Business news 4 August 2022
James Salmon, Operations Director.
Employers believe four-day week will be the norm by 2030. Companies face 500% rise in energy bills. Think-tank in 15% inflation warning. Bank of England set to raise interest rates to 1.75%. Sluggish productivity is slowing growth. Services sector growth slows in July . And more business news.
Employers believe four-day week will be the norm by 2030
The majority of employers believe that a four-day working week will become the norm in the UK before 2030, according to a survey for NatWest Rapid Cash.
The poll of 2,000 office workers, 500 SME employers and 500 recruitment agencies found that 78% of employers believe it will happen by the end of the decade, while 52% of recruiters said it will take place by 2026. While recruiters say a shorter working week will mean happier employees and higher worker retention, a third of SMEs would not offer the scheme unless they have to. The study also found that over a quarter of businesses suffer from weak cash flow, with a third of employers citing staffing costs among their main financial challenges.
The research comes amid a trial where 3,300 workers at 70 companies around the UK are working for four days but retaining their salary in full. Those taking part have pledged to maintain 100% productivity.
Companies face 500% rise in energy bills
Analysis by Cornwall Insight suggests that British businesses could see energy bills soar by as much as 500%. The analysts say energy costs for businesses are rising faster than for households and risk tipping companies “over the edge” unless the Government intervenes. With wholesale prices soaring, Cornwall has said it does not expect them to return to 2020/21 levels before 2030.
Think-tank in 15% inflation warning
The Resolution Foundation has warned that inflation could hit more than seven times the Bank of England’s 2% target, with the think-tank saying it could pass the 15% mark in early 2023.
Inflation currently stands at 9.4% and the Bank’s Monetary Policy Committee is expected to increase interest rates further as it looks to tackle soaring costs.
Jack Leslie, senior economist at the Resolution Foundation, said: “The outlook for inflation is highly uncertain, largely driven by unpredictable gas prices, but changes over recent months suggest that the Bank of England is likely to forecast a higher and later peak for inflation – potentially up to 15% in early 2023.”
Bank of England set to raise interest rates to 1.75%
With the Bank of England looking to rein in record high inflation, markets expect the Monetary Policy Committee (MPC) to increase the interest rate by 50 basis points to 1.75% – its steepest increase 27 years. This comes with inflation at 9.4% – its highest in four decades – and predicted to hit 11% by year end, far beyond the Bank’s 2% target.
The MPC has opted to increase interest rates at a record five consecutive meetings, with each of these seeing a 25 basis point increase. Many analysts expect the Bank to deliver a steeper increase today, taking the rate from 1.25% to 1.75%.
Deutsche Bank is among those who believe a 0.5% increase is on the cards, predicting that the MPC will deliver a bigger increase despite the risk of an economic slowdown or a recession.
OECD: Sluggish productivity is slowing growth
The Organisation for Economic Co-Operation and Development (OECD) says that while the UK economy has recovered to pre-pandemic levels, high energy prices and the rising cost of living are slowing growth.
It warned that the economy is coming under increasing pressure from soaring energy costs, increasing global prices of goods and services, and economic uncertainty fuelled by the war in Ukraine.
While it adds that GDP growth is forecast to be flat in 2023, the OECD said improving “sluggish” productivity and reducing regional and gender disparities can help keep the post-pandemic recovery on track. OECD secretary-general Mathias Cormann said: “Like other economies around the world, the UK economy faces a number of headwinds,” before suggesting that “the key to stronger economic growth and better opportunities will be stronger growth in productivity.”
Services sector growth slows in July
Growth in the UK’s service sector has slowed to a 17-month low. The monthly S&P Global/CIPS UK services PMI survey hit 52.6 in July, compared to 54.3 in June on an index where another above 50 represents growth.
Tim Moore, economics director at S&P Global Market Intelligence, said: “Reduced levels of discretionary consumer spending and efforts by businesses to contain expenses due to escalating inflation have combined to squeeze demand.”
The report shows a considerable slowdown in input cost inflation, with this likely due to lower commodity prices and a gradual easing of global supply shortages, with it also shown that services firms are still hiring strongly. The combined PMI, which measures all activity in the private sector, also dropped to a 17-month low of 52.1 in July, down from 53.7 in June.
Subscription spending slips
Analysis by Barclaycard Payments shows that 67% of UK consumers remain signed up to at least one digital or direct-to-door service, despite an overall decline in consumer spending on subscriptions. The study found that the average UK household spends £41.70 a month on subscription services, compared with an average of £51.65 in 2021, and £45.50 in 2020.
OPEC+ dissapoints
Despite huge diplomatic efforts from the US and European leaders OPEC and its allies agreed a disappointingly small increase in their oil production of just 100,000 barrels a day, equal to 0.1% of global demand. The increase will not make a dent in high oil prices and will do little to help consumers suffering the resultant inflationary squeeze.
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