Business news 2 March 2022
James Salmon, Operations Director.
Manufacturers face higher costs as Ukraine crisis hits supply chains. Firms urged to train to gain. Better UK sick pay will help us live with Covid. Employers asked to explain tax hike on payslips. Inflation. Oil. Borrowing falls back in January. And more business news.
Manufacturers face higher costs as Ukraine crisis hits supply chains
The UK’s manufacturing sector has grown at its fastest pace in seven months as demand increased and supply chain delays and raw material shortages eased. The IHS Markit/CIPS Purchasing Managers’ Index rose to 58 for February, up from 57.3 in January on an index where a score above 50 represents growth. While manufacturing output and new orders from UK-based customers rose across all sub-sectors, new export business fell for the fifth time in six months due to ongoing pandemic restrictions and Brexit-related issues. Around 64% of respondents said they believed production would increase over the next 12 months, while the report also shows employment increased for the 14th consecutive month. Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said that despite 64% of manufacturing businesses saying they are optimistic, “this success comes with a health warning as the Ukrainian crisis deepens,” pointing to the potential for higher commodity prices, disruptions to supply and “economic pain”. Mike Thornton, head of manufacturing at RSM, said: “As the Russia-Ukraine conflict unfolds, UK manufacturers should brace for some additional headwinds. The surge in energy prices is the most obvious for heavy industry.”
Firms urged to train to gain
In a piece for City A.M., Euan Blair warns of the impact of technological transformation in the workplace displacing those without the necessary skills, calling for a greater focus on training. He notes Multiverse research showing that in the last five years, 47% of workers have not done any workplace training, adding that in the same time, the breadth and pace of technological adoption has transformed the way most financial and professional services workers do their jobs. Pointing to the role training can play, Mr Blair says it “represents a brilliant opportunity for firms to retain their talented employees,” noting that access to education is increasingly seen as an in work benefit. He also suggests that while apprenticeships “are often seen as the preserve of young people”, there is a need to give established professionals resilience to technological change, suggesting that apprenticeships are enabling city firms like KPMG to “equip internal talent with cutting-edge skills.”
Better UK sick pay will help us live with Covid
The FT looks at calls for making sick pay more generous, highlighting TUC research showing that 30% of employees receive statutory sick pay of £96.35 a week – or nothing at all.
Employers asked to explain tax hike on payslips
HMRC has asked businesses to print the reasoning behind the Government’s National Insurance tax increase on workers’ payslips, with firms asked to note that the 1.25% increase funds NHS, health and social care. Kitty Ussher of the Institute of Directors called the move an “odd initiative” that was clearly attempting to justify a “deeply unpopular and regressive tax on jobs”. Craig Beaumont of the Federation of Small Businesses said it was not employers’ job to explain or justify spending decisions, commenting: “Taking away people’s pay rises during a cost-of-living crisis is bad enough, but then having the state instruct firms to write PR on payslips just adds insult to injury.” A HMRC spokesperson said it was not mandatory for employers to include the message but added they had been “strongly encouraged” to do so.
Inflation
The British Retail Consortium said “there are limits to the costs that retailers can absorb” and consumers already facing a cost of living crisis can expect further pain as they are forced to pass on the rising prices of basic goods.
Oil
Brent oil extended its unstoppable rally above $110 a barrel before an OPEC+ meeting as the International Energy Agency warned that global energy security is under threat following the invasion of Ukraine.
Borrowing falls back in January
Bank of England data shows that borrowing declined in January, with borrowing using credit cards, personal loans and overdrafts totalling around £600m compared to £800m in December. The annual growth of consumer credit borrowing accelerated to 3.2% in January, up from 1.5% in December. This marked the highest annual growth rate since March 2020, when the increase was 3.7%. The data shows that the effective rate on new personal loans fell by six basis points, to 6.21%, while the effective interest rate paid on individuals’ new time deposits with banks and building societies rose by 31 basis points to 0.67%. Large businesses’ borrowing from banks rose to £1.7bn in January, while SMEs repaid £800m. Meanwhile, households deposited £7.8bn into banks, building societies and NS&I accounts. This was lower than the £9.4bn per month average seen over the previous year but higher than the pre-pandemic average of £5.5bn. Martin Beck, chief economic adviser to the EY Item Club, said: “The intensifying squeeze on household finances is likely to present a more serious impediment to the economy, and the situation is likely to worsen in the short-term, with further rises in food, petrol and energy prices looking likely.”
HMRC tax probes pull in £30bn
The revenue HMRC generated from tax investigations and other compliance activity hit £30.8bn in 2021, up from £28bn in 2020, analysis by law firm Pinsent Masons shows. HMRC had to suspend some tax investigations during the coronavirus crisis as it took on administration of the furlough scheme but with the wage support initiative ending, HMRC has been taking a tougher stance on tax errors and avoidance. The tax office has collected £5.8bn in cash from its tax investigation activity in the last year. It has also prevented a further £11.2bn in revenue being lost and benefitted by £6.4bn from closing tax loopholes. Income from investigations into the 2,000 biggest businesses brought in £8.6bn in the year to March 31, 2021. This represented 28% of all HMRC’s tax investigation yield last year. The taxman believes that £35.8bn of tax may have been underpaid by big businesses over the period. Steven Porter, a partner at Pinsent Masons, said: “HMRC’s stance on corporates underpaying tax has hardened significantly in recent years and is only likely to get tougher as it uses international data, big data and artificial intelligence to help it pursue unpaid tax.
Mortgage approvals hit highest rate since July
Mortgage approvals for house purchases rose in January, according to Bank of England figures, with 73,922 mortgage approvals recorded. This is the highest total since July 2021, when 75,900 mortgages were approved, and exceeds the 12-month pre-pandemic average of 66,700 logged in the period to February 2020. Analysis by Savills shows that mortgage approvals in the opening month of 2021 were 30% below a previous peak seen in November 2020. The value of mortgages approved was up 4% between December 2021 and January 2022. Lenders borrowed £226,673 on average, with this up slightly on December’s £226,091 and 3.4% higher than January 2021’s total. Overall, £5.9bn was borrowed, outdoing the £4bn recorded in December and the pre-pandemic average of £4.3bn.
Investment in small London firms passes £10bn
Equity investment into London’s smaller firms surged past £10bn in the first three quarters of 2021, according to figures from the state-owned British Business Bank. The total was up by 152% in the first nine months of the financial year, surpassing the £5.8bn seen across the whole of 2020. The report shows that smaller businesses in London accounted for 70% of total UK investment. Across the UK, £14bn was invested over the same period, a 130% increase on 2020. Challenger and specialist banks like Starling and Monzo saw a record share of the bank lending market at 51%, with this up from 32% in 2020.
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.