Business news 5 October 2022
James Salmon, Operations Director.
Small businesses are losing customers as prices climb. Shell boss: Taxing energy firms to help the poor is ‘inevitable’. Ministers plan curb on strikes. Commons leader: It ‘makes sense’ for benefits to rise in line with inflation. Higher state pension age not ruled out. Kwarteng: tax plans will grow economy ‘very quickly’. And more business news.
Small businesses are losing customers as prices climb
Santander research shows that 80% of smaller firms are struggling to compete with the lower prices offered by larger firms, meaning 72% are losing customers. While 73% believe the current economic climate is making it harder than ever to compete, 69% said they have no option but to increase their prices. While many small businesses recognise the difficulty in matching their larger competitors in terms of price, 67% said they can offer customers a more personalised service and 42% believe they have more flexibility to reach niche markets. Four in 10 think the quality of their products is better than that of large companies. The poll also saw 76% say some of their customer base has been understanding or supportive following their price increases.
Shell boss: Taxing energy firms to help the poor is ‘inevitable’
Shell chief executive Ben van Beurden has said governments may need to tax energy companies to fund efforts to protect the “poorest” people from soaring bills. He told an energy conference in London: “One way or another there needs to be government intervention,” adding: “There is a discussion to be had about it but I think it’s inevitable.” EU ministers last week agreed to target windfall profits of energy companies and redirect them to customers and businesses as part of an initial energy package, with the bloc hoping to raise €140bn through the levies. Susannah Streeter, senior investment and market analyst at Hargreaves Lansdown, said Mr van Beurden’s comments had “flung open a door on a windfall tax which the UK Government had been trying to close,” saying it will “reignite the debate over how profits of energy giants should be taxed.”
Ministers plan curb on strikes
The Government could expand curbs on the right to strike in a bid to avoid widespread walkouts across public services. Prime Minister Liz Truss is considering a radical extension of laws that ensure a minimum service during rail strikes and has told ministers to find ways to apply the principle across the public sector. Business Minister Jacob Rees-Mogg is drawing up a list of “important public services” on which legal limits on strike action can be imposed to ensure services continue. A spokesman for the TUC said pushing ahead with the plan would show “a government so committed to holding down pay that it will go to extremes”. The spokesman said: “The right to strike is a fundamental British liberty. The Government should be focused on getting wages rising, not looking for new ways to tighten the screw on working people.”
Commons leader: It ‘makes sense’ for benefits to rise in line with inflation
Amid speculation that the Government could oversee a real-terms cuts to benefits in a bid to reduce public spending, Penny Mordaunt, the Leader of the House of Commons, says it “makes sense” for benefits payments to rise in line with inflation. The former Conservative leadership contender told Times Radio she has “always supported” both pensions and welfare support rising alongside inflation. While Liz Truss and her Cabinet allies have so far declined to say whether welfare payments will be increased in line with soaring inflation, Ms Mordaunt suggested that the Prime Minister is committed to the triple lock on pensions to safeguard payments against inflation.
Higher state pension age not ruled out
Prime Minister Liz Truss has not ruled out increasing the retirement age to help balance the books, with ministers looking to find savings to pay for economic growth plans and to bring down the national debt. While people can currently retire and receive state pension at 66, Government plans will see this rise to 67 this decade and 68 as early as 2039, with reviews of the changes under way. Asked at the Tory conference if she was going to end up raising the age at which people can claim the state pension age beyond 67, Ms Truss said: “You’re asking me to speculate all kinds of decisions that haven’t yet been made.” Launching the reviews in January, the Department for Work and Pensions said: “As the number of people over state pension age increases, due to a growing population and people on average living longer, the government needs to make sure that decisions on how to manage its costs are, robust, fair and transparent for taxpayers now and in the future.”
Kwarteng: tax plans will grow economy ‘very quickly’
Kwasi Kwarteng has promised that the Government’s tax reforms will start to grow the economy “very quickly.” Asked at a conference fringe event how long it would take for his economic reforms to boost GDP, the Chancellor said: “There can be immediate impacts – the investment zones, some of these projects, are going to be happening very soon. And I think you’re going to see progress very quickly – I hope so.” While the Chancellor had been planning to announce his medium-term fiscal plan on November 23, Treasury sources say it could be brought forward. The plan is also expected to come alongside an updated economic forecast from the independent Office for Budget Responsibility.
