Business News 29th August 2017
CPA hopes to inform, with its daily bite-size business news on Tuesday 29th August 2017, filled with stories we think will interest our members and visitors.
We apologise for missing a few days due to an absence.
Markets Round up
Stock markets are down this morning. On our last business news (Wednesday) the FTSE 100 was at 7382 and it has fallen to 7300 this morning and the Euro Stoxx 50 is down to 3367 with a sell off caused by rising tensions again on the Korean peninsula. The US markets were fairly level last week but will probably open lower later today with the aftermath of Tropical storm Harvey like to weigh on sentiment. Investors are seeking out havens, boosting traditionally safe assets such as the Japanese yen (no – it makes no sense to me either) , gold (up to $1325) and U.S. Treasurys, after North Korea fired a ballistic missile over Japan for the first time since 2009. Oil has fallen since last week but the US brent price is reversing up to $46.66 as the refinery shutdowns in the Gulf of Mexico affect supply. Brent is at $51.8. The pound is at 1.077 Euros and 1.297 US dollars.
North Korea
North Korea fired a ballistic missile this morning which flew over the Japanese island of Hokkaido before landing in the Pacific Ocean some 745 off land, prompting residents to seek shelter and calls for additional actions against the reclusive state. South Korea’s Joint Chiefs of Staff said the missile was launched near the North Korean capital Pyongyang and traveled more than 2,700 kilometres, reaching a maximum altitude of around 550 kilometres. The missile, which was the first to pass over Japan since 2009, posed an “unprecedented, serious and grave threat” Japanese Prime Minister Shinzo Abe told reporters, adding that Tokyo had lodged a “stern protest” with North Korea. The Pentagon said the projectile didn’t pose a threat to North America.
Hurricane Harvey
Many refineries have shut and almost a fifth of oil and gas production in the Gulf of Mexico has been suspended amid the largest storm to hit in the US in more than a decade. Hurricane Harvey has produced high winds and extensive flooding forcing thousands of people from their homes. The closures are expected to cause a temporary spike in US gas prices. Analysts expect the economic impact of the storm to pass $40bn (£31bn), with direct losses of over $20bn. The storm’s path through southeast Texas and the Gulf of Mexico has hit the heart of the US energy industry, an area home to almost half of US refining capacity and a fifth of its oil production. Houston, where water has overwhelmed the streets, is also the base of one of America’s largest ports. President Trump expects Congress to swiftly pass emergency disaster funding to respond to Hurricane Harvey, even as signs of a political fight over the money began to emerge. House Democratic leader Nancy Pelosi made it clear any bill should be exempt from budget caps that require offsetting spending cuts, something Republicans have balked at in the past.
Brexit- Get Serious
The third round of Brexit talks gets under way this week and it appears to be set for a miserable start. The EU’s chief negotiator Michel Barnier warned yesterday that progress on ‘separation’ issues needed to be made in order for any talks on the future of EU-UK relationship to proceed. Mr Barnier expressed concerns that the British Government has not yet taken a position on all separation issues and urged the British govenment to ‘start negotiating seriously’. ‘To be honest I am concerned. Time passes quickly,’ said Mr Barnier. The stand off about the exit bill is continuing, while the EU last week accused the UK of ‘magical thinking’ on the issue of the Irish border. An agreement over citizens’ rights has not yet been reached either. All of these issues will have to be agreed on before the new trade relationship discussions can begin.
OBR warns of rates threat to public borrowing
The Office for Budget Responsibility has warned that Britain’s deficit and national debt could run out of control if there is a sudden rise in interest rates. The OBR also said a spike in inflation or a decision by the Bank of England to wind down quantitative easing could see the national debt increase from its current level of £1.7trn, or 87% of GDP.
Economists: House prices to hit 15 times the average income
Two leading economists have warned that climbing house prices could see the average value hit 15 times the average income. Imperial College professor David Miles, a former member of the Bank of England’s Monetary Policy Committee, and colleague James Sefton have published a report saying the cost of housing relative to wages will rise by about 40% over the next 50 years.
