business news 4 October 2021
James Salmon, Operations Director.
Small firms concerned over Covid loan repayments. Chancellor considers extension of Covid loans. The Fuel Crisis. UK lags rivals in electric car race. Chancellor urged to go for growth. Shortages hit manufacturing as growth slows. And more business news.
Small firms concerned over Covid loan repayments
A third of small businesses are worried they will not be able to repay Covid loans, according to a poll by EY, while more than half of the firms quizzed said that recovering from the pandemic was a “main challenge” and indicated they may need continuing help.
This comes with the end of September bringing the furlough scheme to an end and seeing support loans and payment holidays tapering. EY analysis shows that close to one in nine small firms received support from financial institutions or the Government amid the coronavirus crisis, with official figures showing that banks have extended almost £80bn in government-guaranteed loans to 1.56m firms. Anita Kimber of EY said: “Economic recovery remains a huge challenge, and is being acutely felt by many small firms that are now concerned with how they will repay their debt.”
Chancellor considers extension of Covid loans
Chancellor Rishi Sunak is reportedly considering plans to extend the coronavirus business loans scheme, with the Treasury mulling an extension to the Recovery Loan Scheme that is due to end on December 31.
The possible extension comes on the back of concerns labour shortages and cost pressures may hurt the country’s post-pandemic recovery. A source has told the Telegraph that Treasury officials will consult with banks and financial institutions on whether to extend the loan scheme and tweak its terms, with the matter being discussed in the run-up to the autumn Budget. Options said to be possible include cutting the Government guarantee, reducing the potential losses taxpayers face from unpaid debt, and reducing the personal guarantee.
Fuel Crisis
Boris Johnson said in an interview with the BBC , that the U.K. fuel crisis is now “abating.” He also pledged not to revert to immigration to solve the U.K.’s truck driver shortage adding that the country faces a “period of adjustment” in the wake of Brexit and the pandemic. Supply crisis sees product lines cut
UK lags rivals in electric car race
A report from EY shows that the UK is lagging behind China, Sweden and Germany in the shift to electric vehicles. EY’s first Electric Vehicle (EV) Country Readiness Index puts the UK fourth against 10 leading global car markets. The report shows that the UK’s charger to EV ratio was 0.08%, which is slightly below the global average of 0.1%. It was also found that the UK had around two gigawatt-hours of battery manufacturing capacity in 2020, with this just 4% of European capacity.
Chancellor urged to go for growth
With the Office for National Statistics having upgraded GDP growth for Q2 from 4.8% to 5.5%, economists, business groups and campaigners have urged Chancellor Rishi Sunak to pursue a growth-oriented Budget.
Federation of Small Businesses national chair Mike Cherry, who said the Conservatives are “losing the trust of small firms which are bracing for a rise in the jobs tax at the same time as having to deal with haywire input cost rises across the board”, says the Budget must see the Government “step up to the plate, rediscover its entrepreneurial zeal, and offer more than tax grabs to fund growing public sector spend.”
With concern over supply chain issues, staff shortages and the impending National Insurance increase, experts suggest lower taxes could put the post-pandemic recovery back on track. Martin Beck, chief economic advisor to the EY Item Club, said cutting taxes may help in “offsetting some of the headwinds facing the economy,” while Julian Jessop, economics fellow at the Institute of Economic Affairs, suggested the Government “should focus on supporting growth, rather than finding even more ways to raise the burden of tax.”
Shortages hit manufacturing as growth slows
Factories felt the impact of supply chain problems and staff shortages hitting manufacturers in September, recording the weakest month since February. The IHS Markit/CIPS Purchasing Managers’ Index came in at 57.1 for September, down from 60.3 in August on an index where a reading above 50 indicates growth. September’s reading marked the weakest performance since February and the fourth consecutive month of decline. New export work fell for the first time in eight months, while jobs growth was the weakest since January. Despite pressure in the sector, the majority of manufacturers surveyed are optimistic about the next 12 months, with 62% expecting to see growth in output. Rob Dobson, director at IHS Markit, said the figures highlight the “risk of the UK descending towards a bout of stagflation”, with growth in output and new orders slowing while costs and selling prices climb.
Supply crisis sees product lines cut
British businesses hit by staff shortages and supply chain issues have had to scale back their offering to customers, with a poll from BDO showing that more than 34% of mid-size firms had already reduced their product lines or services to manage staff or stock shortages by mid-September. A further 31% of companies said that they would have to do so “unless the situation changes within the month”. Almost one in three businesses expect to have to put up prices of their products or services in the next three to six months, with almost a fifth saying they were increasing wages to try to attract staff. BDO’s Ed Dwan said: “Brexit, global supply chain issues and the long tail of Covid-19 has created a perfect storm for UK businesses.”
Pandora Papers: Secret wealth of world leaders exposed
A leak of financial documents dubbed the Pandora Papers, which consist of files from offshore companies, expose the secret wealth and dealings of world leaders, politicians and billionaires, with 35 current and former leaders and more than 300 public officials featured. The BBC’s Panorama in a joint investigation with the Guardian and other media partners have had access to nearly 12m documents and files from 14 financial services companies. Analysis of the files is the largest organised by the International Consortium of Investigative Journalists, with more than 650 reporters taking part. BBC News says that while some figures are facing allegations of corruption, money laundering and global tax avoidance, the way people have been legally setting up companies to secretly buy property in the UK is one of the biggest revelations. The data, it adds, highlights the Government’s failure to introduce a register of offshore property owners despite vowing to do so. One revelation from the documents drawing much press attention is the fact that former PM Tony Blair and his wife Cherie avoided paying £312,000 in stamp duty when they bought a £6.45m London office, having bought the offshore firm that owned the property.
