Brits to spend £2.5bn as restrictions ease – business news 17 May 2021.
James Salmon, Operations Director.
Brits to spend £2.5bn as restrictions ease, SMEs anxious over lockdown lift delays, Small firms set to hire. Will blistering growth spark serious inflation? GDP figures prompt debate, tenth of UK restaurants lost during lock-downs, pandemic hits aspirations of the disadvantaged and more.
Brits to spend £2.5bn as restrictions ease
Consumers are expected to boost the economy by spending billions this week, with indoor dining and entertainment reopening in England as of today. A study by VoucherCodes and the Centre for Retail Research predicts that people will make 104m visits to pubs, restaurants and cafes, spending up to £2.5bn between them. Friday and Saturday are set to be the busiest days, with more than 16m people planning to head out on Friday and over 18m doing so on Saturday, spending in excess of £389m and £426m, respectively. Around 13.6m people are set to visit venues today and spend £297m. The analysis suggests sales in the coming week are set to be up 34% compared to the same week in 2019. Consumers are predicted to spend £426.2m on Saturday, 41.2% more than the £301.84m spent on the same day in 2019.
SMEs anxious over lockdown lift delays
Research from Nucleus Commercial Finance shows that almost a third of small businesses fear that lockdown restrictions will not be eased by June 21 as scheduled, with 26% of SMEs saying they expect the lifting of restrictions to be delayed. The poll, taken before Prime Minister Boris Johnson warned on Friday that the Indian coronavirus variant poses a threat to the exit roadmap, shows that SMEs in the south-west were most pessimistic, with 44% fearful of future lockdowns compared to 23% in the north-west, the most optimistic region.
Small firms set to hire
A poll conducted by SME lender Recognise Bank has found that 62% of small businesses are planning to recruit more staff as lockdown restrictions are eased, with just 18% expecting to cut staff numbers. CEO Jason Oakley said: “Employment is a great barometer for confidence and the fact that six out of 10 SMEs are planning to recruit over the coming months is great news for workers and even better news for the economy.”
Will blistering growth spark serious inflation?
Ambrose Evans-Pritchard in the Telegraph on Saturday said global banks are “scrambling” to raise growth forecasts for the UK, with many expecting the economy to “roar back to life” over coming months and hit pre-pandemic levels of output far sooner than had been expected. He points to a Goldman Sachs forecast of “blistering” growth of 8.1% prompted by signs of “an explosive economic reopening”, while Bank of America has raised its forecast for this year from 5.9% to 7.4%. Mr Evans-Pritchard says the “unknown question” is whether the economic rebound will set off serious inflation, with Bank of America saying UK inflation could temporarily spike by 3% later this year and warning: “It’s going to be a bumpy ride”.
Phillip Inman in the Observer said markets are struggling to predict whether the post-pandemic recovery will be “so strong as to bring with it a tidal wave of spending that sends prices spiralling”, warning that investors are “spooked” over the possibility of inflation rising and the threat to investment and consumer spending. Increases, Mr Inman notes, would need to be tamed by a rise in interest rates, adding that this “would be anathema to markets and a corporate sector that have grown used to cheap money”. Mr Inman considers the factors that may drive up inflation, including: a surge in consumer spending, higher commodity prices, and the Government easing its stimulus measures. He also suggests that as they look to balance the books, policymakers may start raising taxes, “effectively withdrawing a key element of growth from the economic equation”.
GDP figures prompt debate
David Smith in the Sunday Times says official statistics on monthly and quarterly GDP have sparked debate. He says that those coming from a “glass half-full, Britain is bouncing back fast” angle are likely to focus on the monthly figures, with Office for National Statistics (ONS) data showing GDP jumped by 2.1% in March, the biggest rise since August 2020. On the other hand, those of a “more cautious disposition”, will point to quarterly data showing a 1.5% dip in Q1. Mr Smith also notes that most economists “are relaxed about inflation”, with a compilation of independent forecasts by the Treasury showing that the average prediction for consumer prices inflation at the end of this year is 2.1%.
Tenth of UK restaurants lost during lock-downs
The Market Recovery Monitor from CGA and AlixPartners shows that up to one in ten UK restaurants have closed down since the beginning of the coronavirus lock-downs. The data suggests the number of food-led venues has fallen by 4,204. It was also found that by the end of April, only 32.9% of pubs, bars, restaurants and other licensed premises had begun to trade again for the first time since the start of the last national lockdown.
Pandemic hits aspirations of the disadvantaged
James Moore in the Independent reflects on PwC’s latest social mobility study, with the report having found that people from disadvantaged backgrounds are “failing to meet their professional aspirations”, with this further set back by the pandemic. Laura Hinton, PwC’s chief people officer, says the rise of tech-based working brought about by coronavirus restrictions is acting as an additional impediment to those from disadvantaged backgrounds. Alan Milburn, a former cabinet minister who serves as an advisor to PwC, believes the issue is too big and too complex for ministers to address alone, with the PwC analysis showing that a large majority of the public also believe that businesses should do more to support “leveling up”.
