Business news 1 March 2023
James Salmon, Operations Director.
CBI calls for a new deal with workers. Recession uncertainty hits optimism. Small firms flag cost-of-living struggles. High Street & Grocery Inflation.Tax, house prices, high street closures, SME lending and more business news.
CBI calls for a new deal with workers
Tony Danker, director-general of the Confederation of British Industry, will say in a speech today that UK companies need to strike a “New Deal” with workers to lure them back to work as the country is faced with falling participation in the economy after a record dropout of the workforce during the pandemic.
He is to call for employers to drop their opposition to the flexible working revolution or risk losing the war for talent. He will also call for childcare reforms and looser short-term immigration controls to resolve the UK’s labor crisis.
“Flex has always had deep merits,” Danker will say at the CBI Future of Work Conference. He will also argue that bosses need to offer younger workers “strong societal values.”
Recession uncertainty hits optimism
Analysis by Lloyds shows that optimism among businesses in London dipped in February, with uncertainty over whether the economy will fall into recession having an impact on confidence. Optimism among the capital’s companies has dipped 19 points to 18%, according to the bank’s business barometer, with this coming in slightly lower than the 21% national average.
While London firms’ confidence in the UK economy has declined by 34 points to -1%, optimism in their own business prospects fell four points to 37%.
Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “Business confidence has lost a little momentum this month, following the strong gains seen recently,” adding: “While inflation appears to be tapering, pressures on consumers will need to ease further to help make it a more stable environment for businesses to operate.”
On hiring intentions, the UK-wide business barometer saw the rate rise for the third consecutive month, with 43% of firms anticipating an increase in their workforce. The proportion planning to reduce headcount was static at 23%, meaning the net balance was up three points at 20%.
Small firms flag cost-of-living struggles
A poll by Santander has revealed the biggest challenges for small firms, with rising energy costs (61%), higher material costs (47%), and customers spending less (41%) the most commonly cited concerns. The survey saw 65% of SMEs say the cost-of-living crisis has made it harder to run their enterprise.
Of the 750 retailers polled, 44% have taken steps outside of their comfort zone to keep their business viable – including 27% taking out a bank loan. More than a fifth (21%) have used buy now, pay later schemes to purchase business supplies, while 29% have negotiated better deals with suppliers.
John Baldwin, head of commercial banking at Santander UK, noted that small businesses have faced “a series of unprecedented events … starting with the pandemic in 2020, through to the rising cost of living now.”
Challenger bank lending to SMEs hits record high
Data from the Government-backed British Business Bank shows that lending to small firms by challenger and specialist banks hit a record high in 2022. The report shows that smaller banks lent £35.5bn to SMEs last year, giving challenger and specialist banks a 55% share of the market. This exceeds the 51% market share smaller lenders achieved in 2021. While the sector’s biggest banks – Barclays, Lloyds, HSBC, NatWest and Santander – have traditionally dominated smaller business lending, challengers such as TSB and Metro Bank and specialists like Shawbrook Bank and Paragon Bank have taken a growing share of business customers. Gross bank lending to smaller businesses reached £65.1bn in 2022, up from the £57.7bn seen in 2021.
High Street Inflation
The British Retail Consortium said shop price inflation accelerated to 8.4%, an increase from 8% recorded in January. High Street Inflation was at its highest rate since at least 2005 in February, as the cost-of-living crisis showed little sign of easing for struggling consumers.
Grocery Inflation & market share
UK Grocery Price Inflation spiked to a record high earlier in February, while German discount supermarkets continued to make market share gains, according to Kantar, Their research showed grocery price inflation hitting 17.1% in the four weeks to 19 February, more than double the overall retail shopping inflation above, with milk, eggs and margarine among the items driving the increase.
Tesco sales rose 6.6% to £9.19 billion during the 12 weeks, from £8.62 billion. Its market share decreased, however, to 27.3% from 27.7%. J Sainsbury sales rose 6.2% to £5.12 billion from £4.82 billion, though like Tesco, its market share faded. Sainsbury’s had a 15.2% share of the UK grocery market during the 12 weeks, down from 15.5%. Fellow London listing Ocado’s sales surged 11% to £628 million from £564 million. Its market share edged up to 1.9% from 1.8%.
