Business news 3 May 2023
James Salmon, Operations Director.
Manufacturing downturn continues. Scottish economic growth sluggish. UK launches new anti-fraud initiative. London can be a global leader in AI. Regulator proposes sweeping changes to UK listing regime. And more business news.
Manufacturing downturn continues
The latest survey of the UK manufacturing sector by S&P Global and CIPS shows the industry’s downturn extended in April as global demand faltered. The purchasing managers’ index dropped to a three-month low of 47.8, a reading firmly below the 50 mark that separates growth from decline. However, manufacturers were the most optimistic they have been in 14 months with over 61% of the companies polled saying they expected output to rise in the coming year. Glynn Bellamy, UK head of industrial products at KPMG, said manufacturing in the UK was struggling compared with some other parts of the economy: “Whilst some input costs have fallen, UK energy prices remain significantly in excess of those in North America and the Far East, placing ongoing pressure on UK competitiveness.”
Scottish economic growth sluggish
The latest UK Economic Outlook from PwC reveals that Scotland’s economy is leading many of England’s regions with a growth rate of 0.3%, compared with 0.2% in areas such as the North East, South East, South West and West Midlands. But it was “somewhat slower” than regions such as London and Northern Ireland, which led at 0.9% and 0.6%, respectively. Jason Morris , regional market leader at PwC Scotland, said: “Whilst it’s encouraging to see the Scottish economy strengthening and a more positive outlook with regards to any potential recession in 2023, the differences in growth rates in the north versus the south still points to an ongoing productivity gap that must be addressed.” The northwest of England and the east of England both outperformed Scotland with 0.5% growth, while Wales, the East Midlands and Yorkshire and the Humber saw 0.4% rises.
Scottish SMEs predict revenue increase
Some 55% of Scottish SMEs expect revenues to increase this quarter, when compared to the first three months of this year, according to the latest quarterly Barclays SME Barometer. Colin O’Flaherty, head of SME at Barclaycard, said: “It’s unsurprising that in the immediate term, there are still wider concerns for businesses.”
UK launches new anti-fraud initiative
The UK Government is to launch a new National Fraud Squad and expand a 2019 ban on pensions cold-calling to all financial products. As part of the crackdown, Britain’s intelligence agencies will work with new regional squads of police officers to find and stop scammers targeting Britons from abroad while the technology enabling criminals to mass spam people with phishing emails will be banned. Fraud is now the most common crime in the UK costing nearly £7bn a year with 70% of frauds originating from abroad or linked to overseas gangs. Rishi Sunak, the Prime Minister, backed the new fraud strategy, which is set to be announced by the Home Secretary Suella Braverman in the House of Commons today.
HMRC’s record on compliance return falls
The Commons Public Accounts Committee (PAC) has warned that HMRC “cannot demonstrate a credible deterrent effect” against tax avoidance and evasion unless its recovery efforts are improved. Recoveries fell by £9bn as a result of the disruption from the pandemic and rates are yet to recover. PAC chairwoman Dame Meg Hillier said: “HMRC’s ability and efforts to draw in the tax that is so desperately needed to pay for public services were seriously compromised by the pandemic. That alone is bad enough in the current economic crisis but we need to see more effort from HMRC get this back. It is simply not doing enough to deter and punish cheats, even at very high levels.” Hillier added: “We cannot and must not arrive at a situation in the UK where it is easier to cheat the tax system than it is to comply with it.”
Hotels and restaurants back call to cut the tourist tax
A campaign by retailers urging the Government to bring back VAT-free shopping is being backed by the bosses of The Savoy hotel and Greene King pub chain, who say ensuring Britain is an attractive shopping destination is a key tool in the UK’s ability to appeal to high-spending overseas tourists. Kate Nicholls, the CEO of UKHospitality, said an analysis cited by the Government to justify getting rid of the incentive was inadequate and did not consider the effect losing these visitors would have on the wider tourism economy, which contributes £139bn each year.
