Business News 18th September 2017
CPA hopes to inform, with its daily bite-size business news on Monday 18th September 2017, filled with stories we think will interest Business people.
Markets Round up
Shares in London slumped to a 4 month low of 7215.5 on Friday as the pound continued to surge upwards fuelled today after the external MPC member Gertjan Vlieghe said interest rates could rise “in the coming months”. Another missile launch from North Korea added to investor anxiety which was compounded when the Met Police confirmed that the morning’s explosion on the London underground at Parsons Green was a terrorist incident. U.S. shares closed higher with the S&P at 2500.23 and the Nasdaq at 6448.47, with technology, financials, and telecommunication shares leading the way higher. Asian shares gained as investors anticipated clues on the direction of monetary policy from central banks later in the week.
Oil prices fell on friday but recovered this morning to $50.25 for WTI and $55.88 Brent as global markets weakened following North Korea’s latest missile launch, but crude shook off concerns and remained close to five-month highs reached on bullish demand forecasts and US refineries restarting alongside a falling rig count.
Gold prices fell to $1315 after a European Central Bank official called for scaling back the bank’s stimulus programme, although losses were capped when weaker than expected U.S. economic data raised questions about further rate hikes.
The pound has surged on interest rate hike predictions to 1.1366 Euros and 1.3559 US Dollars.
Confidence drained from British firms
A poll of medium-sized firms by BDO has found that 60% are less confident about their growth prospects than at the general election 100 days ago. Only 4% are feeling more confident. Some 83% of firms said there was no clearer picture of the future of the UK’s trading arrangement with the EU, while 58% said clarity on Brexit negotiations should be the top priority for ministers.
Business lending down
A report by UHY Hacker Young has found bank lending to the private sector has slumped by a fifth since the financial crisis. Some $2.29trn (£1.69trn) was lent to businesses in the UK last year, down from $2.87trn in 2008.
U.K. House Price Growth at Slowest Since 2012
U.K. house prices grew at the slowest annual pace in more than five years this month as a slump in London weighed on the market. While the autumn traditionally sees prices pick up after a summer lull, this year had the first month-on-month decline in September in four years as values in London slumped. As house price growth slows in response to sluggish economic growth and a squeeze on consumers in the wake of the Brexit vote, the capital’s property market has been the hardest hit. The outlook for house prices further dimmed last week when the Bank of England suggested it may soon raise interest rates for the first time in a decade.
Hammond plans to keep corporation tax cuts
Chancellor Philip Hammond is said to be resisting pressure to scrap planned corporation tax cuts in the Budget on 22 November. Abandoning the proposed cuts would hand Mr Hammond an extra £6.8bn a year by the end of the parliament, but he is said to be concerned that doing so would undermine business confidence in the government. In the Times, IFS director Paul Johnson says there is no chance of any increases in income tax, VAT or NI being announced in the Budget, and so scrapping the corporation tax cuts is an obvious revenue raiser.
The Times, Page: 2 The Times, Page: 41
Fortysomething graduates could be taxed retrospectively
Researchers at the UCL Institute of Education have suggested graduates aged 40 and above who benefited from a free university education should pay a retrospective tax to help fund the current generation of students. One suggestion is that a graduate tax could be graded, with those who paid nothing for their university education paying one level of tax, while those who paid tuition fees at a much lower level than today would be asked to pay less.
The Daily Telegraph, Page: 2
Purplebricks
Purplebricks formally launched its business in the US Friday. The launch will kick off in Los Angeles before extending across California and other target key states thereafter. The company said this was in line with the region by region rollout successfully adopted for entry in the UK and Australia markets. Purplebricks said California is the “natural launching point” for US expansion as it is the leading US state in terms of both number of annual real estate transactions and estimated commission income. Although California, at 12.6m households has less than half the UK equivalent, the level of commission income in California is more than double that of the UK.
As North Korea threat looms, Trump to address world leaders at U.N.
North Korea’s nuclear threat looms large this week over the annual gathering of world leaders at the United Nations in New York, where diplomats are eager to hear U.S. President Donald Trump address the 193-member body for the first time. North Korean diplomats will have a front-row seat in the U.N. General Assembly for Trump’s speech on Tuesday morning, which will touch on the escalating crisis that has seen Trump and Pyongyang trade threats of military action. Despite his skepticism about the value of international organizations and the United Nations in particular, Trump will seek support for tough measures against North Korea, while pressing his “America First” message to the world body.
Worst pay decade for a century
The Resolution Foundation thinktank has calculated that Britain is poised to experience its worst decade for pay growth since 2013. It said that the growth in average real-term wages over the course of the 2010s is likely to come in at -0.2%.
Banks face grilling over personal debt
Lenders are facing tough talks with the Bank of England next week over the recent surge in consumer loans. BoE officials fear that the boom in personal debt could leave Britain’s big banks over-stretched and vulnerable to a crunch. The Sunday Telegraph speculates that lenders could be told to tighten up standards, beef up tests to make sure borrowers can afford their debts, or reallocate more capital to their consumer loan books.
Terrorism
Britain lifted its national security threat level to critical from severe on Friday, meaning an attack is expected, after a bomb on a London commuter train injured 29 people. Prime Minister Theresa May said in a televised statement that armed police and members of the military would be seen on the streets in the coming days. ”For this period, military personnel will replace police officers on guard duties at certain protected sites that are not accessible to the public,” she said. It was then raised to imminent before for falling today to severe following the weekends arrests.
