Business news 4 March 2022
James Salmon, Operations Director.
Ukraine. IoD urges Brits to stand down from Russian boards. LSE suspends trading in Russian companies. Ukrainians don’t need to declare captured Russian tanks for tax purposes. Rates and inflation could dent property plans. Services sector growth at eight month high. And more business news.
Ukraine
Markets sentiment took another dive on reports of Russia’s shelling of a nuclear complex in Eastern Ukraine. Emergency services said the fire that broke out at the Zaporizhzhia plant had been extinguished and there were no injuries.
In Asia, Nikkei closed down -2.32%. Hong Kong HSI is down -2.38%. China Shanghai SSE is down -0.96%. . Overnight, DOW dropped -0.29%. S&P 500 dropped -0.53%. NASDAQ dropped -1.56%. In Europe markets have started the day down around 3%.
Commodities extended their massive rally as Russia’s invasion continues to scare global markets and fuel fears of a global supply crunch.
IoD urges Brits to stand down from Russian boards
The Institute of Directors (IoD) has urged British business leaders to stand down from the boards of Russian companies, with director general Jonathan Geldart saying: “We believe that it is no longer tenable for British directors to be involved in governance roles in the Russian economy.”
LSE suspends trading in Russian companies
The London Stock Exchange (LSE) has frozen trading in 28 Russian companies, banning investors from buying or selling shares in Russian entities including energy giants Gazprom and Rosneft, as well as the country’s biggest lender, Sberbank, and VTB Bank, Russia’s second-largest lender. The LSE’s FTSE Russell arm – which runs indexes such as the FTSE 100 and FTSE 250 – said it will exclude Russian businesses whose shares are still trading in London from Monday. The Mail notes that the measures are not as strict as those being sought by MPs and business leaders who want Russian companies kicked off the stock exchange entirely.
Ukrainians don’t need to declare captured Russian tanks for tax purposes
Ukrainian authorities have told citizens that any Russian military equipment they seize will not need to be declared for tax purposes. Ukraine’s National Agency for the Protection against Corruption has reportedly declared: “Have you captured a Russian tank or armoured personnel carrier and are worried about how to declare it? Keep calm and continue to defend the motherland!” “Thanks to the courage and victory of the defenders of the Ukrainian state, enemy military equipment usually comes to you already destroyed and disabled, which makes it impossible to evaluate it in accordance with the law,” it added.
Rates and inflation could dent property plans
A poll for Market Financial Solutions (MFS) shows that homeowners and renters fear rising rates and high inflation will hurt their homeownership ambitions. The poll of more than 2,000 people saw 28% of renters say rising interest rates were damaging their chances of getting onto the ladder, while 19% of homeowners said a higher base rate would damage their chances of affording their mortgage payments. While 18% intend to buy a property in 2022, 66% are worried that rising inflation will ruin their chances of doing so. It was also found that among existing homeowners, 14% plan to sell up and move home this year, while 6% hope to purchase an additional investment property. Reflecting on the findings, Paresh Raja, chief executive of MFS, said: “The dual threat of rising inflation and rising interest rates will, naturally, have serious ramifications on those looking to get onto or move up the property ladder. As the cost of borrowing increases, homebuyers will need to consider the budgets carefully and assess their options.”
Retail Footfall
UK Retail Footfall inched closer to pre-virus levels in February, figures on Friday showed, despite storms battering towns and cities up and down the country. According to the latest British Retail Consortium-Sensormatic IQ monitor, retail footfall declined 15% on a two-year basis in February.
