Business news 3 December 2021
James Salmon, Operations Director.
Supply chain crisis sees surge in stockpiling. Firms expect inflation to climb. Lib Dems call for tax cuts for small businesses. Covid concerns see party plans scaled back. And more business news.
Supply chain crisis sees surge in stockpiling
Office for National Statistics (ONS) analysis shows that British businesses have been stockpiling goods and materials at the highest rate in ten months, with 6% building up their stores. This is the highest rate since the ONS started gathering stockpiling data in February. The increase comes amid a global supply chain crisis, with Paul Dales, chief UK economist at Capital Economics, warning: “There’s very little sign in the UK as yet that either supplies of goods or labour have started to ease.” “It’s sensible for companies to build up stocks where they can,” he added.
Firms expect inflation to climb
A survey published by Bank of England shows that businesses are struggling to find staff and expect higher inflation in the year ahead. The Bank’s monthly Decision Maker Panel survey of nearly 3,000 businesses saw 85% of firms say they are finding it harder than normal to recruit new employees, with 58% saying it is proving much harder. On inflation, the firms quizzed expect the rate to be at 4.2% in a year, with this up from 3.9% in the October survey.
Lib Dems call for tax cuts for small businesses
The Liberal Democrats have urged the Government to deliver tax cuts for small businesses that would be worth up to £5.5bn-a-year. The party has called on the Chancellor to quadruple the Employment Allowance for two years, a move that would allow businesses to decrease their National Insurance bill by £32,000 and see the average small business with less than 10 employees pay no National Insurance for two years. Lib Dem leader Ed Davey said the Prime Minister “must be living on another planet” if he thinks planned tax rises are “the answer to business owners coping with spiralling costs”. While Chancellor Rishi Sunak has pledged to cut taxes before the next election, Mr Davey said businesses “need help now” and cannot wait for tax cuts. Calling for a rethink on taxation, he added: “We want to give dedicated local businesses owners and entrepreneurs a helping hand, and to truly unleash Britain’s potential.” Professor Len Shackleton of the free market Institute of Economic Affairs think-tank commented: “While it is good to see the Lib Dems showing awareness of the problems of micro businesses, these particular proposals may not be the answer.” Prof Shackleton warned that “tightened tax rules, a dysfunctional business rates system and excessive regulation” are stifling businesses
Covid concerns see party plans scaled back
A number of big businesses are holding smaller Christmas parties this year, opting for gatherings within departments rather than company-wide events. This comes amid uncertainty over the Omicron coronavirus variant. A poll of 2,000 office workers for Covid testing company Prenetics shows that 52% of workplaces have decided not to hold a Christmas office party. Business Minister George Freeman said that for small businesses where four or five staff work together every day, “gathering to have a drink is not a big risk”, but suggested that larger companies that would usually bring hundreds of staff together may opt against doing so this year. PwC, EY and KPMG have said that firm-wide events are not planned. EY said teams “will be able to have smaller celebrations,” while KPMG said team gatherings can still take place if staff feel comfortable doing so. PwC said smaller parties were still being planned among its workforce, with it noted that staff are all being given December 24 as an extra holiday.
Oil
OPEC+ yesterday decided to stick to a previously agreed upon plan of hiking oil output by 400,000 barrels per day in January, despite falling prices and the threat of Omicron on demand. However the alliance said in a statement that “the meeting remains in session,” meaning they can “make immediate adjustments” should the current market conditions shift.
Apple
Apple has warned suppliers of sliding demand for its latest iPhone 13 – though the technology giant is still headed for a record Christmas quarter. The company had initially been knocked by the global chip shortage, a key component in its hardware as well as in cars, leaving technology and automotive heavyweights to battle it out over a limited supply.
Flexible working can boost economy by £55bn
Analysis suggests that flexible working could boost the economy by £55bn. The Flexonomics report also reveals that refusals to accommodate flexible working cost business £2bn a year.
Experts predict interest rate rise
City analysts expect the Bank of England (BoE) to increase interest rates for the first time in three years this month. Despite uncertainty over the Omicron coronavirus strain, experts at Goldman Sachs believe the economy in a strong position to withstand any fresh wave of infections triggered by the new variant. The bank’s baseline scenario suggests the UK economy “will hold up relatively well during the fourth wave, given high vaccine take-up and a successful booster programme.” Goldman analysts said: “As a result, we still believe that a 15 basis points BoE hike is more likely than not at the December meeting.” Goldman also expects the Bank to increase rates – currently at a record low of 0.1% – again in May 2022, taking them to 0.75% by the end of next year.
Household wealth climbs 8.4% in a year
Household wealth in Britain has risen by 8.4% over the last year, hitting £11.2trn. This marks the highest total since the Office for National Statistics (ONS) started tracking the figures in 1995. The increase was driven by a 7.3% increase in house prices, with values up as the stamp duty holiday prompted a surge in activity across the property market. The household wealth total was also given a boost as pension pots, combined with insurance schemes, exceeded £4trn for the first time last year. The ONS notes that government support schemes and the shift toward remote working enabled many people to set aside the money not spent during lockdowns. This saw household wealth remain strong compared to previous recessions, with it highlighted that household wealth fell 10% during the 2008 financial crisis.
£28bn in Covid loans paid out before anti-fraud measures started
A report from the National Audit Office (NAO) says the Government only put basic anti-fraud checks on the Bounce Back Loan Scheme (BBLS) for small firms once more than £28bn had already been paid out. Checks to ensure that a company was not applying for more than one bounce back loan were not put in place until June 2020, a month after the scheme was launched. By this point 61% of the money that was to be lent under the scheme had already been paid out to businesses. Further counter-fraud activities did not begin until September 2020, the NAO report shows. Counter-fraud activity was “implemented too slowly”, which resulted in “high levels of estimated fraud”, it said. Meg Hillier, chair of the Commons Public Accounts Committee, said the report showed that counter-fraud measures had been “too little, too late”. Analysis by PwC estimates that 7.5% of loans might be lost to fraud, at a potential £3.5bn cost to the taxpayer.
HMRC targets furlough fraud
While HMRC estimates suggest more than £5.3bn was lost to fraud and error during the first 12 months of the furlough scheme, only £28.5m worth of claims were blocked in the period that saw more than £60bn paid out. HMRC analysis suggests that 8.7% of funds advanced through the job retention scheme were lost to fraud and error, with 6.1% thought to have involved opportunistic fraud. This type of deception, which is harder to detect, includes cases where genuine employers inflate their claims or tell their employees to work while also claiming money through the scheme. With HMRC looking to claw back some of the money lost, it has launched a new team that has a target to recover £1bn in fraudulent or mistaken claims.
Majority of Britons doubt government pension capabilities
Research suggests the vast majority of the UK’s over-40s have no confidence in the Government’s handling of pension policy. A survey of almost 1,300 people by My Pension Expert revealed 87% were concerned about the government’s capabilities over retirement saving policy and support. More than half oppose the temporary suspension of the state pension triple lock, while the same proportion is also concerned about the government cutting pension benefits, such as the annual saving allowance or pension tax relief, in the next 12 months.
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