Brexit
Largely silent for months, Foreign Secretary Boris Johnson launched himself back into the Brexit debate late Friday night with a 4,000 word opus. The timing was questionable given it came a week before Prime Minister Theresa May outlines her own vision for the split. Johnson painted a positive picture of what he called a “glorious” post-Brexit Britain, rejected the notion of paying for access to the single market and revived the much-criticized suggestion that the British could redirect £350 million a week toward the National Health Service. Home Secretary Amber Rudd accused him of “backseat driving”. The U.K. statistics watchdog accused him of a “clear misuse of official statistics”. The Times reported that Johnson is increasingly worried about the perception he misled voters last year and doesn’t want to be blamed for a Brexit betrayal. He’s also fed up with his Foreign Office job. EU officials aren’t holding out much hope that May will this week break the deadlock in the Brexit negotiations. They want her to propose solutions to sticking points such as the financial settlement, but aren’t confident she will do so. “It would be very nice if we could get a clear message,” Danish Finance Minister Anders Samuelsen said in an interview in Copenhagen. Sky News reported Brexit Secretary David Davis as saying privately that the bill is £60 billion and “falling.”
SMEs must start reaping R&D benefits
Tom Byng of MHA MacIntyre Hudson says more SMEs need to start reaping the benefits of R&D tax relief. Over the last year, HMRC has given out £2.9bn across a range of industries, with around half of this claimed by SMEs. However, although the number of claims has risen by 19%, this is still less than 1% of UK companies, says Mr Byng.
Call for action to secure pension payments for Britons in EU
Nicky Morgan, the head of the Treasury Select Committee, is calling for urgent action to ensure that British pensioners living in Spain or other EU countries continue to receive their pension payments after Brexit. At the moment, so-called passporting rights are used by many insurers in the EU to sell pensions, insurance and savings products across borders. However, unless an agreement is struck, passporting will end on the day the UK leaves and insurers will would face the choice of either breaking the contract or the law.
UK pension freedoms alarm state-backed workplace scheme
Nest, the UK’s state-backed workplace pension scheme, has warned that pension freedoms could see its 5m members run out of money in later life, be hit by high charges or overpay tax.
Employers hit by rise in non-wage costs
Non-wage costs for employers have risen sharply in the past year, as extra regulations and charges hit companies in the pocket. The ONS said the cost of an average hourly wage for a company in the three months to July rose 1.2% on the year. By contrast non-wage costs – including sickness, maternity and paternity pay, NI contributions and pension contributions – increased by 3.9%. “We’ve got autoenrolment in pensions, the apprenticeship levy, the national living wage. Employers are feeling the pain because they’ve got all of these extra costs,” said Alan Clarke, economist at Scotiabank. The ONS said that since 2000, non-wage costs have almost doubled, rising by 99.1%. Over the same period wage costs have risen by 61.8%.
FCA demands justice for small firms
The head of the Financial Conduct Authority has said that small firms are unable to obtain justice in their complaints against banks, and the system needs an urgent overhaul. Andrew Bailey wants politicians to set up a new independent process to deal with disputes between firms and lenders. Mr Bailey told the Mail on Sunday: “For issues such as RBS and its Global Restructuring Group, interest rate hedging, and complaints from small and medium-sized firms, there isn’t a proper dispute resolution process. I think there should be an ombudsman-style service for them.” The paper’s Ruth Sunderland backs Mr Bailey’s view, calling for the introduction of a small firms ombudsman, or a tribunal that can hear cases. She points out that most business banking is done by the Big Four of Lloyds, HSBC, RBS and Barclays, so firms “don’t have much choice of provider, and they don’t have much negotiating power.” Meanwhile, the Sunday Express reports that victims of Royal Bank of Scotland’s restructuring division could seek a judicial review of the FCA’s decision to not publish a report into how the bank mistreated them.
The Mail on Sunday, Page: 87-88 Sunday Express, Page: 56
BBC removing qualifications from CV’s
The BBC’s director of radio and education, James Purnell, has said the corporation will remove qualifications from the CVs of applicants, pointing out that the move was “something lots of organisations are doing; across accountancy, across law.”
US retaliation feared over tech tax
Philip Hammond is said to have warned EU finance ministers that raising tax bills for digital giants such as Google and Facebook risks angering Washington – which could abandon global tax reform in retaliation. France is pushing to tax the firms on the basis of their turnover – rather than profits – and the proposal has gathered the support of 10 of the 28 EU governments. However, the move is likely to need the backing of all member states to reduce risks of legal challenges.
The Observer, Page: 19
Financial security a factor in remarriage
A study by Investec Wealth & Investment reveals that 48% of divorced and widowed women over the age of 55 say financial wellbeing would influence, or has influenced, their decision to remarry. Some 45% of women surveyed said their decision to remarry is motivated by the right to a portion of their partner’s pension pot if they split. The doubling of the IHT threshold for married couples was also a strong factor.
Treasury targets high earners over EIS
The Treasury is considering how to clamp down on high earners abusing the Enterprise Investment Scheme (EIS). The scheme is designed to stimulate investment in Britain’s most promising start-ups, with investors receiving tax breaks for backing high-risk companies. But it is also said to have allowed wealthy investors to avoid paying tax. Treasury officials are looking at ways to crack down on abuse of the system as part of a review into small business funding, according to investment industry sources. Among the proposals thought to be under consideration are: cutting the level of tax relief; increasing the period an investment must be held to more than two years; and placing greater restrictions on the companies that qualify for funding. Figures from the Enterprise Investment Scheme Association (EISA) show the scheme has led to investments of £15.9bn in 26,000 companies since its launch in 1994.
The Sunday Times, Business and Money, Page: 2
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