Business News 10th October 2017

CPA’s daily bite-size summary of the business news on Tuesday 10th October 2017, filled with stories to inform and interest business people.

Market Round up

The FTSE 100 fell 0.2% to 7507.9 and the FTSE 250 fell 0.3% to 20,102.6 as sterling bounced back after last weeks big drop to 1.318 against the dollar. Expectations are growing of an interest rate rise which has given support to the currency as the ONS revised wage growth up for 1q to 3.5% and for the second quarter increased the estimate from 1.6% to 2.4%. European stocks rose with Germany’s index touching a record high and Spain’s at its highest for a week, as political risk concerns over Catalonia eased a day after a demonstration in Barcelona against independence. In the US the S&P 500 closed lower, down 0.18% to 2544.73 , with the New York based exchange ending a nine-day rally as investors found few reasons to push shares deeper into record territory in a thinly traded session. Asian shares rose, shrugging off modest losses on Wall Street, while expectations of another U.S. interest rate increase this year continued to underpin the dollar. The Nikkei climbed 0.64% and the Chinese CSI 300 was up 0.2%. While the Korean Kospi climbed a barnstorming 1.64%! Oil prices were steady (WTI $49.84 Brent $56.08) as OPEC said there were clear signs the market was rebalancing and as U.S. production remained offline following Hurricane Nate. Gold inched up to 1288.9, its highest in more than a week, but the gains were capped as the dollar held firm bolstered by expectations of another Federal Reserve interest rate hike this year.The pound is at €1.1195 and $1.3190.

UK

Consumer Spending

UK consumer spending declined in September, after a modest gain in the previous month, suggesting continued weakness in the economy amid high inflation, muted wage growth and political uncertainty, results of a survey by payment services provider Visa showed today. Consumer spending dropped 0.3% year-on-year following a 0.2% gain in August. Spending has now dropped in four of the past five months.

Brexit

“The ball is entirely” in Britain’s court regarding Brexit, the European Commission said yesterday, ahead of the fifth round of talks about the terms of Britain’s departure from the bloc. However, confusingly, Britain’s Prime Minister Theresa May is expected to tell other EU countries in a statement in the British parliament that the “ball is in their court,” according to British media reports.The rhetoric on both sides, as well the sparse agenda for this week’s Brexit negotiations – which so far only entails three meetings between both sides until Thursday, and none on Wednesday – suggest that a breakthrough this week is looking unlikely. Prime Minister Theresa May told parliment the UK can “prove the doomsayers wrong” when it comes to Brexit. Mrs May went on to reveal the publication of two White Papers covering future trade and customs options, which give the most detail yet of contingency planning that is under way. They set out three strategic objectives: ensuring UK-EU trade is as frictionless as possible, avoiding a hard border between Ireland and Northern Ireland, and establishing the UK’s own independent international trade policy. The Papers, which are the first real sign that the Government is preparing for a possibility of a no deal scenario, will go through repeated revisions before MPs eventually vote on them as bills.

Few SMEs claim capital allowances relief

A report by Catax has found that 57% of SMEs in the south-west are unaware they can claim tax relief on premises they own. Just one in 10 local businesses have applied for capital allowances tax relief in the past. Mark Tighe, chief executive of Catax, commented: “We know that thousands of businesses in the south-west, from veterinary, dental and GP practices to nurseries and hotels are sitting on a potentially significant tax windfall. Capital allowances are obscure at the best of times but they can be extremely lucrative when identified.”

Rob Hattrell: Brexit brings opportunity for SMEs

Rob Hattrell, the UK boss of eBay, has said Brexit brings an opportunity for small businesses to place a greater focus on exports. SMEs have already been doing this since the EU referendum – a response not just to do with currency movements, he says, but because of the “strong entrepreneurial streak” of British small businesses, creating products “that are loved and looked for all over the world”. Mr Hattrell intends to make changes to the eBay brand and encourage more businesses to use the platform. He also rejected criticism of the company’s tax contributions and claims eBay was not doing enough to deter VAT fraud, saying: “We work closely with HMRC – we share data and if we are notified of sellers who are not paying VAT then we will shut them down. We don’t want them on the platform.”

UK firms lacking the long-term finance for growth

Writing in the Yorkshire Post, Tim Ward, the CEO of the Quoted Companies Alliance, says smaller firms need more support from “patient capital”. He says the decline in the number of companies accessing public markets in the UK indicates that the cost of accessing public equity capital is becoming too high for growth companies. He says the QCA would like to see “raising equity treated the same as raising debt in taxation terms, so companies have a greater incentive to raise finance on public markets and promote long-term economic stability,” and for the FCA “to adopt a more sympathetic approach to smaller listed companies on the Main Market.” Mr Ward adds that these are “a few among many [measures] that would help create markets where entrepreneurs can fulfil their business dreams and where investors can benefit, patiently, from them.”

