Business news 4 May 2022
James Salmon, Operations Director.
Manufacturers see costs climb and optimism dip. Consumer credit set to climb. PM warns that cost of living support would drive inflation higher. Central banks set to target inflation with rate rises. Two-thirds back curbs on bosses’ pay. And more business news.
Manufacturers see costs climb and optimism dip.
UK factories are hiking prices at a record pace, with three in five manufactures saying they have passed higher costs onto customers, according to the latest PMI survey by S&P Global.
It found that cost inflation across the sector was the second-highest in 30 years in April. The rise in costs has made business less confident, with optimism among firms falling to a 16-month low. The S&P Global/CIPS UK Manufacturing PMI rose to 55.8 in April, up from 55.2 in March on an index where a reading above 50 indicates growth.
Martin Beck, chief economic advisor to the EY Item Club, said the outlook for manufacturers was “distinctly downbeat.” He noted that the spending power of consumers and firms is being squeezed by high inflation, while also pointing to the impact of global supply chain disruption, geopolitical uncertainty and fresh lockdowns in China.
Consumer credit set to climb.
Analysis by EY suggests credit card borrowing will hit a five-year high this year, as people take on another £16bn of debt amid the cost of living crisis.
The report says consumer demand for credit will climb 7.9% this year and a further 5.5% in 2023, reversing a decline that saw consumer credit fall 12% during the pandemic. EY predicts that consumer credit will climb from £198bn last year to £214bn this year and £226bn in 2023.
Anna Anthony, partner at EY, said: “Households are already feeling the cost of living squeeze and unfortunately this is set to worsen over the coming months, with inflation set to hit a 40-year high.”
PM warns that cost of living support would drive inflation higher.
Boris Johnson has insisted that while the Government is doing “everything we can” to help amid the cost of living crisis, increasing state support further could drive inflation even higher.
In an interview with ITV’s Good Morning Britain, the Prime Minister pointed to a “global context” caused by a surge in energy prices which is hitting all aspects of the economy, arguing that “the crucial thing is to make sure we deal with the prices over the medium and long term.”
Separately, Mr Johnson has told the BBC that the country was “going to have a tough period for a while.” He vowed that ministers would “continue to look at all the options” to support households, saying: “We will use all the ingenuity and the compassion that we had during Covid to try to help people in the short-term.”
However, he warned that officials do not have “an unlimited number of shots to play,” adding: “We’ve got to be clear – this is taxpayers’ money, you’re taking it to cut prices, there are limits to what you can do.”
Central banks set to target inflation with rate rises.
Central banks are set to hike interest rates in a bid to tackle soaring inflation, with the Bank of England and US Federal Reserve expected to put rates up this week.
The Reserve Bank of Australia yesterday increased rates from 0.1% to 0.35%, marking the country’s first rise in interest rates for 11 years. With the Australian increase steeper than expected, the Standard says it has prompted discussion over whether the Bank of England could put rates up by 0.5 percentage points rather than 0.25%.
Deutsche Bank economist Sanjay Raja said forecasts from the Bank’s Monetary Policy Committee “suggest only a modest level of tightening needed to bring the economy back into equilibrium,” with the Bank expected to increase rates from 0.75% to 1%.
Two-thirds back curbs on bosses’ pay.
A poll for the High Pay Centre think-tank found that 63% of people think company bosses should be paid no more than 10 times the earnings of the firm’s average employee.
The survey of 1,104 people in the UK found that only 3% thought it was appropriate for chief executives to get paid more than 50 times the company’s average pay. High Pay Centre research published in December 2020 shows that the bosses of the 350 biggest UK-listed companies are paid 53 times more than the median employee, with it found that 43 bosses of FTSE 350 companies received more than 100 times as much as the average employee.
High Pay Centre director Luke Hildyard said the research revealed “the extent to which the lives of those at the top and those of everybody else have become so far removed from each other.” Frances O’Grady, general secretary of the TUC, said: “It’s time to set a maximum ratio between the top earner in each firm and other workers,” while Gary Smith, general secretary of the GMB union, commented: “Chief executives’ sky-high pay is a kick in the teeth to working people who make the profits that the richest benefit from.”
Tribunals linked to neurodiversity discrimination up by a third.
The number of employment tribunals relating to conditions such as autism, ADHD, dyslexia, and dyspraxia has increased by a third in a year. Increased awareness about neurodiversity has led to an increase in diagnosis, with workers challenging employers on dismissals and conditions. Analysis by employment law firm Fox shows a 40% rise in tribunals relating to autism, 31% linked to Asperger’s and 14% rise tied to dyslexia. The report found that the number of cases citing discrimination on grounds of neurodiversity has jumped to 93 this year, from 73 in 2020.
Banks enlisted to boost take-up of skills scheme for small businesses.
High street banks are being asked to help promote the Government’s Help to Grow scheme, an initiative designed to raise productivity among SMEs by offering a 90% discount on management training courses.
BP profits prompt fresh windfall tax calls.
With BP’s Q1 profits having more than doubled year-on-year to £4.9bn after oil and gas prices soared, Labour has renewed calls for a windfall tax on energy companies to help households tackle rising bills. Labour leader Sir Keir Starmer said BP’s profits “reinforce the case that we’ve been making which is that, with so many people struggling to pay their energy bills, we should have a windfall tax on oil and gas companies in the North Sea who have made more profit than they were expecting.” Liberal Democrat leader Ed Davey has also expressed a belief that energy companies should “pay a little more to help the most vulnerable,” saying the Government’s refusal to introduce a windfall tax on firms’ vast profits “is becoming impossible to justify.” Frances O’Grady, head of the TUC, took a similar stance, saying: “The Government must stop making excuses and impose a windfall tax on oil and gas companies.” However, Prime Minister Boris Johnson said hitting energy firms with a windfall tax would discourage them from making investments that will keep energy prices lower. Chancellor Rishi Sunak recently said he would explore a windfall tax policy if companies did not invest enough in the UK’s energy supply, although Business Secretary Kwasi Kwarteng has warned against hitting firms with an “arbitrary and unexpected” windfall tax.
JD Wetherspoon
JD Wetherspoon said sales improved steadily since the ending of all restrictions, but the pub chain said virus woes have been replaced by “considerable pressure on costs” as a new source of concern. Wetherspoon reported a 4.0% decrease in sales on a like-for-like basis in its financial third quarter, the 13 weeks that ended April 24. In its financial year to date, like-for-like sales were down 6.2%.
Boohoo Group
Boohoo Group revealed that profits slumped and costs soared as it struggled to get to grips with difficulties caused by the pandemic. Pretax profit for the 12 months to the end of February plunged to GBP7.8 million from GBP124.7 million the year before, as distribution costs rose and customer demand fell.
4m homes pushed into higher stamp duty bracket since the pandemic started.
Soaring house prices have pushed more than 4m homes into a higher stamp duty bracket since the start of the pandemic, according to Zoopla. A total of 4.3m homes now attract a higher grade of stamp duty compared to March 2020. Zoopla analysis shows that the average value of a home in Britain has risen by £29,000 – or 13% – since the beginning of the pandemic, with an 8.3% spike in the last year alone. HMRC data shows that stamp duty receipts in England and Northern Ireland reached £18.6bn in the year to March, a rise of £6.1bn on the previous year.
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