Amazon
Amazon is to create 10,000 jobs in the UK as part of its warehouse expansion plans taking its total UK workforce to 55,000. Business Secretary Kwasi Kwarteng said the announcement was a “huge vote of confidence in the UK economy”. It said that it would also invest £10 million over three years to train up 5,000 of its staff using its “Career Choice” programme.
Sage: Growth to hit top end of forecast
Software developer Sage, which makes accounting and payroll tools for SMEs, has reported a stronger-than-expected 4.4% rise in organic recurring revenue in the six months to the end of March. The firm expects growth for the year to be towards the upper end of its previous forecast range, between 3% and 5%. CEO Steve Hare pointed to customers’ “optimism and confidence” and a “desire to really now invest in technology”, adding that SMEs “will lead the recovery”.
EU Financial services talks must accelerate
Chris Blackhurst in the Independent on Saturday said talks between Brussels and London over a deal for financial services “are dragging”. Reflecting on the impact Brexit has had on the City, he notes that while Morgan Stanley, Goldman Sachs and Barclays are among firms moving senior bankers to EU centres, “dire predictions of a mass flight” of finance professionals from London after the referendum “have not yet been realised”, with EY analysis suggesting 7,600 financial services jobs had relocated from London in the period to March this year. Mr Blackhurst calls for negotiations with the EU over financial services to accelerate, saying that while the UK is striking many trade agreements across the world, “this is one deal that really matters”.
Government looks to rewrite financial rules
The Government is drawing up plans to scrap swathes of pre-Brexit financial rules amid the expectation that Brussels will not grant the City widespread access to the single market. The Treasury has begun scrutinising the whole suite of finance regulations which were kept in British law after the UK’s departure from the EU, with a view to cutting red tape and enhancing London’s role as a global trading hub. The European Commission has demanded details of Britain’s plans to diverge from EU rules before it considers granting access through equivalence. However, senior figures in Brussels are suspected of seeking to stall the equivalence process in a bid to steal business from London or extract concessions in other areas.
Fashion firm forced out of business
Fashion design firm Amanda Wakeley has been forced into administration after backers private equity firm AGC Equity Partners and Ms Wakeley herself said they were unwilling to put any more money into the business which has struggled due to the closure of stores during the coronavirus lock-downs. Smith & Williamson, which is acting as administrator, said “a small number of redundancies have regrettably been necessary”, adding that a “core team” remains to help sell the business. Colin Hardman, joint administrator, said that despite “significant interest” it was unable to find a buyer and therefore had decided to place the business into administration.
Retailers urged to focus on ESG
The Sunday Times’ David Smith says the environmental, social and corporate governance (ESG) agenda “is a huge issue for business”, with the latest KPMG/Ipsos Retail Think Tank report saying ESG will need to be one of the top three priorities for larger retailers. These businesses, he adds, will be driven to change by shareholders, employees, regulators, policymakers, lenders and consumers. The report says retail is behind other sectors in adopting ESG agendas, noting that one reason players in the sector have been slow to adopt ESG is that they operate low-margin businesses. Nick Bubb, an independent retail analyst and member of the think-tank, comments: “It usually isn’t customer reaction that forces businesses to jump through hoops to address its ESG inadequacies; it is [also] the likes of pension fund managers, who have the long-term interests for their investments at heart”.
HMRC’s ‘Big Brother’ system targets tax debts
HMRC is using special powers to recover unpaid bills directly from wage packets and pensions, reports Harry Brennan in the Telegraph. He says figures uncovered by a probe into the tax office’s most extreme enforcement methods show that HMRC has bankrupted almost 15,000 taxpayers and businesses over unpaid bills since 2016. It has also threatened to take possessions from more than a quarter of a million people and sell them to cover debts. While debt collectors have confronted almost two million people in pursuit of arrears, HMRC has seized hundreds of thousands of pounds from taxpayers by taking money straight out of bank accounts. Mr Brennan says that with tax debts soaring, HMRC is recovering money by deducting cash directly from salaries and pension incomes, using a digital system known as “coding out”. The taxman forcibly changed the tax codes of 134,000 debtors and docked money from their wages to recover more than £54m in unpaid bills last year, up from fewer than 74,000 the year before. Richard Morley of HW Fisher comments: “HMRC has an astonishingly powerful computer system at its disposal. The system’s power and reach have increased over time in a Big Brother style, which inevitably makes it far easier for it to pursue things like the digital recovery of tax debts”.
House prices
Rightmove’s House Price Index showed the cost of the average UK property rose 1.8 per cent this month, to £333,564. The boom in prices is largely driven areas such as Wales, the north-west of England and Yorkshire, which all saw prices jump over 10 per cent.
Last Debenhams stores close
The last remaining Debenhams closed their doors on Saturday, more than 240 years after the department store began trading. The chain went into administration in 2019 and, with the pandemic hitting business in 2020, its owners announced the business was being wound down with 12,000 job losses in December. The Debenhams brand will continue to trade online after it was bought by Boohoo for £55m in January.
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