Services sector growth at eight month high
Growth in Britain’s services sector rose at its fastest pace for eight months in February, despite record price rises. The IHS Markit/CIPS services PMI survey scored 60.5 in February, with this up from 54.1 in January on an index where a reading above 50 represents growth. February’s rate was the highest since June 2021, with the sector rebounding as the Omicron coronavirus wave eased and restrictions were lifted. Around one third of survey respondents raised their selling prices during February, with this coming in response to soaring inflation. Service firms saw input price inflation increase at the second fastest pace on record, with staff salaries climbing alongside fuel and energy bills. While the overall all-sector PMI reading rose from 54.2 in January to 59.9 in February, there are concerns that growth may come under pressure as the cost-of-living crisis and conflict in Ukraine have an impact on confidence. Pantheon Macroeconomics economist Gabriella Dickens said a recent surge in oil, natural gas and agricultural commodity prices will squeeze the amount of income households have left to spend on domestically produced goods and services over the next year. “So after brisk quarter-on-quarter growth in GDP of about 0.6% in the first quarter, we expect the economy to stagnate in the second quarter and to grow only slowly in the second half of this year,” she added. Andrew Harker, economics director at IHS Markit, commented: “Although the latest set of PMI data were encouraging, the inflationary picture still has the potential to limit growth.”
Firms set to hike prices as costs climb
Research by the Confederation of British Industry (CBI) suggests businesses are preparing to hike prices in an effort to combat increasing costs. A net 26% of British services firms intend to up prices over the next three months, with three in four expecting costs to increase further in the quarter. Charlotte Dendy, head of economic surveys at the CBI, said: “Rising inflation and cost pressures are hitting firms’ profitability and their bottom line. The spectre of further price increases is being felt across the board.” While Office for National Statistics data shows that inflation is running at a near 30 year high of 5.5%, economists expect price rises to continue in the coming months and possibly pass 8% in April when the energy price cap increases. While the CBI poll shows sales growth slowed over the previous quarter, hiring and investment intentions remain strong and firms expect business volumes to increase over the coming quarter.
Businesses face postcode lottery on rates relief
Analysis shows that some businesses have been left waiting almost a year to receive support through a £1.5bn business rates relief fund. The Covid-19 Additional Relief Fund, which was announced in March 2021, is distributed by local authorities to businesses impacted by the pandemic, excluding the retail, hospitality and leisure sectors. Business rates experts from Colliers have criticised the Government for taking nine months to pass necessary legislation, while also questioning the decision to allow councils to distribute funds at their own discretion. John Webber, head of business rates at Colliers, said ministers have “instigated a relief system that has been decimated not only by the size of fund to be distributed but also by the interpretation and resources of local authorities on how to distribute it.” With just 19% of local authorities having released their relief policies, Mr Webber warned that distribution has turned into a postcode lottery, describing the situation as a “total joke” and saying many businesses have been neglected for support for two years.
Box-ticking warning on whistleblowing
In a piece for the Times, Adam Wyman and Sarah Baker of law firm Travers Smith say employers are increasingly looking at the quality of their whistleblowing policies and procedures. They note that the issue has become more prominent against a backdrop a high-profile investigations and public scrutiny, while regulators including the Financial Conduct Authority have stressed the importance of promoting speak-up cultures in the workplace. Mr Wyman and Ms Baker say employees’ faith in the system is “of fundamental importance” to the success of a speak-up culture, stressing that while they may not always be right, staff “should not be side-lined or vilified for raising an issue.” They add that organisations that have a positive culture in regard to speaking up are able to “nip issues in the bud early” and make positive changes. They also say that senior executives must be willing to hear concerns and deal with them, noting that “ticking the box with a whistleblowing policy or hotline alone is no longer enough.”
Rentokil Initial
Rentokil Initial reported strong profit growth in 2021 as the firm’s acquisition strategy lead to booming revenue, which was also backed up by near double-digit organic growth. In 2021, Rentokil posted pretax profit of £325.1 million, up 41% from £229.8 million in 2020.
Admiral Group
Admiral Group reported strong profit growth in 2021 as the insurer was able to write more premiums thanks to an increased number of motor customers in the UK. In 2021, Cardiff-based Admiral recorded pretax profit of £713.5 million, up 17% from £608.2 million in 2020.
Darktrace
Cyber security firm Darktrace raised guidance due to healthy growth in the first half of its financial year. The firm said adjusted earnings before interest, depreciation and amortisation surged 124.6% to $46.7m as the pandemic continued to suppress costs across areas like travel and entertainment across its business.
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