Gas
The UK is reportedly in talks with Norway to secure a supply of natural gas for potentially 20 years in a attempt to avoid shortages and the risk of winter blackouts
Tesco consumers watching every penny.
Tesco Plc said consumers “watching every penny” are still shopping at its stores amid intense competition from discount grocery rivals. Tesco has reported a slimmer profit for the first half, after customer behaviour has normalised after lockdown and the supermarket has invested in keeping its prices competitive for shoppers. The country’s largest supermarket posted a £413m profit before tax this morning, down 64% versus the first half of 2021 when shoppers flocked to supermarkets after Covid-19 lock-downs. Group sales increased 3.1% over the period, which has seen many customers switching their supermarket destination for their weekly shop.
Royal Mail >>> International Distributions Services
Royal Mail confirmed its name has changed to International Distributions Services. The company said the change has now taken effect. In July, Royal Mail said the move would reflect the importance of its GLS distribution unit, which the company said it has become ‘increasingly’ reliant on.
Twitter
Elon Musk has reportedly sent a letter to twitter reviving his bid to buy the company at $54.20 a share ($44 billion in total) Musk later tweeted that “buying Twitter is an accelerant to creating X, the everything app.” Musk has said he wants Twitter to be more engaging for users like apps TikTok and WeChat. Shares of Twitter climbed 22% to $52 at the close in New York
Markets
Lead by wall streets lead, the FTSE100 surged above 7000 again yesterday. US stocks climbed as investor speculated that the Federal Reserve would temper its aggressive rate hike path. The pound also strengthened against the dollar. US stocks continued their rally last night as the DOW rose 2.80%, the S&P 500 rose 3.06% and the NASDAQ rose 3.34%. Sterling is so far the winner in the currency markets, continuing to reverse prior deep losses while Euro and Swiss France are also firm.
Topps Tiles
Topps Tiles says the home improvement boom shows no signs of stopping beyond the pandemic. Group sales in the 52-week period were approximately £247.3m, a second consecutive record year of turnover, with year on year sales growth of 10.6 per cent. Topps Tiles said it continued to perform well against a “very strong comparative period last year”. Like-for-like sales were 1.2 per cent lower than last year in the final quarter, but like-for-like sales growth for the full year in Topps Tiles was still 9.4 per cent.
Mid-sized UK businesses scale back investment
Britain’s mid-sized companies are scaling back investment plans, with soaring inflation and interest rate increases hitting business confidence and driving fears of a recession. Just over two-fifths of mid-sized firms plan to increase capital expenditure in the next six months, research from RSM UK suggests, with this the lowest proportion since records began at the start of 2021. However, the survey of 700 bosses at firms with annual revenues between £10m and £750m found that profit margins have improved. The Middle Market Business Index reveals that 44% were able to increase prices in the last three months, up from 40% in the previous quarter. The difference between input and output prices has also improved significantly. Just over a third said they were recruiting more staff, down from half at the start of the year. The report suggests a cut in corporation tax announced by the Government will do little to spur companies to invest, with RSM UK economist Thomas Pugh saying: “As there is very little evidence that lower corporation tax feeds into higher business investment, we are anticipating a 3% drop in business investment next year.”
PM still in favour of lower tax for high earners
Despite the Government’s U-turn on its plan to scrap the 45p tax rate for those earning over £150,000, Liz Truss has said she is still in favour of lowering tax for the highest earners. The Prime Minister told the BBC that she still believes in the principle, saying: “I would like to see the higher rate lower, I want us to be a competitive country.” Ms Truss said the U-turn on the controversial tax cut came as she had “listened to feedback,” adding that debate on the matter had become a “distraction” from major policies including the energy price guarantee and her decision to reverse a rise in National Insurance and scrap a planned increase to corporation tax. Ms Truss insisted she is “not contemplating” reviving the plan to scrap the top rate of income tax at the moment and said that the 45p rate “wasn’t a priority policy” for her Government.
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