Business leaders’ confidence plummets – business news 1 October 2021

James Salmon, Operations Director.

Business leaders’ confidence plummet.  Economy recovers faster than expected. Hybrid working could boost social mobility. Public support £15 minimum wage and more business news.

Business leaders’ confidence plummets
Optimism among business leaders has been hit by soaring costs, staff shortages and looming tax increases.

The Institute of Directors (IoD) says confidence in the economy has fallen from 22% to -1% in the last two months. With climbing costs hitting supply chains and firms having to increase pay in a bid to attract workers, three in four businesses think their costs will be higher over the next year.

Kitty Ussher, chief economist at the IoD, said that alongside higher costs, the Government’s decision to raise employers’ National Insurance contributions is set to have an impact, suggesting it “acts as a disincentive to hire just when the furlough scheme is ending.”

Economy recovers faster than expected
Figures from the Office for National Statistics (ONS) show that the UK economy recovered faster than expected in Q2. GDP increased by 5.5% between April and June, with the figure revised up from an initial estimation of 4.8%.

Despite the revised figure, the economy was still 3.3% smaller than in Q4 2019, the last quarter before the pandemic hit.

The analysis shows household spending was the biggest contributor to the economic boost, with this driven up as lockdown restrictions eased in April.

Jonathan Athow, deputy national statistician at the ONS, said: “Household saving fell particularly strongly in the latest quarter from the record highs seen during the pandemic”. The ONS also revised its Q1 figure, estimating the economy shrunk by 1.4% rather than 1.6%, while also reporting that the economy contracted by a record 9.7% in 2020, down from the previously estimated 9.8% dip. The ONS said the revisions came as it acquired more complete data and made “numerous improvements” to data sources and methods.

UK GDP coming in ahead of forecasts for the quarter seemingly steadied the Pound after recent weakness.

BDO: Hybrid working could boost social mobility
Hybrid working could boost social mobility, with research from BDO showing that young people from disadvantaged backgrounds favour the model more than wealthier peers. Over a third of those from lower-socioeconomic environments think hybrid working can give them a better work-life balance, 10% more than 16 to 21-year-olds with different backgrounds.

Sarah Hillary of BDO said: “If changing working practices can help reach young people in social mobility cold spots, businesses and government should be seizing the opportunity to improve access and opportunity for young people in these areas.”

Gas prices

European gas prices have surged above 100 euros as Russia reduced pipeline supplies. Many industries are looking at shutting down as prices become uneconomic.  In the UK  a new higher energy price cap means tose on standard tariffs, with typical household levels of energy use, will see bills go up by £139 to £1,277 a year. It represents a 12% rise in energy prices. About 15 million households in England, Wales and Scotland are affected by the changes.

Meanwhile the first commercial flows of renewable electricity between Norway and the U.K. are set to start today, providing some relief to our energy crisis that’s rippling through the economy. National Grid Plc’s 1.6 billion-euro North Sea Link is meant to be a two-way cable, but the huge premium for U.K. power this autumn ensures that initially energy will be only flowing one way.

Public support £15 minimum wage
A Survation poll for think-tank Autonomy has found that 65% of people support raising the minimum wage to £15, while just 14% oppose the idea.

Support for lifting the hourly rate to £15 from the current £8.91 was seen across the political spectrum, with 76% of Labour voters and 59% of Tories saying they backed the increase.

The £15 minimum wage made headlines this week when the Labour conference approved making the rate policy, despite party leader Sir Keir Starmer backing a smaller increase, to a £10 an hour. A Conservative pledge to raise the minimum wage to two-thirds of median earnings would see the rate increased to around £10.50 on current figures.

Starmer: Labour tax plan would target those ‘with the broadest shoulders’
Sir Keir Starmer has suggested that a Labour government could tax homes and shares to boost funding for the NHS and improvements to the social care system. Speaking to BBC Radio 4’s Today programme, the Labour leader said: “We have said that those with the broadest shoulders should pay.” He added: “We have said that means we have to look at those that get their income from property, from stocks and shares and dividends”. The Mail’s David Wilcock says the comments mark “the latest sign” that the party would increase capital gains tax. Shadow Chancellor Rachel Reeves earlier this week said she would look to increase capital gains tax to target “people who get their incomes through stocks and shares and buy-to-let properties”. She also outlined plans for a review of tax breaks, arguing that the system is ripe for reform, while also vowing to scrap business rates. Ms Reeves said Labour has “no plans” to increase income tax, despite Mr Starmer saying the option is not “off the table”.

House price growth slows
Data from Nationwide shows that UK house price growth slowed in September, with the average price up by just 0.1% over the month, with this far lower than the growth of 2% recorded in August. The month-on-month increase means the average price hit £248,742 last month. The report also shows that annual house price growth in September came in at 10%, down from 11% in August. Reflecting on the data, Robert Gardner, Nationwide’s chief economist, noted the impact of the tapering stamp duty holiday, adding that “activity is likely to soften” now the tax break has been withdrawn, with the threshold back to £125,000 as of today. Martin Beck, senior economic advisor to the EY Item Club, expects demand for properties and price growth to “soften” as a result of the stamp duty threshold reverting to its previous level, “but by how much is still unclear.” He added that “while the strong and sustained house price growth seen over most of the past year or so is unlikely to persist, any serious correction in values looks unlikely.”

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