Business news 2 March 2023

James Salmon, Operations Director.

Factories report improved performance. Bailey: Nothing decided on further interest rate rises. Latest on gender equality on boards. FSB warns of ‘childcare crisis’. Retail staff facing a wave of abuse & violence.  And more business news.

Factories report improved performance
British factories are performing better than expected, according to the latest S&P/CIPS UK manufacturing PMI survey. The index rose to 49.3 points last month, exceeding a consensus forecast but still below the 50-point threshold that separates growth and contraction.

February’s reading marked an increase on the 47 recorded in January and December’s 45.3. The report shows that price increases were shallower as supply chain pressures eased and cost inflation came down, while output rose for the first time in eight months.

S&P director Rob Dobson said: “Input prices increased at the slowest pace since July 2020 and supplier performance improved for the first time in three-and-a-half years.” This, he added, “offset some of the ongoing negative impacts from strikes, the cost-of-living crisis and lower order intakes.”

Bailey: Nothing decided on further interest rate rises
Bank of England governor Andrew Bailey says interest rates may need to increase again in an effort to ease the cost of living, saying higher rates may be “appropriate” to control inflation. “I would caution against suggesting either that we are done with increasing Bank Rate, or that we will inevitably need to do more,” Mr Bailey said, adding: “Some further increase in Bank Rate may turn out to be appropriate, but nothing is decided.” Pointing to the balancing act the Bank faces, he told an event hosted by PR firm Brunswick: “If we do too little with interest rates now, we will only have to do more later on.”

Boards will not be 50/50 until 2038, gender inequality study shows
Analysis by data provider MSCI suggests that gender inequality in boardrooms will not be eliminated until 2038 if the current rate of improvement in female representation is maintained. If the average rate of growth for the number of women on boards between 2018 and 2022 continues, the 2,811 companies which make up MSCI’s All Country World Index will not have gender-balanced boards for 15 years. This marks an improvement from data collected in 2021 which suggested the 50% threshold would not be met until 2042. The study shows that the number of board seats held by women increased by 1.9% year-on-year in 2022. In 2022, women held 24.5% of director seats across the global index, compared with 22.6% in 2021. It was also shown that women held CEO positions in just 163 of the 2,811 companies.

FSB warns of ‘childcare crisis’

Three-quarters of women paying for child care in the UK say it doesn’t make financial sense for them to work.

The Federation of Small Businesses (FSB) has urged Chancellor Jeremy Hunt to tackle a “childcare crisis,” warning that high costs are increasingly forcing parents out of the workforce. The business group said there is a funding shortfall which childcare providers have to pass onto parents.

FSB policy chair Tina McKenzie said this means parents are faced with an ultimatum, “to leave the workforce altogether or take on the extra, crippling costs with less and less choice when providers are forced to close.” While the Government funds 30 hours of free childcare for 38 weeks of the year, the FSB argues the entitlement should be expanded to 45 weeks.

Elsewhere, Confederation of British Industry director general Tony Danker has suggested that the UK needs a “childcare revolution.”

Retail staff facing a wave of abuse & violence
According to the British Retail Consortium, violence and abuse against shop workers has almost doubled on pre-pandemic levels as cases of theft have also become more common.  Retail employees faced more than 850 incidents of abuse each day in the year to March 2022 compared with 450 cases per day in the year to March 2020,

Britain on a path toward double taxation
Former Grant Thornton director Mike Warburton warns that those looking to save for the future “are sadly being dragged back to bad old days of double taxation.” He notes that the capital gains tax annual allowance is being reduced in April, with the dividend allowance also being cut and the additional rate income tax threshold falling for higher earners. He says the impending cuts mean “we are virtually back to double taxation on stock market investments,” as company profits are charged corporation tax, followed by income tax on any dividends paid.

Director questions plan to scrap the OTS
Bill Dodwell, tax director of the Office for Tax Simplification (OTS), has questioned the decision to close the independent body, saying former Chancellor Kwasi Kwarteng made the decision without justification. Urging current Chancellor Jeremy Hunt to reconsider the decision, Mr Dodwell told the Treasury Committee that officials had offered no reason why the office should be closed, adding that the Government, and future governments, “will miss some of its attributes.” Urging MPs to vote against the closure of the OTS, Mr Dodwell said: “The country will be better off … we are not expensive and have done good work.” Harriett Baldwin, chair of the committee, said she would write to Mr Hunt, asking for a justification for the decision to axe the OTS.

Government loan sales trap mortgage prisoners
A new report suggests that the Government made £2.4bn by selling mortgages from collapsed lenders to investment firms, with 200,000 mortgages sold to firms which cannot offer new deals. With other lenders refusing to accept these homeowners, they have been left as so-called “mortgage prisoners,” trapped on high rates. The London School of Economics report, which was commissioned by MoneySavingExpert founder Martin Lewis, suggests that ministers could offer free financial advice and loans to mortgage prisoners, or could guarantee loans from other mortgage lenders. The report says measures to solve the issue would cost between £50m and £347m over 10 years. The Treasury said that it had “already taken steps with the Financial Conduct Authority (FCA) to update mortgage lending rules, removing the barrier that prevented some mortgage prisoners from being able to switch.” The FCA said it has “removed regulatory barriers to switching and set clear expectations for firms to support borrowers.”

Tesla

Elon Musk set out his latest masterplan for the company in a four hour presentation, with plans to cut car assembly costs by 50%, in preparation for releasing a cheaper Electric car. But lack of clear and specific details caused investors to sell and the stock to fall 5%.

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