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UK TAX
Weekly News 16th DEC
UK economy declines in October, but minimal impact expected from Trump’s proposed tariffs
According to the latest data from the Office for National Statistics (ONS), after a 0.1% decline in September, the UK’s output fell by another 0.1% in October, continuing its downward trend. This marks the first time since the COVID-19 pandemic that the economy has contracted for two consecutive months.
The data reveals that the service sector grew strongly, while manufacturing and construction fell by 0.6% and 0.4%, respectively.
Before the announcement of the Autumn Budget, economists had predicted positive growth. Critics blame the Labour government’s weeks-long warnings about ‘budget austerity’ and substantial tax hikes for scaring the public and businesses, damaging market sentiment, and leading to weaker-than-expected consumer spending and wage increases.
With the budget now announced, most industries believe that measures like increasing employer National Insurance contributions will only slow wage growth, reduce jobs, and raise prices. Financial markets expect four interest rate cuts in 2025, but the Bank of England is not expected to change rates at its final meeting of 2024 next week.
Yael Selfin, Chief Economist at KPMG UK, stated that ‘October activity was held back by uncertainty ahead of the budget, with consumer and business confidence near recent lows. The fourth quarter could see a weaker pace of growth, as businesses come to terms with the higher tax burden announced at the budget as well as rising geopolitical uncertainties. Nevertheless, we expect higher public spending to lift GDP growth next year, with lower interest rates providing some boost to private sector demand’.
Looking into the future impact on the UK economy, in a survey of international economists, the potential impact of President Trump’s proposed 10% tariffs on all imports to the US in January 2025 on the UK economy was deemed ‘insignificant’. The main reason cited was that most of the UK’s trade with the US is in services, not goods, and the UK is accelerating efforts to repair its relationship with its largest trading partner, the EU.
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TikTok loses US ban appeal – but will Trump’s presidency offer a reprieve?
TikTok has lost its appeal against a ban on the video-sharing app in the US.
The social media platform argued that the proposal violated the First Amendment of the US Constitution, which protects freedom of speech, but this was unanimously rejected by a three-judge panel of the DC Circuit Court of Appeals. This means TikTok faces a complete ban in the US in just 34 days.
According to an executive order signed by President Biden, if TikTok’s parent company ByteDance does not sell the app by 19 January 2025, it will be banned in the US.
TikTok currently has over 170 million users in the US, and a Pew Centre survey in September found that 17% of American adults frequently use TikTok for news.
Following the ruling, TikTok and ByteDance are preparing to appeal to the US Supreme Court.
Meanwhile, the recent US presidential election victory of Donald Trump may provide a lifeline for TikTok in the US. Trump is set to be inaugurated as the 47th President of the United States on 20 January 2025. Although he attempted to introduce a TikTok ban during his previous term, he reversed his stance and, during the 2024 campaign, expressed a desire to save the app, fearing that the ban could lead to a Facebook monopoly. Trump is also a TikTok user, with over 14 million followers, although he has not posted since his election victory.
Legal experts suggest that Trump, if re-elected, may have several options, but he cannot unilaterally overturn the law enforcing the ban. Anupam Chander, a global tech law expert at Georgetown University Law School, believes that Trump could ask Congress to authorise him to negotiate a different arrangement with ByteDance and TikTok, or persuade Congress to amend the law. David Greene, civil liberties director at the Electronic Frontier Foundation (EFF), suggested Trump could instruct the Justice Department to drop or modify its defence in the lawsuit against ByteDance, or direct the Department of Commerce not to enforce the law.
Similar security concerns have led to TikTok being banned or restricted in many countries, including Afghanistan, India, Nepal, Somalia, Australia, Canada, and the UK. In March 2023, the UK banned TikTok from government phones, and in October, about 13 US states and Washington DC took legal action against the platform.
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London Underground fares set to rise by 5% in 2025
London Mayor Sadiq Khan announced that, starting in March 2025, fares for the London Underground, Overground, and Elizabeth Line will increase by an average of 4.6%. However, bus fares will remain unchanged at £1.75 for the second consecutive year, the lowest in the UK. These changes are expected to generate an additional £211 million for Transport for London (TfL) next year.
Rail and public transport fares in the UK are adjusted annually based on the previous year’s inflation rate.
Buses remain the most used form of public transport in London. Passenger numbers continue to grow, with over a billion rides taken this fiscal year. More than 95% of Londoners live within 400 meters of a bus stop. Meanwhile, Hopper fares will still be valid, meaning that passengers can take unlimited bus and tram rides within one hour of their first journey for a £1.75 fare.
Despite TfL’s plan to generate £150 million in profit since April, the current deficit is £5 million. By April 2025, TfL’s annual surplus may be only £23 million, far below the £138 million surplus in 2023/24.
It is estimated that Sadiq Khan’s decision to freeze some fares from 2016 to 2020 led to a £640 million loss in TfL’s revenue.