BP’s profits lead to calls for further windfall taxes
BP reported on Tuesday that underlying profits had reached $5bn (£4bn) in the first three months of the year, outstripping analysts’ forecasts of $4.3bn. BP said its results had been boosted by reduced refining costs, an “exceptional” result in its gas trading arm and a “very strong oil trading result”. Volatility in the energy markets has increased revenues in the trading divisions of oil companies. However, shares closed more than 8% lower in London trading after it said it would repurchase shares worth $1.75bn over the next three months, down from $2.75bn in the previous three. BP also said it expects to pay $1bn under a UK windfall tax on the oil and gas sector between May 2022 and April 2023. But critics said BP’s “eye-watering profits” needed to be more heavily taxed. Global Justice Now, the campaign group, said: “Today’s heinous profits from BP are another kick in the teeth to the millions of people who can’t afford to heat their homes.” Meanwhile, Labour leader Sir Keir Starmer said his party would introduce “a proper windfall tax and use that directly to help people with the bills that they’re struggling with.”
London can be a global leader in AI – Chris Hayward
Chris Hayward, the Policy Chairman of the City of London Corporation, writes in City AM on how artificial intelligence developments could help boost London as the capital’s competitiveness advantage comes under threat like never before. “One of the areas we need to show leadership is in artificial intelligence. At a time when everyone, everywhere, is looking to stimulate economic growth, has predicted that UK GDP will be 10.3% higher in 2030 because of AI. That’s the equivalent of an additional £232bn – greater than the annual cost of the NHS in England – making it one of the biggest economic opportunities in a generation.” Hayward also points to digital cross border payments and cyber security as major growth areas. “By striking the right balance of innovation and regulation, the City has a real opportunity to become the world’s leading tech capital.”
Co-founders of Google DeepMind and LinkedIn launch chatbot
Google DeepMind co-founder Mustafa Suleyman, LinkedIn founder Reid Hoffman and British scientist and DeepMind researcher Karén Simonyan, have launched an artificial intelligence chatbot called Pi, developed by their AI start-up Inflection AI. PI is touted as being more personal than OpenAI’s GPT-4, although it can also provide fact-based answers. “It’s really a new class of AI — it’s distinct in the sense that a personal AI is one that really works for you as the individual,” Suleyman said. Eventually, Inflection’s CEO added, Pi will help you organize your schedule, prep for meetings and learn new skills. The company was in discussions to raise up to $675m from investors earlier this year having raised $225m in seed money last May from venture capital firms including Greylock Partners, where Suleyman and Hoffman remain investors.
Regulator proposes sweeping changes to UK listing regime
The Financial Conduct Authority will today publish a package of proposals to make it easier for companies seeking new listings in London. The FCA’s proposals include replacing the two classes of listings and create a single category. Currently there are standard and premium listing segments. The watchdog says this move would “remove eligibility requirements that can deter early-stage companies, be more permissive on dual class share structures, and remove mandatory shareholder votes on transactions such as acquisitions”. Removing some mandatory votes would “reduce frictions to companies pursuing their business strategies”, the watchdog says. But concerns have been raised about the impact of the changes on investor rights. Richard Wilson, the CEO of Interactive Investor, said: “We strongly support the principles behind listing rule reform to make the UK more competitive, but eroding shareholder rights risks undermining market standards, and this is not the right answer.” Lord Hill, who began a review of the listing regime in 2020, said: “I very much welcome these proposals from the FCA, which build on the direction of travel we tried to set out in our listing review. If implemented, London would be able to stand toe to toe with our international competitors.”
Eurozone Inflation
Eurozone Inflation rose in April, according to preliminary data released Tuesday, remaining significantly above levels targeted by the European Central Bank but core price growth showed a surprise slowing. Headline inflation came in at 7% for last month, according to Eurostat, after it dropped to 6.9% in March.
US jobs
US Job Openings totaled 9.59 million in March, according to monthly data released Tuesday by the Bureau of Labor Statistics. That’s down from an upwardly revised 9.974 million reported in February. Economists were expecting 9.775 million openings, according to consensus estimates on Refinitiv.
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