Business news 4 September 2023
James Salmon, Operations Director.
UK recovered much faster from pandemic than thought. British factories suffer weakest month since May 2020. Green Steel, Inflation, Care costs, WFH, AI, Tax cuts, house prices & more business news that we thought would interest our members.
UK recovered much faster from pandemic than thought
The UK economy shrank less during the pandemic and bounced back faster than previously thought, revised figures from the Office for National Statistics show. The updated figures add nearly 2% to the size of the economy as of the end of 2021, meaning Britain recovered to its pre-pandemic size almost two years ago.
The ONS previously said the economy was still 1.2% smaller than its pre-lockdown size at the time. However, GDP is now believed to have been 0.6% above pre-pandemic in the final three months of 2021. The ONS also said the economy shrank by less than expected in 2020, contracting by 10.4% rather than 11%. In 2021, the stats body now estimates the economy bounced back by 8.7%, rather than an earlier estimate of 7.6% growth.
Chancellor Jeremy Hunt said: “The fact that the UK recovered from the pandemic much faster than thought shows that once again those determined to talk down the British economy have been proved wrong. There are many battles still to win, most of all against inflation so we can ease cost of living pressures on families. But if we stick to the plan we can look forward to healthy growth which according to the IMF will be faster than Germany, France and Italy in the long term.”
British factories suffer weakest month since May 2020
British factories suffered their weakest month in August since early in the COVID-19 crisis, with orders shrinking dramatically due to rising interest rates. The S&P Global/CIPS UK manufacturing Purchasing Managers’ Index (PMI) dropped for a sixth month in a row, falling to 43.0 from 45.3 in July – the lowest reading in 39 months and well below the 50 level that marks the point between expansion and contraction. Rob Dobson, director at S&P Global Market Intelligence, said output and new orders in the factory sector contracted at rates rarely seen outside of crisis periods. “Purchasing activity, inventory holdings and staffing levels were all cut back in August as manufacturers strived to control costs, protect margins and operate in a much leaner and efficient manner,” he said. Glynn Bellamy, the UK head of industrial products for KPMG, said: “The inevitable lag between interest rate rises and the full impact on the global economy is leading to caution around investment and employment decisions.”
UK offers Tata Steel £500m to fund green steel switch
The UK Government is in advanced funding talks with Tata Steel to help safeguard the future of its Port Talbot plant. Sky News reveals that a deal being negotiated in Whitehall would see £500m of public money injected into the company while Tata Steel’s Indian parent would sign off £700m of capital expenditure over a multi-year period to help pay for a switch away from polluting coal-fired blast furnaces. The company would reportedly commit to building electric arc furnaces, which offer greener, less labour-intensive ways of producing steel than traditional blast furnaces. But despite the support, as many as 3,000 British-based staff were likely to lose their jobs. Unite general secretary Sharon Graham criticised the reported plans and said the union would be “mounting a significant campaign” to protect jobs. “This government could make us the green steel capital of Europe – instead they are choosing to follow a job cuts agenda,” she said.
Moody’s: UK will have highest inflation in G7 for two years
British consumer prices are predicted to rise by a further 3.9% next year, according to Moody’s, meaning the UK will have the highest inflation rate in the G7 until at least the end of 2024. UK inflation currently stands at 6.8% and its average across 2023 is predicted to hit 7.8%, far higher than in other large advanced economies. Inflation in Germany is expected to average 3% next year, 2.5% in the US and 2.1% in France.
Britain faces “unsustainable” rise in old-age care costs
A rapidly expanding NHS and an increasingly elderly population will burden Britain with the highest rate of spending on healthcare for the elderly in Europe over the next 50 years. Analysis of Office for Budget Responsibility and European Commission data by KPMG suggests age-related healthcare spending is set to rise by just under 8% of GDP, or about £200bn in today’s money. The UK spent about £283bn in total on healthcare in 2022, or 11.3% of GDP. Yael Selfin, KPMG’s chief economist, said the projected increase in spending was “unsustainable” and called for a review of the NHS model.
Civil servants face curb on working from home
Downing Street is poised to issue new guidance to all Whitehall departments in a bid to end the culture of ‘Tuesday to Thursday’ working which has developed since the pandemic. One option being considered is to enforce a set number of days that officials have to work in the office, which would probably be fixed at four per week. Jeremy Quin, the Paymaster General, will launch the push as part of efforts to boost public sector productivity, which has plummeted post-Covid.
TUC to examine AI threat to workers’ rights
The TUC union is setting up a new taskforce to examine the threat artificial intelligence poses to workers’ rights. Gina Neff, a tech expert at the University of Cambridge and co-chair of the new taskforce, says the focus needs to shift from the existential threat from AI to the affect the technology is having on peoples’ realties. Dee Masters, an employment barrister, and the TUC campaigner Mary Towers will also lead the taskforce, which plans to produce draft legislation to protect workers from AI next spring.
