Business news 6 April 2023
James Salmon, Operations Director.
New orders deliver boost to services sector. Pensioners and under-25s lead rebound in optimism. Factories record eighth consecutive fall in activity. Retailers suffer sharp drop in footfall . And more business news. Sorry for there being no news round up for two days due to circumstances beyond our control.
New orders deliver boost to services sector
The UK’s services sector enjoyed a surge in new orders and rising business confidence last month, according to a survey by S&P Global and CIPS. The services purchasing managers’ index (PMI) fell back from 53.5 to 52.9 in March but remained above the 50 mark that signals growth. John Glen, chief economist at the Chartered Institute of Procurement and Supply, said the survey “could trigger hopes that a turnaround is finally on the horizon for the UK economy” after growth stalled at the end of last year. “Consumer confidence improved, adding to levels of orders on the domestic front, while the highest rise in exports since September 2014 added another cheerful note.”
Pensioners and under-25s lead rebound in optimism
Figures from PwC indicate a recovery in consumer confidence since last autumn with its sentiment score changing from -44 to -25 following last month’s Budget. The rise in optimism is being driven by pensioners and Gen Z – the under 25s – with both groups more likely to have disposable income, PwC says. Overall, one in three people in Britain say their finances are healthy.
WTO warns surge in borrowing costs set to hit exports
Rising interest rates and financial instability will weigh on export volumes this year, the World Trade Organization has warned, with growth expected to come in at just 1.7%, far below the decade average of 2.6%.
Factories record eighth consecutive fall in activity
UK manufacturers recorded their eighth consecutive monthly drop in activity last month, despite a welcome decline in inflationary pressures. Final survey results from S&P Global and the Chartered Institute of Procurement and Supply showed the manufacturing PMI declined to 47.9 in March, lower than expected and down from the 49.3 registered in February. The flash estimate was 48.0. A strong improvement in supplier delivery times was more than offset by deteriorating new orders and production, which shrank for the eighth time in the past nine months. Martin Beck, adviser to the EY Item Club, said that “while prospects for the sector are looking more promising” a manufacturing recovery was only likely in the second half of the year, when inflation is projected come down from its double digit highs.
Retailers suffer sharp drop in footfall
Retailers in the UK experienced a sharp drop in footfall in March as consumers restricted themselves to essential shopping due to rising cost-of-living pressures. New data shows footfall across all retail destinations fell by 2.8% from February, a significant drop considering the 9.4% increase seen between January and February. The footfall on high streets was down 18.7% on 2019 levels, and 0.6% below last March. Separate figures from BDO confirm inflation and a dip in spending hit sales in last month. Sophie Michael, head of retail and wholesale at the firm, said: “Across the board, inflation is above 10%, and for food it now stands at a staggering 18%. This is eating into consumers’ discretionary spending and is bad news for the fashion, lifestyle and homewares sectors, as we can see in the March retail sales results.”
Nearly 80% of UK employers pay men more than women
Analysis of the Government’s gender pay gap data shows four out of five employers in the UK still pay their male employees more than female ones. The median pay gap remains at 9.4% – the same level as in 2017-18, when employers were first required to disclose the information. The gap is larger in the public sector at 15.1%, compared with 8% in the private sector. The Fawcett Society, which campaigns for gender equality, said progress was disappointing. “If we are to see meaningful progress on closing the pervasive pay gap, employers must go further than data sharing,” it said. “We want this government to require every employer to create an action plan which sets out how they will improve gender equality in their workplace. Many do, but it is not yet widespread.”
Cath Kidston looks to dump stock before stores shut for good
The fashion and homeware retailer Cath Kidston has launched a huge closing down sale before stores shut forever. PwC said there “will be redundancies” at the business, which currently employs 125 people
‘Friendshoring’ is a risk to growth and financial stability, warns IMF
The International Monetary Fund (IMF) has warned that the trend away from globalism to investing with geopolitical allies risked depressing growth and raised the risk of financial instability. A report from the IMF also warned that should geopolitical tensions continue to intensify and countries further diverge along geopolitical fault lines, foreign direct investment (FDI) may become even more concentrated within groups of aligned countries, with emerging market and developing economies more vulnerable to FDI relocation than advanced economies.
Government suspends relationship with CBI amid misconduct allegations
The UK Government has paused its engagement with the Confederation of British Industry (CBI) following revelations of inappropriate behaviour by staff at the lobby group. The Guardian reported allegations from more than a dozen women who said they had been victims of various forms of sexual misconduct by senior figures at the CBI, including a woman who alleged she was raped at a staff party on a boat in 2019. Separate, unrelated claims have been made about the conduct of its director general, Tony Danker, that last month prompted him to step aside while they were investigated. A government source said the serious nature of the allegations, and an investigation by the CBI, had informed its decision to suspend its relationship. Companies including Rolls- Royce, EY and Marks & Spencer also raised concerns following the allegations.
Short-seller sends AI stocks tumbling
Shares in artificial intelligence (AI) companies fell on Wednesday after a short-seller report from Kerrisdale Capital alleged accounting issues at AI software firm C3.ai. In a letter to Deloitte & Touche, C3.ai’s auditor, Kerrisdale accused the company of booking fictional revenue and recording it as unbilled receivables. Security firm Guardforce AI fell more than 18%, while data analytics firm BigBear.ai lost 16% and conversation intelligence company SoundHound AI declined 9%. C3.ai, which denies wrongdoing, is down nearly 40% on Tuesday’s price.
Zero firms charged with ‘failure to prevent’ tax evasion in 6 years
No British companies have been charged with the “failure to prevent tax evasion” offence since it was introduced six years ago, HMRC has confirmed, although it does have nine ongoing investigations into possible breaches. In an attempt to justify the lack of conviction, an HMRC spokesperson said the offences were introduced to “drive behavioural change and encourage organisations to put preventative measures in place to reduce tax evasion.” However, Barry Vitou, head of white-collar crime at HFW, said that “in order for there to be a deterrent, you need to prosecute and punish wrongdoers.” Nicholas Gardner, a tax partner at Ashurst, agreed, arguing that a “successful conviction” would drive a “tightening” of companies’ policies and procedures. Funding issues could have also hindered HMRC’s efforts, lawyers conceded.
House prices
UK House Prices slowed in March, according to data from Halifax. According to the mortgage lender, average house prices edged up 0.8% in March on a monthly basis. Growth slowed from a 1.2% climb in February. Annually, growth in house prices slowed to 1.6% in March, from the 2.1% climb seen in each of the previous three months. “This is the weakest rate of annual growth in nearly three-and-a-half years (October 2019), having fallen markedly since June 2022’s peak of 12.5%,” said Kim Kinnaird, Halifax Mortgages director.
Tories to cost workers an extra £43bn
The Shadow Chancellor has said workers face being hit with a £43bn extra tax bill if the Tories remain in power. Over the next four years, money taken in National Insurance and PAYE income tax receipts will be £43bn higher than in 2010, costing £2,345 per working household, Rachel Reeves warned. Ms Reeves said: “The Tories have overseen the highest tax burden since the Second World War, economic failure and plummeting growth. They have abandoned any responsibility for cleaning up their own mess after they crashed the economy. Never have working people paid so much and got so little in return. After 13 years of Tory government all they have to show for it is economic failure, public services on their knees, high taxes and low growth.”
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