business news 5 October 2021

James Salmon, Operations Director.

Small firms say tax rises threaten faltering recovery. Staff shortages spread, shrinking product lines. Tories say businesses have become ‘drunk on cheap labour’. R&D spending climbs to record £47bn. Johnson to urge Britons to return to the office. And more business news.

Small firms say tax rises threaten faltering recovery
The national chair of the Federation of Small Businesses has responded to Chancellor Rishi Sunak’s speech at Conservative Party Conference by saying that small firms were hoping for more help from the Government to tackle employment costs and the burden of business rates. Mike Cherry said: “Rishi Sunak says Conservatives want to be the party of business, but ambition is not enough – small firms need to see action. While it’s good to see some practical changes being announced by the Chancellor to get people back into work after the end of the furlough scheme, there needs to be far more focus on helping employers actually create jobs.”

Staff shortages spread, shrinking product lines
A new survey by BDO has found that staff shortages are spreading to almost all parts of the economy, putting severe pressure on mid-sized businesses. A third of mid-size firms have already been forced to trim their product lines and services and a further 31% say they will have to follow suit “unless the situation changes within the month”. Brexit, global supply chain issues and the long tail of COVID-19 has created a perfect storm for UK businesses,” said Ed Dwan, partner at BDO. “After navigating the challenges of the pandemic and hoping for some respite, businesses have found themselves facing more major disruption, with those across almost all sectors reporting staff shortages. This is an era of upheaval, and the challenges faced by the UK’s mid-tier – the engine of the UK’s economy – points to a long road ahead.”

Tories say businesses have become ‘drunk on cheap labour’
The Prime Minister has said it was not the Government’s job to fix the current supply chain problems, arguing that it should be up to businesses and industry to “work out the way ahead”. Boris Johnson explained that some of the issues were global and connected with the world economy “coming back to life” after Covid. He was backed by a string of ministers who said staff shortages could be ameliorated through increasing workers’ pay. Liz Truss, the foreign secretary, commented: “I don’t believe in a command and control economy, so I don’t believe the Prime Minister is responsible for what’s in the shops.” Other ministers said some businesses had been slow to prepare for life after Brexit. One source close to a senior Cabinet minister said: “They have known for five years that we were ending freedom of movement, and we have told them repeatedly they shouldn’t pull the lever of uncontrolled immigration every time. But they are drunk on cheap labour.” But business leaders accused the Government of “starting to panic” in the face of potential shortages at Christmas and “getting their excuses in early”. Tony Danker, the director general of the CBI, said the Government needed to convene a task force with businesses to solve the supply problems rather than blaming firms.

R&D spending climbs to record £47bn
Research and development spending jumped 15% to £47bn last year, according to figures compiled by UHY Hacker Young. This is up from £41bn the year before and marks a record high. UK businesses also claimed a record £7.4bn in R&D tax relief last year, up 19% from £6.3bn the previous year. “The increase in R&D spending is a great sign for the UK economy. It suggests more businesses see the value of innovation in helping to increase turnover, productivity and employment,” commented Sasha Talbot, R&D Tax Manager at UHY Hacker Young. Talbot continued: “The R&D tax relief is a long-term driver of growth within businesses. This tax break is going to play a key role in getting the UK’s economy back to health, following the pandemic-related hit.”

Johnson to urge Britons to return to the office
Boris Johnson will use his Tory conference speech tomorrow to encourage a return to the workplace, according to reports. With ministers confident that Covid will not spark further lockdowns, the Prime Minister will call for workers to get back to the office. “He believes very strongly in the value of face-to-face working,” a senior source said. “It is critical for the training and development of young people. How can you learn a new job on Zoom?”

Pandora Papers raise questions over Tory party funding
The Guardian continues with its reports on the publication of the Pandora Papers, which reveal alleged links between some Conservative Party donors and corruption. Revelations in the leaked files have led to renewed criticism of the Government for failing to clamp down on the perceived money laundering practices in Britain’s overseas territories and the City of London. Conservative MP  Andrew Mitchell called for “these murky practices” to be exposed and for the UK’s “weak enforcement” to be toughened up. Margaret Hodge, the former Commons public accounts committee chair, said: “Secrecy about property ownership permits money laundering. British lawyers, bankers and advisers provide the cover. Our regulation is weak, our enforcement pathetic.” Responding to challenges over sources of funding for the Conservative party, a spokesperson said the party performed compliance checks in line with the law.

