Business news 3 April 2023

James Salmon, Operations Director.

Energy support changes put small businesses at risk. UK businesses face ‘week of woe’ as corporation tax rise hits. Opec+ nations cut oil output by 1m barrels a day. Staff offended by customers could soon sue their boss. And more business news.

Energy support changes put small businesses at risk
The Federation of Small Businesses has warned that 370,000 small businesses will be negatively impacted by changes to the Government’s energy support scheme. The previous Energy Bill Relief scheme capped energy costs, but the new support measure, the Energy Bills Discount scheme, will only see bills discounted. Craig Beaumont, Chief of External Affairs at the FSB, said: “We’ll see some small businesses reduce their hours of operation, we’ll have some having to let staff go, or look at other major expenditures. We expect some small businesses to close down altogether.” He explained: “The first government energy scheme was a fixed price, this second scheme is only a small discount, which means that while before you’d have your bill cut to about 25% of what it would’ve been, your new bill will be nearly exactly where it was last August.”

With the Energy Bill Relief Scheme coming to an end, the British Chambers of Commerce (BCC) said businesses face an 85% decrease in energy support. The business group called for targeted help for firms who “desperately” need it, with director of policy and public affairs Alex Veitch saying; “Almost half of firms say paying bills will be difficult.” Noting that none of the energy policies the BCC urged the Government to include in the Budget were acted upon, Mr Veitch said: “Flexibility to increase support for those who desperately need it – ignored. Easing the burden of claiming VAT on energy – ignored. Funding for improved business energy efficiency – ignored. And so the list goes on.” The BCC has also urged ministers to ensure that Ofgem has the necessary powers to “properly regulate” the industry and wants to see increased regulation of the business energy sector.

UK businesses face ‘week of woe’ as corporation tax rise hits
Business groups say UK companies face a “week of woe,” with corporation tax climbing from 19% to 25%, energy bill support being reduced and a cut to research and development tax reliefs.

Opec+ nations cut oil output by 1m barrels a day
Saudi Arabia and other members of the Opec+ group, which includes Russia, announced surprise oil production cuts of more than 1m barrels a day on Sunday, causing prices to leap 8% in Asia on Monday morning. Amrita Sen, director of research at Energy Aspects, said: “Opec+ have made a pre-emptive cut to get ahead of any possible demand weakness from the banking crisis that has emerged.” But Helima Croft, head of commodity strategy at RBC Capital Markets, pointed to wider geopolitical shifts to explain the move: “It’s a Saudi-first policy. They’re making new friends, as we saw with China…[Riyadh] was sending a message to the US that “it’s no longer a unipolar world.” Despite drastically cutting domestic supply and draining the reserves built up by President Trump, the Biden administration has been pushing for more production to keep prices down and prevent Vladimir Putin from earning more revenue to fund Russia’s invasion of Ukraine. But Joe Biden’s demands are being largely ignored by a growing coalition of countries determined to cast US hegemony and the dominance of the US dollar into the annals of history.

Staff offended by customers could soon sue their boss
A new law making its way through Parliament could give employees the right to sue their employer if they are offended by a member of the public while at work. The Worker Protection Bill, sponsored by two Liberal Democrat MPs, is on course to become law within weeks and introduces a legal requirement for companies and public bodies to take “all reasonable steps” to prevent staff being harassed by “third parties” such as customers or members of the public. Lord Frost, the former Cabinet Office minister, described the Bill as a “woke, socialist measure” that would “have a chilling effect on every conversation in a workplace”.

Business optimism increases
British businesses are more confident than in any month since May last year, according to the Lloyds Bank Business Barometer. The index rose by 11 points to 32% in March, with this driven by rising optimism about the outlook for the economy. While wage expectations increased slightly in March, Lloyds said it detected signals that they had peaked from last year’s highs. Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking, commented: “Business confidence has seen a surge this month with economic optimism and trading prospects bolstering firms.” He added: “With hiring intentions improving, we may see employment growth picking up in the coming months. Tentative signs of easing wage pressures suggest that businesses’ difficulties in finding staff may have started to ease.”

UK avoided recession in 2022
The UK economy performed better than previously estimated in the closing quarter of 2022, revised figures from the Office for National Statistics (ONS) show. While it was previously though that the economy was flat in Q4, a revised analysis shows it grew by 0.1%. This confirms that the economy avoided falling into recession in 2022. ONS director of economic statistics Darren Morgan highlighted that the telecommunications, construction and manufacturing sectors all fared better than initially thought in Q4 2022. The ONS also revised up its estimate for the economy’s performance in the July-to-September quarter, saying GDP fell by 0.1% in Q3, compared with its previous estimate of a 0.2% decline. Chancellor Jeremy Hunt said the figures “show there’s underlying resilience in the UK economy.” Ruth Gregory of Capital Economics said the revised ONS figures show that high inflation took a slightly smaller toll on the economy than thought. Noting that much of the impact of higher rates was yet to be felt, she added: “We still think the economy will slip into a recession this year.”