Hunt downplays prospect of tax cuts
The Chancellor, Jeremy Hunt, has stated that halving inflation is the key economic aim of the Government, as it would benefit families more than tax cuts. He believes that meeting the Prime Minister’s pledge to halve inflation would be worth five times a 1p income tax cut. His comments come as backbench Tory MPs continue to call for tax cuts to promote growth in the economy.
ULEZ will not achieve net zero by 2030 – report
A new report by Oxford Economics says Sadiq Khan’s ultra-low emission zone (ULEZ) scheme will not help the Mayor of London reach his net zero target by 2030. Experts said that because the number of high polluting vehicles will only be cut by about 120,000 or less, out of three million vehicles in London, using ULEZ to achieve net zero would take “more than a century” while the fall in the number of non-compliant cars would have happened anyway because of new industry standards. Motorists in Greater London are now forced to pay £12.50 a day if their vehicles do not meet strict emissions standards. To reach Mr Khan’s net zero goal, Londoners would need to move to electric vehicles far more rapidly than they are currently and the city would need to install between 450 and 675 additional new public charging points per month.
Energy Bill amendment aims to rid solar industry of forced labour
An amendment to the Energy Bill proposed by members of the foreign affairs select committee will require solar energy companies to prove that their supply chains are free of slave labour. Ministers have been warned that if the Government rejects the amendment the UK will risk becoming a dumping ground for the products of forced labour from Xinjiang province in China. Alicia Kearns, the chair of the foreign affairs select committee, said: “The fight against forced labour is a collective responsibility. Together, we must pave a path towards a clean energy transition, without becoming complicit in not just slavery, but genocide.” However, critics argue that the amendment sets such a high burden of proof of no forced labour that it would in effect amount to a ban on British trade with Xinjiang province.
US Data
US dollar was weaker on Friday as investors concluded data releases would not prompt another rate hike by itself, however overall it is outperforming the pound. Almost 91% of investors think the US Federal Reserve will hold rates steady at the September meeting. US manufacturing sector PMI fell to 47.9 points from 49 in July amid reportedly tough conditions with weaker new orders and US consumer confidence fell to 106.1 points in August from 114 in July according to the Conference Board. US employers also added 187,000 jobs in August. The unemployment rate increased unexpectedly to 3.8%, but this was due to people returning to the labour force looking for jobs. Overall the market appears to be cooling.
Oil
Oil extended its rally to hit its highest level since last November as traders predict supply cuts by OPEC+ leaders will lrad to a tightening of the market. WTI climbed to near $86 a barrel ahaving gained over 7% last week.
Loopholes allow owners of shell companies to remain hidden
The true owners of more than 100,000 properties in England and Wales controlled via overseas shell companies are not public, researchers have found, despite the introduction of a register of overseas entities in August last year. Legal loopholes are used to obscure the ownership of 87% of the properties while between 6% and 9% were owned by companies that had ignored the law and the rest had “out-of-date or poorly documented records”. Trusts were used to hold property in 63% of those with obscured overseas ownership and have been found to have been used extensively by Russian oligarchs. Andy Summers, an associate professor at the LSE, said: “There is no point building a dam halfway across a river. These gaps are threatening the efficacy of the entire register and the government should close them at the earliest opportunity.”
Property owners face prison for EPC breaches
Proposals contained in the Government’s Energy Bill, which is set to come before the Commons on Tuesday, would give ministers the power to create new criminal offences and increase civil penalties as part of efforts to hit net zero targets. Under the proposals, people who fall foul of regulations to reduce their energy consumption could face up to a year in prison and fines of up to £15,000. The Bill will replace and strengthen the rules on energy performance certificates (EPCs), which were previously based on now repealed EU law.
UK house prices fall at fastest rate since 2009
House prices fell by 5.3% in the year to August, according to Nationwide, the fastest annual drop in 14 years. The bigger-than-expected drop brings the average house price down £14,600 to £259,153 compared with a year ago. “The softening is not surprising given the extent of the rise in borrowing costs in recent months, which has resulted in activity in the housing market running well below pre-pandemic levels,” said Robert Gardner, the chief economist at Nationwide. The number of completions of house sales was down 20% in the first half of the year compared with 2019, and about 40% down on 2021. There was also a 25% drop in first-time buyers in the first half of 2023 when compared with 2019, Nationwide said, while buyers turned their attention from detached homes to smaller, less expensive properties.
Premier League achieves first £2bn transfer window
The Premier League’s first £2bn transfer window demonstrates the “incredible pace of growth” in the league’s wealth, according to Deloitte. Calum Ross, assistant director in Deloitte’s Sports Business Group, stated that it took 14 summer transfer windows to exceed £1bn and only seven more to surpass £2bn. The Premier League spent almost as much as the other members of Europe’s ‘big five’ leagues combined this summer. The Saudi Pro League has emerged as a new challenge, attracting top players and providing additional funding for English clubs.
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The Credit Protection Association (CPA) has been assisting thousands of UK businesses to get paid, since 1914. We have seen many financial crises, this one will be particularly deadly for suppliers for some time to come.
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.
Get compensated for previous late payments
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.