UK accused of providing illegal state aid in fibre optics push

European Commission competition authorities have claimed the UK government has been providing BT with illegal state aid through the business rates system. BT and Virgin Media will be the biggest beneficiaries of tax breaks on broadband fibre-optic upgrades, with Vodafone also likely to benefit through its partnership with Openreach. European officials did not reveal the source of the complaint but said the UK needed to provide a satisfactory explanation or apply for state aid approval. A government spokesman said: “The Commission have previously ruled that state aid is not present in the business rates system for telecom companies. Given the complainant has presented no new evidence, we are confident the Commission will conclude that this latest complaint is also unfounded.”

TUC: Millions remain at risk of poverty

According to the TUC, as many as six in 10 workers in low-paid sectors such as retail and agriculture are not enrolled in a pension because they earn less than the £10,000 minimum level at which employers must set them up with a savings plan. The industries with the lowest pension cover are agriculture, forestry and fishing, hospitality, construction, arts and entertainment, and other services such as hairdressing and beauty.

Fall in pound fails to boost manufacturers

Figures from BDO show a steep fall in manufacturing order book expectations suggesting a boost from a fall in sterling have yet to be realised. Peter Hemington, a partner at BDO, said: “UK manufacturers seem not to have benefited much from the expected boost to their competitiveness. And there has to be a suspicion that fears of the damage that could be done by a poorly negotiated Brexit are beginning to weigh heavily upon our makers.” The figures come as BAE Systems prepares to axe over 1,000 jobs at UK plants thought to be due to weak orders for the Eurofighter Typhoon fighter aircraft.

Confidence falls in third quarter

Business confidence levels have dropped according to the latest quarterly survey of chartered accountants based in Scotland. ICAEW, which surveyed 60 of its members in Scotland, blamed the fall in Q3 partly on uncertainties surrounding Brexit negotiations and the outcome of the general election.

Diageo tops list of best governed UK businesses

Diageo has topped the annual ranking of public companies by the IoD, the CQI and Cass Business School. Factors used to compile the rankings included board diversity, directors’ pay, length of time with an auditor and whistleblowing policies. GSK was at the bottom of the list due to a bribery scandal and excessive pay.

BAE Systems

BAE Systems’ new boss is preparing to trim the defence group’s workforce by at least 1,000, according to a report on Monday. Charles Woodburn, the oil executive who joined the defence contractor as chief operating officer last year ahead of his promotion to chief executive this June, will get rid of well over 1,000 jobs. The rumoured job cuts come despite last month’s news that the UK government had secured a contract with Qatar for BAE to assemble 24 Typhoon fighter jets, worth at least £2bn across the four-nation consortium behind the Eurofighter.

Royal Mail

Royal Mail said it is seeking a high court injunction to stop strike action by the Communications Workers Union, after the union failed to withdraw its strike plan. Royal Mail members of the Communications Workers Union are due to stage a strike between 1100BST on October 19 to 1100BST on October 21. Royal Mail said it had asked the union to withdraw its plans for action in favour of mediation but said the “CWU has declined to withdraw its notification.”

International

Nudge unit co-founder awarded Nobel prize

Academic Richard Thaler has won the Nobel Prize for economics for his work on the “nudge” theory, which asserted that people can be influenced by prompts – such as changing the wording of tax demands – to alter their behaviour. The theory led to the creation of the Whitehall nudge unit, which helped to rewrite tax reminder letters using principles of behavioural economics, which it said helped to bring forward more than £200m for the government in one year

Amazon faces US tax bill after European ruling

Following a €250m demand last week by Brussels for back taxes, Amazon now faces a €300m bill from the US on profits held in Europe.

Turkey

The U.S.’s spat with Turkey could drag on with Thanksgiving approaching. Animosity is building between the NATO allies. U.S. envoy John Bass said a resolution depends on officials explaining why two Turkish employees at American outposts were detained. President Erdogan, on tour in eastern Europe, said the crisis is “very saddening.” The lira traded at a record low against its basket, while bonds and stocks tumbled.

Catalonia

It’s going to be a big day in Catalonia. Carles Puigdemont is due to address lawmakers in Barcelona at 6 p.m. A declaration of gradual independence may be forthcoming, Efe reported, without citing anyone. Spanish PM Mariano Rajoy has vowed intervention by security forces and the reassertion of central control if the declaration comes, while major companies have begun relocating away from the region.

Saint Nick

Yes, there was a Santa Claus — and his bones lie under Saint Nicholas Church in Antalya, Turkey. At least, that’s what the director of monuments there believes. Cemil Karabayram said last week that radar uncovered an intact temple and burial site underground near the birthplace of Nicholas, the fourth-century saint who gave rise to the legend. It’ll be a while before the theory can be confirmed. Archaeologists must first excavate and preserve a series of mosaics that are buried between the church and the temple.