Business news 3 November 2021
James Salmon, Operations Director.
Chancellor accused of stealth tax on sole traders. End of furlough has not delivered a surge in job-seekers. SMEs call for support to go green. Poll flags cost of living concerns. Recovery in consumer spending slows. And more business news.
Chancellor accused of stealth tax on sole traders
Labour has accused the Chancellor of hitting the self-employed with a stealth tax that was buried in the small print of the Budget.
The Treasury has altered the rules on how tax is calculated for unincorporated businesses, with more than 500,000 sole traders now facing an average extra bill of around £3,000 in a move that will net the Treasury £1.7bn over the next five years.
Speaking in the Commons, Shadow Treasury Minister Pat McFadden asked: “Why are the self-employed being hit with this extra tax rise which the Chancellor didn’t even mention in his Budget last week?”
Under the current system, the profits of unincorporated businesses are based on the accounting period which they choose themselves. From 2024 onwards, they will instead be calculated according to the tax year.
About 528,000 self-employed sole traders will therefore pay tax on more than a single year’s profit when the switchover happens, providing a windfall for the Treasury.
Mr Sunak responded that “there were no extra taxes for the self-employed in last week’s Budget”, insisting that the increase was a result of “a timing difference that was reflected in the Budget scorecard”.
End of furlough has not delivered a surge in job-seekers
Data by recruitment website Indeed suggests that the end of the furlough scheme has not led to a surge in new job-seekers, with an increase seen deemed “not statistically significant”.
The firm polled 5,000 working-age people and saw only a slight increase in job-seekers. The proportion of people who said they were “actively looking, urgently” for a job rose to 7.7% in October from 7% in September and 6.8%in July, when Indeed first conducted the survey.
The share of people “actively looking, not urgently” for a new job rose to 17.9% from 17.3%. Office for National Statistics data estimates between 900,000 and 1.4m employees were furloughed in late September, with this marking the final period of support as the initiative came to an end at the end of that month.
COP26
More than 100 countries pledged to reduce global methane emissions by 30% below 2020 levels by 2030 at the UN’s COP26 climate conference. Boris Johnson said countries must match action to their promises on fighting climate change as he kept pressure on China, the biggest emitter, to move faster.
SMEs call for support to go green
Small businesses hope that the COP26 event will bring about measures that will help them become more sustainable, according to a report from the Federation of Small Businesses (FSB).
Mike Cherry, national chair of the FSB, said small firms “are keen to play their part” in regard to climate change, but often lack the resources, finances and dedicated specialists enjoyed by larger businesses, “so can find identifying and taking the necessary steps a challenge”.
He added that with world leaders meeting for the climate conference in Glasgow, “We need much more than a talking shop. This moment must be a catalyst for governments to remove the barriers that are holding small businesses back.”
A poll by the FSB shows that while the majority of SMEs are concerned about climate change, just one in three have a plan in place to help tackle it. The FSB poll of 1,200 businesses found that 54% thought grants or low-interest loans would incentivise firms to become more energy-efficient, while 28% said a business rates discount would help.
The FSB has suggested that lowering the capital requirements banks must adhere to when lending to businesses for sustainability purposes could help more SMEs go green
Listed firms will be forced to publish annual green plans
Chancellor Rishi Sunak will today announce that all companies listed on the UK stock exchange will be legally obliged to produce annual plans for becoming more green. The firms will have to produce regular “transition plans” for how they will help Britain reach net zero in carbon emissions by 2050, with the requirement set to be in place as soon as 2023. With the Financial Conduct Authority (FCA) to oversee the requirements, companies failing to publish these plans could face fines or be removed from UK stock markets. Ministers are to set up a task force, under the control of the FCA, that will set the standards under which companies are required to report under the new financial net zero reporting scheme. The Chancellor will also announce that more than 450 firms from the financial industry have signed up to climate change goals
Poll flags cost of living concerns
A Nationwide survey has found that almost three-quarters of people are worried about the increasing cost of living, while a quarter are concerned about their finances. While 18% believe their spending to pay off debt will increase, 15% said the amount they spend on their mortgage or rent will rise in the coming months. It also saw 18% say they had relied on credit to get by more in the past few months than previously, while 36% are expecting to dip into their savings.
Inflation could add more than £180 to family food bills
Labour analysis of Office for Budget Responsibility (OBR) data shows family food bills could increase by more than £180 next year because of climbing inflation. The OBR has forecast that Consumer Prices Index inflation could rise to more than 4% in 2022, an increase that would add £3.50 to the cost of an average family’s weekly food shop.
Shadow Chancellor Rachel Reeves raised the issue during Treasury questions in the House of Commons, noting that alongside climbing food prices, energy bills are set to rise. She went on to argue that Chancellor Rishi Sunak had the opportunity to help people with their gas and electricity bills by reducing VAT to 0% in the Budget. Mr Sunak pointed to analysis suggesting cutting VAT on fuel bills would disproportionately benefit wealthier families.
