Virtue Accountants Monthly Newsletter – January 2025

Welcome to the first edition of the Virtue Accountants Newsletter! At Virtue Accountants, we’re passionate about keeping UK business owners and local residents informed of the latest economic trends impacting their finances and operations. The start of 2025 brings a mixture of challenges and opportunities for businesses and households alike.

Here’s everything you need to know to stay ahead—whether you're a small business owner in Peterborough or running an e-commerce venture online.

A Mixed Start for the UK Economy in 2025

Navigating the UK economy in 2025 is no small task. Many businesses are still grappling with high interest rates and ongoing inflation, making for a challenging start to the year. The recently released ONS Business Insights Report reveals that 30% of trading businesses saw a drop in turnover in December 2024—the highest recorded since late 2022.

Despite this dip, there's room for cautious optimism. The economy is expected to rebound, with GDP growth projected to reach 1.3%—a significant improvement from 2024’s 0.8%. Meanwhile, inflation has dropped to 2.6%, edging closer to the Bank of England’s 2% target. However, businesses should remain vigilant, particularly in managing rising energy and labour costs.

What This Means for You

• Businesses should focus on streamlining operations to combat pressures from inflation.
• Households might see slight improvements as incomes inch upward, but budgeting remains essential.
• Stay prepared—review cash flow and loan terms as interest rates are expected to decline gradually through 2025.

Peterborough’s Budget Priorities for 2025/26

Closer to home, the 2025/26 Peterborough City Council budget outlines plans to tackle rising service demands while fostering strategic growth. The £220 million budget prioritises areas such as adult social care (up 18% in demand), homelessness, and infrastructure projects like the Peterborough Station regeneration and university expansions.

However, to bridge a £20 million shortfall, the council has proposed a 4.99% council tax increase, translating to an additional £83.15 annually for a Band D household.

Opportunities for Local Businesses

• Regeneration projects could lead to increased footfall and customer opportunities for small businesses.
• Growth in student populations from the university expansion may boost local spending in hospitality and retail sectors.
• Evaluate the financial impact of council tax adjustments on your business and consider ways to adjust operational costs.

Workforce Shortages Show Improvement

Good news for employers—the recruitment landscape is brightening. Only 8% of businesses reported recruitment difficulties in December 2024, marking the best hiring conditions since 2022. Additionally, worker shortages decreased to 16%, a two-year low.

If you’re planning to grow your team, now could be the time to act and attract top-tier talent. For sectors like construction and transportation still facing challenges, creative hiring strategies and partnerships with recruitment agencies can help plug workforce gaps.

Tips for Hiring Success

1. Use employee referral incentives to find qualified candidates.
2. Partner with local training providers to upskill potential hires.
3. Offer flexible work arrangements to appeal to a broader talent pool.

Inflation and Interest Rate Trends

While inflation has eased, cost pressures remain high for both businesses and households. To provide relief, the Bank of England plans to gradually reduce interest rates from today’s 4.75% to an expected 3.5% by 2026.

This shift presents unique opportunities—for example, exploring refinancing options or securing loans with more favourable terms. On the flip side, the current rate environment may still impact short-term cash flow, so closely monitoring financial health remains crucial.

Actionable Advice

• Review loan terms and interest payments to ensure your business isn’t overpaying.
• Plan for potential savings by re-negotiating contracts locked in at higher rates.
• Leverage lower borrowing costs as they materialise to fund growth initiatives.

Seizing the Moment in 2025

With stabilising economic conditions, small businesses have the opportunity to strengthen their operations and plan for growth. According to the ONS, 17% of businesses expect their turnover to increase by February 2025—a sign that confidence is making a slow comeback.

Take advantage of Peterborough's ongoing regeneration initiatives by positioning your business for collaboration and local engagement. Whether it’s exploring council-led projects or participating in community events, remaining proactive will help secure a foothold in the competitive landscape.

Practical Steps to Get Ahead

• Invest in digital marketing to tap into new customer segments.
• Focus on customer retention by offering loyalty incentives.
• Revisit operational efficiency—cutting waste can free up funds for strategic investments.

How Virtue Accountants Can Help

Navigating today’s economic landscape can be stressful, but you don’t have to do it alone. At Virtue Accountants, we specialise in helping small businesses and individuals make sense of their finances. From tax planning to bookkeeping and payroll, our tailored solutions will keep you confident, compliant, and in control.

Here’s how we can support you in 2025 and beyond:

• Comprehensive tax planning to maximise deductions.
• VAT and payroll management to ease administrative burdens.
• Cash flow analysis to keep your business on track through uncertain times.

Feel free to reach out to us at [email protected] or call 01733 639076 for personalised guidance.

Planning Ahead

The start of 2025 brings its fair share of challenges, but it’s also brimming with opportunities for businesses willing to adapt and stay proactive. We’ll be with you every step of the way, sharing updates, insights, and strategies to keep you ahead of the curve.

Be sure to check out our website at www.virtue.accountants for additional resources and follow us on social media for regular updates and tips tailored to small business owners and Peterborough residents.

Thank you for trusting Virtue Accountants. Here’s to a successful year ahead!

Warm regards,

The Virtue Accountants Team