IoD’s new chief economist slams Tory tax hikes
Kitty Ussher, chief economist at the Institute of Directors, has criticised the Tories’ decision to hike national insurance 1.25 percentage points and urged the Government to ease the tax burden on business and households at the upcoming budget. She told City A.M.: “With hindsight, the Government went too far and overshot what they needed to do in March’s budget. And then after that they raise a flat tax through national insurance. They’ve gone too far and they need to go back.”

Countess backs menopause campaign
The Countess of Wessex has backed a campaign to highlight the “tragic” impact the menopause can have on women in the workplace. An estimated 900,000 women in the UK have quit their jobs due to the menopause, with research showing many struggle to manage their symptoms at work. PwC, HarperCollins UK, Santander UK and Tesco are among the companies that have already signed up to the Menopause Workplace Pledge, which, in partnership with Hello! magazine and supported by Bupa, calls on all organisations to commit to recognising that the menopause is an issue in the workplace; talking openly, positively and respectfully about it; and to actively supporting employees.

Lord Wolfson: Let firms pay more to hire foreign staff
The boss of Next has called for the UK’s immigration system to be liberalised so businesses are free to recruit overseas workers in return for paying an additional 7% tax on their wages. Lord Wolfson said such a visa tax would end a labour shortage whilst preventing over-reliance on cheap foreign labour. Lord Wolfson said a “small but meaningful premium” on hiring overseas workers under a visa tax would help control immigration numbers and stop them depressing wages.

Sunak – future tax cuts depend on repairing public finances
The Chancellor told the Conservative party conference yesterday that future tax cuts are conditional on repairing the UK’s public finances after the pandemic. Rishi Sunak defended a series of recent tax hikes arguing that funding the pandemic recovery “comes with a cost”. He added that borrowing excessively and making unfunded promises was “not just economically irresponsible — it is immoral”. Mr Sunak went on to say he was “proud to back Brexit”, arguing that “the agility, flexibility and freedom provided by Brexit would be more valuable in a 21st-century global economy than just proximity to a market”. He also committed £500m to renew job support programmes set up during the Covid pandemic, after the end of the furlough scheme last month.

Chip shortage

Melrose Industries reported “frustrating” computer chip shortages. The industrial buy-improve-and-sell specialist said it is seeing improvement in its Aerospace end-markets, with revenue in the period up 16% on a year ago. Its performance is expected to improve further as the business continues restructuring.


Greggs upgraded its outlook on full-year performance after reporting that third-quarter like-for-like sales in company-managed shops rose by 3.5% when compared with the same period in 2019. ‘Growth was particularly strong in August when a ‘staycation’ effect was evident and remained in positive territory in September, with two-year like-for-like growth of 3.0% in the four weeks to 2 October,’ the company said.

Office uptake

Great Portland Estates reported ‘strong’ performance for the quarter ended September as leasing momentum in London continued to recovery as people return to the office.For the quarter to 30 September 2021,£14.3 million of new lettings were secured, with market lettings 10.4% ahead of March 2021 estimated rental value.


French Connection has been sold to a consortium including its second-largest shareholder in a deal valuing it at £29m. The firm – which operates 150 stores and concessions across the world – has accepted a 30p-per-share offer, after struggling with years of losses. It represented a 30% premium to the share price when the bid was first revealed last month.


The pound has struggled over the last fortnight as the UK supply chain and energy crises caused significant disruption. GBP/EUR fluctuated between €1.17 and €1.16, bouncing off a two-month low, while GBP/USD fell from $1.37 to $1.34, before regaining the $1.35 mark.


Oil Prices climbed on Tuesday, hitting their highest levels in at least three years, extending gains triggered during the previous session  after Reuters reported that OPEC+ would stick to its current output policy. Despite tight energy supplies, the cartel said it would stick to the gradual increases agreed to over the summer, raising production each month by a total of 400,000 barrels a day. Brent Crude added 3% in the afternoon, resulting in gains for both BP and Royal Dutch Shell.

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