Business news 1 September 2022
James Salmon, Operations Director.
Ministers urged to support small firms with energy grants. Mass redundancies could hit smaller firms. Make UK calls for emergency support as manufacturing insolvencies rise. And more business news.
Ministers urged to support small firms with energy grants
Amid concern that soaring energy prices could put small firms at risk of collapse, the Liberal Democrats have urged ministers to deliver a £10bn bailout fund.
Leader Ed Davey has called for support scheme similar to those rolled out during the pandemic that would see 1.4m SMEs offered grants of up to £50,000 to help them pay gas and electricity bills, with this funded by reversing tax cuts for big banks.
Sir Ed said: “Our treasured high streets risk being turned into ghost towns and small businesses across the country risk being devastated by sky-rocketing energy bills,” warning business could be forced to close “unless the Government steps up urgently.”
Mass redundancies could hit smaller firms
Small businesses are starting to brace for a steep rise in redundancies amid double-digit inflation and a looming recession. Citation, an employment law firm, said it had seen a 184% increase in SMEs seeking advice relating to redundancies from June to July. Hundreds, if not thousands, of workers in small and enterprises could be laid off over the autumn, according to the data.
Gill McAteer, director of employment law at Citation, dubbed the situation ”the big redundancy”, but added that making redundancies is not always the best option for firms: “It can often end up costing them more in redundancy packages, than if they looked at other potential options such as a temporary change in working hours, reduced hours or changes to terms and conditions.”
Make UK calls for emergency support
Make UK has called for a “shock and awe” budget to prevent permanent “economic scarring” and protect against substantial insolvencies and job losses. The group, which represents about 20,000 manufacturing and engineering companies, has urged ministers to introduce emergency measures to help to avert a recession.
Make UK said that a survey of its members had found rising energy costs were causing “major disruption” for half of companies, while manufacturing investment is lower today than it was before the pandemic. Immediate measures being called for include a reduction of VAT on business energy bills from 20% to 5%, a reversal of the National Insurance contributions increase and a “full and fundamental” reform of business rates.
UK manufacturing sector insolvencies increased 63 per cent in the last year, as firms suffered from issues including COVID-19, pandemic-related debts, Brexit trade restrictions and shortages of labour and raw materials. The number of insolvencies in the manufacturing sector increased from 893 in 2020-21 to 1,454 this year, with more companies also likely to have entered voluntary liquidation.
Markets
European markets turned lower yesterday as euro zone inflation data accelerated to 9.1%, more than expected, raising expectation for further interest rate hikes. The FTSE100 index was off 1.1% in late trading, while leading indices in France and Germany were down 1.0% and 0.7% respectively. In currencies, Sterling continued to slide against the US dollar. In commodities, Brent Crude was down nearly 3%. on worries of dropping demand as the global economy stumbles. Oil and gas stocks were lower in response to the drop in crude prices. Overnight, the DOW dropped -0.88%, the S&P 500 dropped -0.78% and the NASDAQ dropped -0.56%.
Oil
G7 finance ministers are meeting this week to agree a capped price on purchases of Russian Oil
Climate
Greenhouse-gas concentrations and sea levels reached record highs last year, according to America’s national weather forecaster. They also said 2021 was among the six warmest years ever.
Natwest
The UK Competition & Markets Authority fined NatWest Group for coercing customers to open current accounts that cost money in order to secure a loan. The CMA ordered the bank to pay back a total sum of £600,000 to over 700 small and medium-sized businesses.
House Prices
UK House Price growth on an annual basis slowed to 10% in August, from 11% in July. According to Nationwide HPI, prices are climbing 0.8% month-on-month after taking account of seasonal effects, with the average house price rising by £50,000 in two years.
Royal Mail
Royal Mail workers have walked out on strike again in a their dispute over pay, with further industrial action planned. Members of the Communication Workers Union mounted picket lines outside Royal Mail offices across the country yesterday. The union said more than 100,000 workers are involved, making it the biggest strike of the summer. The action follows a walkout last week and there will be further stoppages on Thursday September 8th and Friday September 9th.
Tax authorities could reform working abroad rules
The Office of Tax Simplification (OTS) has begun collecting data on the number of people working from abroad and could look to crack down on so-called ‘workcations’. The review of remote working will examine possible reforms of tax rules for Britons who do their jobs while spending time in another country. It will also consider whether to overhaul rules for hybrid workers in the UK.
Chris Sanger, head of tax policy at EY, said the tax system “is designed under the old paradigm where homeworking was either occasional for the office worker or was put as a permanence.” He added: “Now we’re in a new world where many people are working partially at home and partially in the office.”
Tax experts believe European countries could start hitting remote employees and UK businesses with separate tax bills for work done in their jurisdictions. They also flag concern that businesses risk being liable for corporation tax in other countries if executives are making business decisions and entering into contracts while working abroad.
Tim Stovold, a partner at Moore Kingston Smith, said: “The problem with senior employees or directors making decisions abroad is that they may create a taxable presence for their employer in that country so that corporation tax on profits would be due there.”
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