and an extra £160,000 in salary. So, a total extra cost of £263,000, though if you are a company the corporation tax relief available brings it down to £197,000. It is widely reported and acknowledged that whilst the changes to NIC will affect all businesses it will be especially hard hitting for those in the hospitality and care sectors and all of those for which staff costs are the greatest cost. Measures to manage the impact of the hike in employers NIC are likely to include:

• consideration to reducing head count
• reducing hours and the staffing mix
• replacing labour with technology
• holding off recruitment and even a freeze on pay or reduced pay awards in 2025.

Perhaps one of the more common approaches to soften the blow is offering a salary sacrifice scheme, whereby employees agree to reduce their gross salary in exchange for a non-cash benefit, such as additional pension contributions, tech schemes, electric vehicle schemes or bike-to-work schemes. However, care must be taken to ensure the overall package remains attractive to employees. For those employees who are company directors, it may be worth considering looking at alternative remuneration and paying a portion of their income as dividends instead of salary, as dividends are not subject to NICs. However, this approach requires the business to be profitable to make such payments. For others it might be a good time to look at taking on an apprentice, as employers who employ apprentices under the age of 25 pay a lower rate of National Insurance contributions. Under certain conditions, they may be eligible to pay no employer NICs on apprentices’ earnings up to a certain threshold. Whilst April may seem some time off, all employers and especially those with a larger number of employees and/or those for whom their payroll is the greatest cost, will need to assess and consider the impact of the pending changes. Assessing the potential increase in both your wage and NIC bills is paramount, as is talking to your accountants and their tax teams about any strategy to manage the situation. It is vital that any steps or actions taken do not fall foul of HMRC’s rules and regulations. Non compliance can lead to penalties, fines, and even reputational damage. There could also be a risk that any action taken, whilst seeming to save on tax, could lead to another unintended tax liability. See this column in the December issue of East Midlands Business Link Magazine here.