Recovery in consumer spending slows
While consumer spending has continued to bounce back post-pandemic, research by Nationwide shows that growth has started to slow. Between July and September growth in consumer spending hit 3%, marking a slowdown following the 14% increase recorded in Q2.
The study, which looked at more than 620m transactions by Nationwide consumers, also revealed that spending on paying back debts was up 10% in Q4.
Reflecting on the Q3 figures, Mark Nalder, Nationwide’s head of payments, said they point to “a sense of belt-tightening”. He added that Nationwide expects the growth of spending to slow further, with the rising cost of living “likely to continue to bite consumers”.
Next
Next said it was growing sales faster than it had expected, though it stuck to its annual profit guidance citing higher costs. Pre-tax profit for the year through January was still expected to rise 6.9% year-on-year to £800 million, Next said in a trading update.Full-price sales in the 13 weeks to 30 October were up 17%% versus two years ago.
Smurfit Kappa
Smurfit Kappa said its earnings had risen 10% in the year to date, putting it on track to meet its annual forecasts. Earnings before interest, tax, depreciation and amortisation for the nine months through September had increased to €1.24 billion, with a margin of 17%, the company said in a trading update.
Pets at Home
Pets at Home upgraded its annual profit guidance, while also announcing the departure of chief executive Peter Pritchard. Underlying pre-tax profit for the year through March was now expected to be at the top end of current analysts’ expectations that range between £128 million and £135 million
Morgan Sindall
Morgan Sindall said it expected to deliver a full-year result ‘slightly above’ its previous forecasts. The company said that since it released first-half results on 4 August, trading had continued to be strong.
Oil
Oil fell as the US put pressure on OPEC+ to boost supplies. West Texas Intermediate (WTI) sank 1.6% after easing 0.2% on Tuesday as Brent also dropped.WTI remains up 70% on the year.
House Prices across Europe will continue to climb
Analysis by S&P Global suggests the housing market across Europe is recovering from the pandemic faster than other sectors of the economy, with prices rising at the fastest pace since 2006. Prices across Europe were, on average, 6.9% up in Q2 compared to the same quarter in 2020. With demand set to outpace supply, S&P expects the rise in prices to continue over the next four years.
The report says that lockdowns have limited spending and seen people accumulate more savings, meaning they have been able to pay larger deposits. S&P estimates that between Q1 2020 and Q2 2021, households in the eurozone accumulated around 6% of 2019’s GDP in excess savings, while in the UK the rate was higher, at 9.4%. S&P expects house price inflation to have peaked in mid-2021 in most countries, with higher savings and loose monetary policy likely to fade. It notes that the end of the stamp duty holiday is contributing to a significant slowdown in price growth in the UK
Pension tax relief boost for 1.2m low-paid workers
More than 1m low-paid workers are to receive a pension boost – but not for another three years. All savers should receive tax relief of 20% on pension contributions but, due to a quirk in the system, around 1.2m workers do not currently benefit from this vital top-up. In his Budget last week, Chancellor Rishi Sunak pledged to fix the issue, giving those affected an average of £53-a-year extra towards their pension. However, the new system will not come into force until the tax year beginning in April 2024.
House of Lords votes for changes to pension triple lock freeze
The Government has been defeated in the House of Lords over its one-year suspension of the triple lock formula to increase the state pension. Ministers plan to temporarily break the link between pensions and the rise in earnings, in response to a rise in average wages would have meant pensions increasing by 8%. Peers have voted to restore a link with earnings, but MPs could still go on to reject their amendment. The House of Lords backed an amendment by Baroness Altmann to the law required to suspend the triple lock, by 220 votes to 178. It will set up a vote in the House of Commons, where the Government will have to decide whether to order its MPs to oppose her plan. Under Baroness Altmann’s amendment, the Government would have to continue to link pensions to an adjusted version of the official earnings figure.
Why should you become a CPA member!
The Credit Protection Association (CPA) has been assisting thousands of UK businesses to get paid since 1914. We have seen many financial crises, this one will be particularly deadly for suppliers for some time to come.
CPA eases cash from tardy debtors – Efficiently, Effectively, Economically and Ethically. And we provide credit information so you can monitor and assess your key customers.
Unlike other credit management companies, we charge our members a fixed annual subscription irrespective of how high the debt value is!
It takes less than 17 minutes to see how you would benefit, do you have the time now?
No face-to-face meeting required – just call Peter Uwins, CPA’s National Sales Manager, on 020 8846 0000 (business hours) or email nsm@cpa.co.uk today.
When you see your money come in, you will be so glad you used CPA.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
Get compensated for previous late payments
Have you been paid late by business customers in the last six years?
Maybe you no longer work with them. Under legislation, you are entitled to compensation you for those late payments you have suffered.
You put up with the PAIN – now claim the GAIN!
Claim late payment compensation (LPC) from former business customers who paid you late in the last six years!
CPA (LPC) Recoveries is using our bespoke software and decades of experience to do just that for our clients