Business news 5 May 2023
James Salmon, Operations Director.
Resurgent economy increases inflation concerns. Give small firms tax breaks for tech investment. Consumer credit growth, Summer Fridays, prisoners to fill vacancies, strikes, Apple, US banks, AI, pensions and more business news.
Resurgent economy increases inflation concerns
The S&P Global UK services PMI jumped to 55.9 in April, up from 52.9 in March, well above the 50 mark that divides growth from contraction. The score marks a 12-month high for private sector activity, underlining how higher wages are pushing up business costs and helping to drive up prices. Tim Moore, economics director at S&P Global, said “strong growth in spending on travel, tourism and leisure was a tailwind for the service economy in April, alongside a sustained recovery in international visitors”. Analysts at Citi said the data was likely to cause “additional concern” at the Bank of England that higher rates are “not yet having the desired effect.”
Give small firms tax breaks for tech investment
Steve Hare says in the Sun that it’s time the Government turned its focus to supporting small businesses, which have shown remarkable resilience in the face of a dire economy. Hare says SMEs should be offered tax breaks to invest in digital technology so they’re not left behind as larger firms rush to utilise advances such as ChatGPT. “If they’re not part of the digital economy, they risk not being part of the economy at all.”
Consumer credit growth rises
Figures from the Bank of England show the annual growth rate for consumer credit rose for the sixth month in a row in March, accelerating from 7.7% in February to 7.9%. Alice Haine, a personal finance analyst at investment platform Bestinvest, said: “The sad reality is that turning to credit to meet everyday living costs is the only solution for many households.”
PwC, Asos and Kellogg’s among firms offering Summer Fridays
The trend of allowing some workers to leave early on Fridays over the summer is spreading with companies including Kellogg’s, Asos and PwC all offering summer working hours. Kellogg’s lets staff in its Manchester head office leave at 12pm on Fridays providing they have completed a full week’s working hours by midday at the end of the week. PwC lets its UK employees finish at lunchtime on Fridays in the months of June, July and August, but acknowledged that not everyone could take every Friday due to heavy workloads. Campaigners believe the increased uptake of Summer Fridays schemes are a sign that firms are bending to pressure to shift away from the traditional 9-5 model and begin offering a four-day working week.
More prisoners to be let out on day release to plug labour shortages
Ministers are considering plans to let out more prisoners on day release to help struggling employers fill roles. Labour shortages were identified in the March Budget as a key threat to economic growth and lawmakers now want to allow more inmates out on licence to take up apprenticeships in areas such as construction, haulage and hospitality. “There are over a million vacancies in the UK. So, there has never been a better opportunity for businesses to unlock the potential in our prisons,” Damian Hinds, the prisons minister says in the foreword to a report by the Centre for Social Justice think tank. “Getting more prisoners into work really is a win-win – it will cut crime by reducing reoffending and grow our economy to the benefit of us all.”
RMT votes for further strike action
Rail travellers are facing disruption again after RMT members backed further strikes. Industrial action across 14 train operating companies could continue until November after 90% of union members who voted backed more strikes. RMT general secretary Mick Lynch said: “This sends a clear message to the employers that the huge anger amongst rail workers is very real and they need to recognise that fact, face reality and make improved proposals.” Transport Secretary Mark Harper said he was “disappointed” by the RMT’s decision.
Apple
Apple reported second-fiscal quarter earnings on Thursday that beat Wall Street’s soft expectations, driven by stronger-than-anticipated iPhones sales ($51.3 billion – up 2% on last quarter). Apple CEO Tim Cook said that the quarter was “better than we expected.” However, Apple’s overall sales fell for the second quarter in a row. Overall revenue dropped 2.5% to $94.8 billion in the fiscal second quarter, exceeding the $92.6 billion analysts predicted as MAC and Ipad sales declined.
PacWest
Another US regional bank – PacWest – is in trouble with shares dropping over 50% yesterday as it admitted it was exploring solutions with potential investors.
US officials meet tech bosses for ‘frank discussion’ of AI risks
The CEOs of OpenAI, Google, Anthropic and Microsoft met with senior White House officials on Thursday to discuss the rise of artificial intelligence and the risks it poses.
