Business news 6 January 2023
James Salmon, Operations Director.
UK’s services sector ended 2022 in lacklustre fashion. One in six businesses were impacted by strikes. UK businesses cut investment as interest rates rise. Sterling, house prices, and more business news.
UK’s services sector ended 2022 in lacklustre fashion
The S&P Global/CIPS UK Services Purchasing Managers’ Index (PMI) for December has been revised down to 49.9 from an earlier flash reading of 50.0, indicating a minor contraction in business activity. Tim Moore, economics director at S&P Global Market Intelligence, said: “UK service providers ended the year with another downturn in new orders as strong inflationary pressures and worries about the economic outlook sapped demand.” Although business optimism had recovered slightly, respondents were “braced for a sustained period of subdued demand in 2023,” Moore added.
One in six businesses were impacted by strikes
New data from the Office for National Statistics (ONS) show that 16% of surveyed companies across the economy were affected by industrial action in November. Strikes by postal and transport workers meant 28% of affected businesses struggled to get essential items with wholesale retailers and vehicle repair services the sectors most affected. Manufacturers, social workers and transport-related businesses were also hit. The ONS’s twice-monthly business insights and conditions survey also found that just under a third of private sector companies with ten or more workers were suffering from labour shortages, led by health and social work firms, over half of which are short-staffed. However, just 5% of companies said they would cut staff in the coming months.
UK businesses cut investment as interest rates rise, BoE survey finds
A Bank of England survey reveals higher interest rates are prompting UK companies to cut back on investment. KPMG’s Yael Selfin said lacklustre capital spending was “a major worry for the UK’s medium-term growth prospects.”
Sterling
In currency markets, the pound slipped against the dollar following strong US jobs data which suggested that the US interest rates will continue to rise. Sterling dropped almost 2 cents from $1.205 at $1.185. Private payrolls in the US rose by 235,000 for the month, well ahead of the 153,000 Dow Jones estimate and the 127,000 initially reported for November.
House prices
UK House Prices fell in December against the prior month, though at a more moderate decline than seen previously. The average UK house price was £281,272 in December, a fall of 1.5% against the previous month. In November, house prices fell by 2.4% to £285.425. Against the previous year, house prices grew by 2.0%.
Older people forced to delay retirement or go back to work
Analysis by investment firm AJ Bell reveals that nearly a quarter of older people are being forced to delay their retirement, partially retire or go back to work due to the increased cost of living. One in 10 say they will have to delay their retirement, the same proportion now expect to take on a part-time job in order to have the retirement they want, while 3.3% will go back to work full-time.
AJ Bell’s head of retirement policy, Tom Selby said: “For those who have already retired or are approaching retirement, economic turbulence is already forcing many to reconsider how and when they stop working.”
Meanwhile, figures from HMRC show retirement savers are taking more cash out of their pensions to get by. Some £3.6bn of flexible pension withdrawals were made between 1 April and 30 June 2022 – a 23% increase compared to the same period in 2021.
Employers could sue unions under anti-strike laws
Anti-strike laws planned by the Government could see unions sued by employers if they fail to provide minimum levels of service. The legislation is expected to be published next week, with Business Secretary Grant Shapps saying the measures would “restore the balance between those seeking to strike and protecting the public from disproportionate disruption”.
The minimum service level requirements would cover key public sectors including health, education, transport, border security and nuclear. A government source told the Times that not only would employers be able to sue unions, but union members who were told to work under the minimum service requirement but refused to do so could be dismissed. Initially, it will apply to firefighters, ambulance staff and rail workers, whilst Number 10 will try to strike voluntary agreements with doctors, nurses and teaching unions.
Responding to the plans, Kevin Courtney, the joint general secretary of the National Education Union, said: “[The Government] want to have a situation where you have a right to strike but no meaningful way to do it. I think the public will see that they are extremely one-sided.” The sentiment was echoed by other union leaders.
HMRC now charging 6% interest fee for unpaid tax
HMRC has increased the interest rate it charges on unpaid income tax, national insurance, capital gains tax, stamp duty, corporation tax and inheritance tax by 0.5 percentage points to 6% following last month’s Bank of England base rate rise. The rate now stands at a 14-year high and is more than double what it was last January, when it was 2.75%. However, those owed money by HMRC will receive just 2.5% interest, up by two percentage points since January last year.
Call connection services charge up to £140 to contact HMRC
Taxpayers who need to call HMRC have been urged to check online search results carefully and avoid calling numbers that begin with 09, 087 and 084 after the Low Income Tax Reform Group (LITRG) noticed an increase in online adverts from companies that put callers through to HMRC at hugely inflated costs. LITRG said it has heard from a number of people who have been misled by connection service companies, including one taxpayer who was charged £140 to contact HMRC. An HMRC spokesman said: “Most customers prefer to deal with us online but, if you do need to call us, don’t use costly call connection services advertised online. Contact us direct on our 0300 helpline numbers that are mostly free or charged at the national landline rate and can be easily found by searching gov.uk.”
Samsung
Samsung profits in 2022 dropped by the most in over a decade (69%), to their lowest levels in 8 years in a sign that the global economic slowdown may be hurting electronics demand even more than anticipated
Next
Next lifted its profit outlook and said its Christmas sales topped expectations. For the year ending in January 2023, Next increased its 2022 pre-tax profit guidance to £860 million, from £840 million. This would represent growth of 4.5% against the year prior, if achieved.
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