UK-Asia trade deal will boost economy
The UK has signed a deal to join a trade pact with 11 Asia and Pacific nations, with the trade area covering a market of around 500m people. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which was established in 2018, includes Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. Together, the 11 members account for about 13% of the world’s income. Prime Minister Rishi Sunak said the deal demonstrated the “real economic benefits of our post-Brexit freedoms.” He added: “As part of CPTPP, the UK is now in a prime position in the global economy to seize opportunities for new jobs, growth and innovation.” Business and Trade Secretary Kemi Badenoch said joining the CPTPP would “support jobs and create opportunities for companies of all sizes and in all parts of the UK.” Government analysis suggests that membership of the bloc will add 0.08% to the size of the UK economy.

Employable skills could soon trump degrees
Writing in the Times, James Kirkup, director of the Social Market Foundation, comments on the growing trend for employers to focus on skills rather than qualifications when hiring new staff. The skills-first approach means selecting candidates not on the basis of their education or even experience but according to their ability to actually do the job, Kirkup explains, and comes after major companies including PwC dropped a requirement that graduate recruits have at least an upper second-class degree. Current labour shortages are accelerating the shift and as major US firms including Accenture, Bank of America, Dell and IBM are all dropping the degree requirement from many job specifications, UK recruiters can soon be expected to move further down the “skills-first, qualification-blind” road, Kirkup says.

Ryanair

Ryanair said that the number of passengers in March rose by 12% to 12.6 million from 11.2 million a year earlier. Ryanair’s load factor improved to 93% from 87%.

Natwest

UK Government Investments said it has agreed to extend the sale of part of the Governments shareholding in NatWest Group. They explained that the sale is part of its trading plan, which was first announced in June 2021 and extended in June the following year. Following the extension, the trading plan will now terminate no later than 11 August 2025, instead of 11 August 2023.

Small firms embrace open banking
Research by Open Banking Limited reveals that at least 750,000 SMEs now integrate their bank accounts with third-party services to reduce the cost of transactions and help to manage cashflow. The number of “open banking” payments more than doubled last year to 68m with small firms adopting the technology more quickly than consumers, Open Banking said. Richard Newman, of the body, said more small businesses were taking advantage of the option because it “makes life easier and means less time can be spent on paperwork”.

Tesla

Tesla delivered a record 422,875 cars last quarter, just above analysts estimates but short of the increase needed to meet Musk’s target of 50% growth.

UK consumers cut back on unnecessary spending
Research from KPMG reveals that 55% of UK consumers have cut back on discretional spending since the start of the year with the high cost of energy cited as the main reason. With bills rising further from this month and tax increases coming into effect, 49% of consumers said they plan to spend less on non-essentials while 30% will turn to their savings to cope. Shops, pubs and restaurants will be alarmed by the figures which indicate more pain ahead for consumer-facing businesses. Linda Ellett, UK head of consumer markets, retail and leisure for KPMG, said: “Already in 2023, over half of the consumers that we spoke with have reduced non-essential spending. Buying behaviour also continues to change, including switching to discounters, as shoppers look to lower costs.”

Minimum wage rises but inflation wipes out increase
Around 1.7m workers will get a “significant” pay boost, with the national minimum wage increasing today. However, the increasing cost of everyday essentials is outstripping rises in earnings. The 92p rise to £10.42 an hour for workers aged 23 and over is equivalent to a near 10% increase. This marks the biggest ever cash increase for the minimum wage and one of the largest percentage rises. However, Labour analysis of Office for National Statistics data shows the cost of everyday essentials has gone up by £3,500 over the last three years. Around 1.7m workers currently earning up to 5p above the current minimum wage will directly benefit from the increase, while another 5m low-paid workers could benefit indirectly as employers look to maintain differentials between pay bands. TUC general secretary Paul Nowak said: “Everyone who works for a living deserves to earn a decent living, but this below-inflation increase to the minimum wage is not going to lift the pressure on hard-pressed families.”

Freeze on income tax bands will cost workers £25bn a year
Analysis by the Resolution Foundation estimates that the freeze on income tax bands introduced in 2021 will cost workers £25bn a year, nearly three times more than predicted. Spokesman for the think tank Adam Corlett said: “High inflation has pushed up the projected revenue take from the Government’s personal tax threshold freeze to £25bn a year – almost triple the amount forecast when the freeze was introduced.”

House prices see biggest annual fall since 2009
House prices fell at their fastest annual pace for 14 years in March, according to figures from the Nationwide. Prices fell 3.1% year-on-year, with this the steepest annual decline since July 2009. March’s reading means prices have now fallen for seven months in a row. Nationwide said the housing market hit a “turning point” last year, with activity remaining “subdued” following the market turbulence which followed the mini-Budget. Robert Gardner, Nationwide’s chief economist, said: “It will be hard for the market to regain much momentum in the near term, since consumer confidence remains weak and household budgets remain under pressure from high inflation.”

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