Bosses were told by Joe Biden they have an “ethical, moral and legal responsibility” to protect the public from the potential threats of AI development. The meeting comes amid a slew of warnings from experts on the dangers of developing technology that is smarter than humans. In the UK, the Competition and Markets Authority (CMA) issued a warning to AI developers that it would be probing the sector. The regulator’s CEO Sarah Cardell said: “It’s crucial that the potential benefits of this transformative technology are readily accessible to UK businesses and consumers while people remain protected from issues like false or misleading information.”
AI
Microsoft has teamed up with AMD to develop AI capable processors in a challenge to market leading producer of GPU’s, Nvidia.
WANdisco to cut 30% of staff after fraud uncovered
WANdisco, the data software company that last month confirmed a suspected accounting fraud, has said it is planning to cut 30% of its workforce – about fifty to sixty jobs will go. An investigation by FRP Advisory into the suspected fraud concluded last month that about $15m of recorded revenue and $115m of sales bookings linked to a senior employee of the company were illegitimate. FRP’s report will be passed to the company’s auditors, BDO, so that the firm can prepare WANdisco’s 2022 final accounts. The Financial Conduct Authority opened an investigation into WANdisco in April.
Shell boss issues warning over Labour tax plans
Energy giant Shell posted record quarterly profits on Thursday of nearly $10bn (£8bn), from $9.1bn a year earlier, leading to calls from Labour for harsher windfall taxes on energy companies. Shell’s announcement that it would hand $12bn back to shareholders through dividends and stock buybacks further stoked calls for a bigger levy. But Shell’s CEO Wael Sawan suggested that imposing higher taxes now would risk throttling investment in green energy infrastructure. Shell confirmed it will pay just under £400m in windfall taxes this year relating to its UK operations.
Workers face longer wait for pensions
Middle-aged workers with savings could face a two-year delay in accessing their pension pots, as the minimum age for access is set to increase from 55 to 57 in five years’ time. Six in 10 workers are worried about the change, with 21% planning to take a 25% tax-free slice from their pension pot. Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said that the change would cause “real concern” and that working two extra years could be a “bitter blow”.
UK retirement savings double since last Coronation
The number of people receiving the state pension in the UK has more than doubled since the last coronation in 1953, according to a report by Scottish Widows. The full new state pension is currently £203.85 per week, compared to £1 and 12 shillings per week in 1953. Despite female employment levels having surged over the decades, a pensions gender gap remains. Women today are still retiring with an average of £123,000 less in their pension than men. Robert Cochran, senior retirement specialist at Scottish Widows, said that although the number of people receiving the state pension has more than doubled in the last 70 years, it will not alone provide a retirement fit for a king.
FCA must do more to save shareholder capitalism in the UK
Merryn Somerset Webb writes in Bloomberg on why company owners would balk at listing in the UK, with its onerous rules and corporate governance demands. She notes requirements around diversity and the climate along with the prospect of pressure from investors for you, the founder, to step down from your own board after nine years. The Financial Reporting Council’s guidance to boards is some 40 pages long, Somerset Webb adds, complaining that there “is almost nothing a quoted company can do without checking some kind of compliance along the way.” As for the Financial Conduct Authority’s latest proposals to ease listing rules, they do not go far enough, Somerset Webb argues. But beyond this a shift in culture is needed where enterprise and success is celebrated. “The FCA should press ahead with these reforms. And then sit down to think of a few more.”
BoE looks to cut penalties to incentivise co-operation
The Bank of England is to give City rulebreakers half-price fines if they settle cases early. The Bank’s Prudential Regulation Authority (PRA) has outlined plans for an “early account scheme” in an attempt to speed up investigations. Sam Woods, chief executive of the PRA, said: “The changes we are consulting on include the creation of options for quicker investigatory outcomes, by providing a new route for early cooperation and increased incentives for earlier admissions by subjects.” Commenting on the proposals, Robert Dedman, a partner at City law firm CMS and former head of enforcement at the PRA, said: “The problem is that they will need to move quickly to qualify without necessarily knowing the full extent of the failing alleged. The scheme also increases risks for senior managers who have been suspended or dismissed by their firms, as they may find themselves effectively unable to access the information they need to qualify for the discount.”
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.