The Mail on Sunday, Page: 80
Interest rates set to stay low
Economists have said interest rates are likely to stay on hold for at least another two years, as the economy continues to show signs of slowing. Sam Hill of RBC Capital Markets said the weakness of consumer spending and the fall in the savings ratio has even raised the possibility of rates being cut.
The Sunday Telegraph
Eurozone Inflation
Inflation data from the euro zone’s largest economies this week may show prices nudged up in August, but because of higher gasoline prices rather than anything fundamental to cheer up Mario Draghi. Underlying inflation is expected to remain subdued. Figures from the U.K. will probably confirm a slowdown in house price growth while consumer lending stayed robust.
Google
Google must tell the EU today how it will stop discriminating against rival shopping search services. Those changes have to put in place by 28th September, or the search engine risks fines of 5% of daily revenue for each day it fails to comply, on top of a record 2.4 billion-euro penalty. Google must tell the EU today how it will stop discriminating against rival shopping search services. Those changes have to put in place by 28th September, or the search engine risks fines of 5% of daily revenue for each day it fails to comply, on top of a record 2.4 billion-euro penalty.
Treasury plans co-operative audit cull
The majority of Britain’s co-operatives will no longer have to endure a full financial audit, under new plans from the Treasury. The proposals mean co-ops with turnover of less than £10.2m and assets under £5.1m do not need to choose an auditor. The current thresholds stand at £5.6m and £2.8m respectively, and the Treasury said co-ops could each save up to £10,000 a year under the plans. City minister Steve Barclay said the government wanted to reduce “onerous administrative burdens on these societies, saving them money”.
RBS ‘mistreated business customers’
A leaked report for the Financial Conduct Authority says the RBS department set up to help companies in trouble mistreated more than 90% of its clients. The FCA found some “inappropriate action” – such as interest charges being raised or unnecessary fees added – was experienced by 92% of viable firms seen by RBS’s Global Restructuring Group. The 361-page report also says the bank only provided “narrow compliance” to investigators but RBS refuted this, saying it “co-operated fully with this complex and lengthy review.” GRG operated from 2005 to 2013 and at its peak handled 16,000 companies.
Millions of taxpayers sent warning about secret offshore accounts
As part of a global transparency drive, advisers and financial institutions have until the end of August to tell their clients about the risks of holding undeclared offshore accounts.
Which? finds lack of trust in pensions
A survey by the consumer group Which? has found just 23% of consumers trust long-term financial products such as pensions – fewer than the 40% who trust in day-to-day banking. Elsewhere, the Times reports that the government is planning to ban pensions cold calling, following claims that private pension scammers have conned savers out of an estimated £43m since April 2014.
Forgotten pension pots worth £800bn
Research by Royal London suggests millions of Britons are unaware that they are collectively sitting on pensions worth £800bn from their former employers’ final salary schemes. According to the insurer, there are approximately five million deferred members of defined benefit funds, and many of them have no idea what their pension would be worth as a lump sum.
Sunday Express, Page: 63
Corbyn vows to protect triple-lock
Jeremy Corbyn has promised that Labour would retain the triple lock on pensions, as well as maintain the free bus pass and winter fuel allowance for pensioners.
The Sunday Times
Crackdown on avoidance targets smaller firms
A tax avoidance crackdown on smaller firms brought in an extra half a billion pounds in corporation tax for HMRC in 2016-17. Investigations raised £474m – 5% more than in 2015-16, according to UHY Hacker Young. The firm said more SMEs were being targeted to close the tax gap. UHY partner Roy Maugham commented: “Small businesses are increasingly subject to scrutiny by the taxman, often unfairly. They may not have the resources to bounce back, even if they have made an honest error.”
The Mail on Sunday, Page: 84
LinkedIn fraudsters pose as finance chiefs
Criminal gangs are increasingly scouring LinkedIn for information about a company’s chain of command, before using the details to perpetrate ‘CEO fraud’. The frauds typically involve an email purporting to be from a finance director or chief executive sent to someone in the company’s finance department, ordering them to transfer their money quickly to a bank account for a specific reason. A report last year from the City of London police’s National Fraud Intelligence Bureau showed that £32m had been reported lost as a result of CEO fraud in Britain. “The attackers use LinkedIn to do corporate reconnaissance. It tells them a lot about who does what in an organisation,” says cybersecurity expert Andrew Nanson.
