Business news 1 February 2022
James Salmon, Operations Director.
Self-employed numbers fall again. Rate rise is a certainty, say markets. Central banks have underestimated inflation impact. Foreign firms responsible for almost a third of underpaid tax. And more business news.
Self-employed numbers fall again
Research from the Association of Independent Professionals and the Self Employed (IPSE) shows that the number of self-employed workers fell for the second consecutive year in 2021. The number of self-employed workers in the UK fell by 5%, from 4.3m in 2020 to 4.1m last year. The falls recorded in 2020 and 2020 follow a 40% increase in the number of self-employed workers seen between 2008 and 2019.
IPSE’s Self-Employed Landscape report also found that the self-employed sector contributes an estimated figure of £303bn to the UK economy per year.
IPSE chief executive Derek Cribb comments: “It is worrying to see that the number of self-employed workers has fallen for a second year running, especially given the significant contribution the self-employed are known to make in periods of economic recovery.” He added that the pandemic, Brexit and changes to IR35 tax rules that govern freelancers have “seriously impacted the sector and have sown seeds of doubt and uncertainty throughout the freelancing industry over the past two years.”
Rate rise is a certainty, say markets
Financial markets are betting that the Bank of England is certain to implement back-to-back interest rate rises for the first time since 2004 later this week. Futures markets have now priced in a 100% chance that the central bank will increase its base rate by 0.25% to 0.5% when the Monetary Policy Committee (MPC) meets on Thursday. Economists are convinced that the Bank will need to act because it has failed to anticipate the extent and breadth of price rises under which consumer price inflation reached a 30-year high of 5.4% in December. Economists also believe the Bank has underestimated the strength of the labour market, where job vacancies almost match the number of unemployed people for the first time since consistent records began more than 20 years ago. Andrew Sentance, a former Bank ratesetter, said that the MPC was struggling after having avoided raising rates in the second half of last year. Writing in The Times, he criticises the central bank for getting its forecasts “badly wrong” and has called for a review of the performance and conduct of the MPC.
Central banks have underestimated inflation impact
Analysis by Goldman Sachs suggests central banks have underestimated the impact of inflation and will be required to hike rates to tackle price rises. The Goldman analysts said inflationary pressures “have significantly firmed”, with this “clearest in the UK and the US”. The bank believes central banks have underestimated the stickiness of inflation, a view shared by Seth Carpenter, global chief economist at Morgan Stanley. It is noted that experts expect the Bank of England to lift rates at least four times this year, while the US Federal Reserve is forecast to increase borrowing costs five times in 2022.
Tescos
Tesco has announced it will close down seven of its Jack’s stores, while the remaining six branches will be converted into Tesco superstores, with the move affecting 130 jobs although
Tesco will try and find those affected, alternative roles.
HMRC: Foreign firms responsible for almost a third of underpaid tax
Foreign companies are responsible for almost a third of underpaid tax in the UK, according to HMRC data analysed by Pinsent Masons. The law firm found that foreign-owned firms are responsible for around 32% of the under paid tax by large businesses in the UK, accounting for £11.5bn of the £35.8bn that has gone unpaid. Large US-owned businesses account for around 47% (£5.4bn) of the total underpaid by foreign-owned companies. Switzerland (£825m) and the Republic of Ireland (£674m) account for the next biggest totals. HMRC believes some large businesses are artificially reducing their tax liabilities by using transfer pricing, which sees business pay less corporation tax by charging an inflated price for services to its UK division. Pinsent Masons’ partner Steven Porter says HMRC is “aggressively” pursuing transfer pricing arrangements that it sees as artificial. “Reducing losses to the Treasury from transfer pricing and base erosion is a key target, both for HMRC and for the Government,” he added.
Three in 10 UK board seats held by women
Analysis by Deloitte and campaign group the 30% Club shows that just 30.1% of board seats are held by women in the UK, with this falling short of the 43.2% seen in France, 42.4% in Norway and 36.3% in Italy. Although the UK improved its global ranking in regard to gender diversity, moving from 13th to 9th since the 2019 edition of the report 2019, it fell behind six European countries as well as New Zealand and South Africa. The study also shows that in 2010, women accounted for just 12% of FTSE 100 boards but this has now grown to 36.2%. However, there are only 15 women board chairs in the FTSE 100 and eight chief executives, an increase of just one since 2019. The average tenure for women on boards in the UK has fallen from 4.1 years to 3.6 years since 2019. Globally, just 19.7% of boardroom seats are held by women, a 2.8% increase since 2019. Jackie Henry, a managing partner at Deloitte, said UK businesses “need to be even more proactive in taking diversity targets seriously, improving disclosure and more transparent reporting.”
Lynch nearly got away with it, says analyst
Paul Morland, a City analyst who said that Autonomy’s accounts were “wrong and misleading” years before a major fraud was uncovered, says founder and chief executive Mike Lynch “very nearly” got away with it. A High Court judge last week said that Mr Lynch had masterminded a fraud by deploying false accounting to inflate the value of the company before it was acquired by Hewlett-Packard for $11bn in 2011. Mr Morland said Mr Lynch and Autonomy’s finance director Sushovan Hussain, who is serving a five-year prison sentence in the US for criminal fraud, displayed “arrogance” in thinking they could fool analysts and investors. “They think they’re smarter than everybody else, and they can pull the wool over the eyes of everybody. And they very nearly succeeded,” he added.
Outright home ownership rises
Figures from the Office for National Statistics (ONS) show that the number of houses owned outright in England has jumped to 8.8m, with almost 500,000 more properties owned without a mortgage in 2020. The total is up 6% from 2019, while the number of properties owned outright rose by 1.6m between 2012 and 2020. The ONS report shows that the number of houses owned with a mortgage fell by 292,000 in 2020. There were an estimated 6.8m properties owned with a mortgage or loan, alongside 4.7m privately rented houses and 4.1m under social rent. The data also shows that the average UK house price added £25,000 in the year to November when compared to the previous year. Tim Pateman, of the housing analysis team at the ONS, said: “At the start of this series in 2012, more homes were owned with a mortgage than were owned outright, but by 2020 dwellings owned outright had become the most common.”
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