High Street chain closures slow
Chain stores are closing at their slowest rate for eight years, new research from PwC shows. While a total of 11,530 outlets shut across in 2022 – representing an average of 32 closures a day – this marks an improvement compared with the previous three years. Comparing openings to closures, 2022 saw 3,627 net closures. This was far below the 10,059 seen in 2021 and the 9,877 recorded in 2020.
PM rules out tax corporation rethink
Rishi Sunak has ruled out cancelling an increase in business taxation, saying there is a need to “balance the books” and arguing that increasing corporation tax from 19% to 25% will help do so. While former Chancellors George Osborne, Philip Hammond and Kwasi Kwarteng have all argued that April’s 6% tax hike should be scrapped, the Prime Minister said: “We are borrowing an enormous amount of money. That’s not good, it is not good for the country, we have got to get our borrowing down and we have got to do that in a responsible way,” adding that the rise is corporation tax “is going to help us do it.” Mr Sunak went on to say that at 25%, the corporation tax rate “will still be the lowest rate out of all the large economies that we compete with around the world.”
The Confederation of British Industry (CBI) has warned that Britain will become less attractive to investors and fall behind global rivals if plans to hike corporation tax and end a super-deduction tax break go ahead. Chancellor Jeremy Hunt has faced calls to scrap plans to raise corporation tax from 19% to 25% in April and extend the super-deduction that gives big tax breaks to companies that invest in new infrastructure, factory and machinery assets.
The CBI’s lead economist Alpesh Paleja said Mr Hunt must take “decisive action towards stimulating business investment and unlocking greater economic growth,” adding: “Businesses are facing a double-whammy of the super-deduction expiring and a higher rate of corporation tax.” The CBI wants to see the super-deduction replaced by a similar though less generous scheme.
House Prices
Nationwide announced that house prices fell 0.5% in February, with prices falling 1.1% from last year (Surveys had predicted a 0.9% fall).
House sellers are taking 4.5% off their original asking prices to achieve a sale, according to data collected by Zoopla. It shows that the average home has been discounted by £14,100, with more than four in 10 homes listed on the website currently having had their asking prices reduced. The discounts reflect the market adjusting to the reduction in buying power, as higher mortgage rates affect affordability, according to the platform.
Meanwhile, the average estate agent office has 24 homes for sale compared with 15 a year ago, giving buyers more choice and room to negotiate. Activity has fallen, with buyer demand and sales 20-50% lower than a year ago.
UK property prices will fall less than previously expected in 2023, according to analysts polled by Reuters. A survey of 19 housing market experts suggests house prices will fall by 2.4% this year. This marks an improvement on the 4.7% decline predicted in November’s survey.
Northern Ireland
Overseas investment into Northern Ireland is poised to rocket if the Windsor deal is ratified, with US businesses leading the way into a market with access both to the UK and the EU.
Travis Parkins
Travis Perkins said annual profit declined despite revenue rising, and said it will slash 400 jobs and close branches as it looks to keep a lid on costs. The building supplies retailer said 2022 pretax profit fell 20% to £245.0 million from £305.6 million a year earlier.
Reckitt Benckiser
Reckitt Benckiser said net revenue grew 9.2% to £14.45 billion in 2022 from £13.23 billion in 2021. It swung to a pretax profit of £3.07 billion from a loss of £260 million. Like-for-like net revenue growth was 7.6%, with a decline in the Hygiene division offset by strong growth in Health and Nutrition.
Persimmon
Persimmon said annual revenue rose 5.7% to £3.82 billion in 2022 from £3.61 billion in 2021. Pretax profit fell 24% to £730.7 million from £966.8 million, however. This reflects a £275.0 million increase in Persimmon’s provision for building safety remediation, which relates to flammable cladding. The average selling price in 2022 increased 4.9% to £248,616, as new home completions rose 2.2% to 14,868.
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.