Almost £1.5bn UK tax relief claimed on individuals’ charity gifts
Figures from HMRC show almost £1.5bn of tax relief was claimed by individuals making gifts to charity last year – an increase of more than 50% since 2012.
Digital services focus on SMEs
The UK Government and other public sector organisations have spent £1.2bn with SMEs on cloud and digital services since 2012. It means nearly half of all digital spend from the public purse, or £1.39 in every £3, is going to SMEs.
Corporate reforms ‘a step in the right direction’
Stefan Stern, director of the High Pay Centre, has welcomed Theresa May’s proposals to crack down on boardroom excess as “a step in the right direction”. However, he also said that more needed to be done to address the systemic issue of high executive pay.
BBC News
Corporate reforms target pay disparity
Business secretary Greg Clark will today outline a new package of government reforms aimed at increasing boardroom transparency. Firms who face more than 20% shareholder opposition to executive pay deals will be named and shamed on a new register. And the Financial Reporting Council is being asked to write into the UK Corporate Governance Code a new call for listed companies to ensure employees’ interests are better represented at board level. The new corporate governance laws, which are due to come into effect by June 2018, will also force some 900 publicly-listed companies to reveal the pay ratio between bosses and workers. While the majority of the new measures will only apply to publicly-listed companies, the government has asked the FRC to draw up a voluntary set of corporate governance principals for large private companies. Some business groups have welcomed the plans, but general secretary of the TUC Frances O’Grady said they amounted to “business as usual for British boardrooms.”
BBC News
AI set to transform the workplace
The Telegraph’s Joe Shute says the rise of artificial intelligence (AI) will engender the biggest change to the workplace ever experienced in the technological era. He warns that accountants are amongst those workers who face being overtaken by machines with far better accuracy and processing power.
The Daily Telegraph, Page: 17-18
May seeks to restore trust in business
Theresa May says the government will step up its efforts to curb boardroom abuses and excesses in order to restore public confidence in big business. Writing in the Mail on Sunday, the PM sets out a series of measures to tackle ‘fat cat’ behaviour. Under the reforms, to be announced this week, companies where a fifth of shareholders revolt over pay will be named in a public register. Similar measures will expose executives who earn hundreds of times the amount of ordinary workers on the same company payroll.
Costs weigh on services sector
Profits in the services sector have been hit by a steep rise in costs, even as demand remains robust. Data from the CBI’s latest quarterly survey for the three months to August show business and professional services firms saw volumes grow at the fastest rate since May 2016. But only 21% of firms said overall profitability was up on the previous quarter, compared to 25% who said it was down.
The Daily Telegraph, Page: 28
Pension deficit soars
Analysis by Barnett Waddingham reveals the aggregate pension deficit of the FTSE 350 rose by £12bn to £62bn last year, and now represents a higher proportion of pre-tax profit than just after the financial crisis.
The Times, Page: 40
Marriage can prove taxing
In an analysis of how marriage affects tax, Sam Meadows in the Telegraph highlights that when a spouse owns a property in their sole name an additional property bought by their partner – even in their sole name – will be subject to the 3% stamp duty surcharge. Mr Meadows also notes that in certain cases, couples can reduce their IHT or pension tax obligations by getting divorced.
The Daily Telegraph, Page: 21
BBC stars should declare ‘off the books’ pay
Damian Collins, the chairman of the culture, media and sport select committee, has said BBC stars who are paid ‘off the books’ should be forced to reveal their earnings. Shows made by BBC Studios will be classed as ‘independent productions’ in the next tax year, meaning the salaries of their top names will be omitted from a list of the corporation’s high earners.
New £1 coins ‘being wrongly returned’
Efforts to phase out the old £1 coin, which ceases to be legal tender on 15 October, are being hampered by companies who are returning the new 12-sided replacement by mistake. Cash management company Vaultex says roughly half of the £1 coins being sent back are the new version. Treasury minister Andrew Jones said “businesses must remain vigilant”.
BBC News
Or see our recent previous news pages
Business News 23rd August 2017
Business News 22nd August 2017
Business News 21st August 2017
Business News 18th August 2017
Business News 17th August 2017
Business News 16th August 2017
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