Business news 4 January 2023
James Salmon, Operations Director.
Inflation, Manufacturing, markets, fraud, crypto, tax, Tesla and more business news.
Inflation
UK Inflation is beginning to ease, but food prices are still accelerating at one of the fastest paces on record, new research out this morning shows. Annual shop price inflation, calculated by the British Retail Consortium (BRC) and NielsenIQ, dropped slightly to 7.3 per cent last month from 7.4 per cent in November.
Despite the drop, the rate of price increases is still running at among the quickest since the BRC started tracking the data. Food prices in the UK rose at their fastest rate in December since at least 2005, soaring by 13.3%.
Manufacturing
The UK’s manufacturing sector recording its fifth consecutive month of contraction in December and the lowest output in more than two years, ending 2022 weakly, with output, new orders and employment all falling at increasingly faster rates. The seasonally adjusted Manufacturing Purchasing Managers’ Index fell to a 31-month low of 45.3 in December, down from 46.5 in November but above the earlier estimate of 44.7.
Manufacturers cited a slowdown in export demand, high energy costs, and Brexit-related trade disruption. December’s survey data showed declines in all five sub-indexes including output, new orders, jobs, and stock levels, making it one of the worst months for factories since 2009.
“Output contracted at one of the quickest rates during the past 14 years, as new order inflows weakened and supply chain issues continued to bite. The decline in new business was worryingly steep, as weak domestic demand was accompanied by a further marked drop in new orders from overseas,” said Rob Dobson, director at S&P Global Market Intelligence.
Stocks
The FTSE100 had a strong start to 2023, climbing 150 points as it was boosted by a low pound, a re-opening China and a fall in gas prices. Overnight, the S&P 500 dropped -0.40% and the NASDAQ dropped -0.76% as US investors grew concerned again about inflation.
Tesla
Tesla says it delivered a record 1.3m vehicles last year, 40% more than in 2021. It comes after the company delivered more than 405,000 vehicles in the last three months of 2022. However, that figure missed Wall Street forecasts of around 430,000 deliveries for the period.
Crypto
FTX founder Sam Bankman-Fried’s pleaded not guilty to eight criminal charges including fraud and money laundering yesterday, setting the stage for one of biggest lockbuster white collar crime trials in recent years.
UK falling behind on chip manufacturing
The boss of silicon chip designer IQE has warned that Britain could lose its allure as a technology hub to US and European rivals if it does not move quickly to attract semiconductor manufacturers. Americo Lemos says global moves to reshore production of the vital computer components from countries such as China are racing ahead of the UK. “This is the year for the UK to make a decision on whether we want to play our part in a new global semiconductor market or if we’re willing to let that opportunity slip away,” he added. The comments come after other industry figures and MPs took aim at the Government over its lack of action to strengthen the UK chip sector. MPs on the Business, Energy and Industrial Strategy Committee said of the efforts so far by the Department for Digital, Culture, Media and Sport: “It is not clear to us that the support currently offered by government is at anything like the scale which is needed to make a real difference, or in line with a clear strategy from ministers.”
The many ways you’ll pay more tax in 2023
Experts at Hargreaves Lansdown have detailed the myriad ways Britons will pay more taxes in 2023. Sarah Coles, senior personal finance analyst at the firm, explained how for most people, the “lion’s share of the rise” will come from the freeze in income tax thresholds. But for businesses, investors and property owners the “tax attacks” will come from all sides. Accordingly, more people will need to understand just where the tax pressures are coming from and more importantly how to protect themselves from it. Frozen income tax and National Insurance thresholds mean workers are likely to pay more tax on their salary while business owners could pay more tax after the dividend tax allowance is cut in half. Investors could pay more tax with the dividend tax and CGT thresholds halving. Council tax bills will likely rise up by 5% in most areas and inflation could mean paying more VAT. The cut to the CGT allowance will probably mean higher taxes for property investors. Finally, much higher house prices and frozen inheritance tax thresholds could mean more people forced to pay inheritance tax.
Taxpayers left on hold as HMRC staff work from home
HMRC phone operators working from home have been overwhelmed with calls for help ahead of the January 31 filing deadline. Taxpayers seeking help yesterday were being forced to wait an hour or more for call handlers to answer their queries or were cut off before getting a response. HMRC’s generous work from home policy has been blamed for standards slipping. Chris Etherington, of the tax specialists RSM, said HMRC was not equipped to both work from home and deliver a high standard of customer service. “HMRC moved rapidly to working from home, but the technology was not there for them to adapt quickly. It may be good for staff to have that flexibility but a balance has to be struck – it has to work for the employer, employees and the taxpayer,” he explained. Nimesh Shah, of the tax specialist Blick Rothenberg, said: “Waiting times have shot through the roof since the pandemic. The department has a very bureaucratic culture. Perhaps it is not best suited to a working from home environment.”
Government has no idea about scale of Kickstart fraud
The Government has admitted that it has no idea of the scale of fraud associated with its Kickstart programme – launched during the pandemic to help fund jobs for 16-to-24-year-olds. The Department for Work and Pensions has conceded that it has not done any work to understand the value of losses, or even an estimated rate of loss, since the launch of Kickstart in 2020. The Government has also refused to disclose the identity of company that took Kickstart cash. Dame Meg Hillier, chairwoman of the Public Accounts Committee, asked: “What is there to hide about how public money was used to support the economy in this emergency?” She added: “[The department’s] record on fraud was extremely poor long before the pandemic, but the Kickstart checks failed to catch even some organisations that didn’t exist before they applied for grants.”
Merge SFO and CPS to fight fraud, says top lawyer
A leading criminal lawyer has called for the Serious Fraud Office to be merged with the Crown Prosecution Service to better fight major financial crime. Clare Montgomery KC said the SFO’s structural and systemic flaws were too deep for it to be rescued and that a process aiming to provide witnesses with greater leniency in return for cooperation had become a bureaucratic mess. She went on to criticise the broader investigation of fraud in the UK, saying: “In terms of actually having police officers interested in fraud it has been subject to a decline now where I don’t believe they have any interest in prosecuting fraud anywhere.” Her comments came in a podcast made by Matrix Chambers.
Twitter
Twitter has said it will relax a three-year ban on political advertising in a continued policy shift under Musk.
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