PM refuses to rule out tax increases
With the Chancellor’s autumn Budget on the horizon, the Prime Minister has refused to rule out further tax increases. In an interview with the BBC’s Andrew Marr Show on the first day of Conservative Party conference, Boris Johnson said that he was a “zealous opponent of unnecessary tax rises” but warned that the pandemic had hit the economy like a “fiscal meteorite”. BBC News notes that when the Government last month announced an increase to National Insurance, the PM was asked whether he would rule out additional taxes, with Mr Johnson offering an “emotional commitment” that he did not want to introduce further rises. When quizzed by Mr Marr as to whether ministers will raise taxes again, Mr Johnson said: “If I can possibly avoid it, I do not want to raise taxes again.” Insisting that there is “no fiercer and more zealous opponent of unnecessary tax rises” than himself, the PM warned: “But we have had to deal with a pandemic on a scale which this country has not seen before in our lifetimes and long before.” “We don’t want to raise taxes, of course we don’t, but what we will not do is be irresponsible with the public finances,” he added. Meanwhile, a number of Conservatives have warned against higher taxation, with Leader of the House Jacob Rees-Mogg telling a party conference fringe event that “we are at the upper reaches of the reasonableness of the tax burden” and Foreign Secretary Liz Truss telling BBC News: “None of us want to see taxes rise, we are a low tax party.” Meanwhile, Sir Graham Brady, chairman of the backbench Conservative 1922 Committee, told an event hosted by the Centre for Policy Studies that ministers need to set out a plan to cut taxes “well before” the next election, warning that the Tories’ “credible reputation” as a low tax party is under threat.
WM Morrison
Private Equity giant Clayton Dubilier & Rice won a months-long tussle for WM Morrison Supermarket, beating out rival Fortress Investment Group in an unusual auction with a winning 7 billion-pound offer for the supermarket chain. The deal will see the biggest public company taken private in the UK in more than a decade. Shareholders still need to agree when they vote on the deal on 19th October
Funding for back to work
UK Chancellor Rishi Sunak will commit more than £500 million in fresh funding to help people back into work as he seeks to stem the continuing turbulence of the pandemic. Sunak is shifting the focus on to getting people into new or better jobs as the government comes under sustained pressure over a major squeeze on living standards.
Rishi Sunak is set to announce a £500m extension to his “plan for jobs” as the Government looks to avoid a surge in unemployment after the furlough scheme came to an end. Speaking at the Conservative party conference, the Chancellor is expected to say he is “doubling down” on his 2020 promise to do “whatever it takes” to support people through the crisis. Measures included in the new package will include prioritising those coming off furlough for support from jobcentres and extending the £3,000 incentive for employers to take on apprentices until January 31.
White-collar staff shortages drive ‘fierce war for talent’
Professional services businesses have warned of labour shortages as the economic recovery increases demand for talent, with some accounting, consulting and law firms turning away work due to a lack of staff.
Airlines
Ryanair and Wizz Air both reported a jump in passengers flown in September amid a brighter outlook for the travel industry, with UK rules relaxed and simplified from Monday. Ryanair saw traffic more than double to 10.6 million in September from 5.2 million a year ago, while load factor improved to 81% from 71%. September’s figure slipped from August’s 11.1 million passengers, however. Wizz Air, meanwhile, flew 3.0 million passengers in September, up 91% on a year ago, with an improved load factor of 78.4% versus 64.6%.
Prime London prices at a ‘turning point’
Property prices in London’s prime locations have started to increase, according to estate agent Savills. Average annual price growth for prime central London properties hit 1.4% in Q3, marking the second consecutive quarter where prices were up year-on-year. Savills said the prime market in the capital was now at a “turning point”, with the figures serving as evidence that prices across the market had “bottomed out”.
Fewer than one in 10 homes are now stamp duty exempt
Fewer than one in ten properties listed for sale in England are now exempt from stamp duty, according to Rightmove. The property website said only 9% of homes it lists for sale have an asking price of £125,000 or below – the threshold below which no stamp duty is paid if the property is being purchased as a main home. It follows the end of the stamp duty holiday, which was introduced last year to boost the housing market amid the pandemic. Rightmove said that the findings apply to England only and exclude first-time buyers. “Hundreds of thousands of buyers have benefited from stamp duty savings over the last year, which has provided people with an added incentive to move,” said Rightmove’s Tim Bannister. “That being said, we’re still seeing much higher levels of competition for properties in the market, compared to before the pandemic started, so we’re expecting the market to stay busy for the rest of the year, and into next year.”
UK gender pay gap rules fall short
A study by King’s College London’s Global Institute for Women’s Leadership and the Fawcett Society suggests that the UK’s gender pay gap rules lack bite because employers are not forced to explain how they will address the problem. The UK ranked joint bottom of six countries analysed because rules do not ensure companies tackle disparities. The study weighed the strength of the reporting system through which companies are obliged to disclose their gender pay gaps, looking at gender pay gap reporting systems in the UK, Australia, France, Spain, Sweden and South Africa. Australia ranked joint bottom with the UK, while Spain was ranked first. The report praised the UK system’s transparency and suggested a legal obligation for firms to publish action plans on how they plan to address the pay gap could boost its ranking. The report also recommended the introduction of automatic fines for non-submission of reports, and suggested officials should lower the minimum employee threshold for reporting gender pay gaps, with only businesses with 250 or more staff currently expected to detail gaps. Why should you become a CPA member!
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