Business news 6 December 2021

James Salmon, Operations Director.

CBI cuts growth forecasts. New restrictions could halve growth. Job ads hit record 3.5m. Christmas crucial for many small firms. Service sector growth slows in November. Supply chain disruption to drive up prices.  Experts warn over soaring personal inflation. And more business news.

CBI cuts growth forecasts
The Confederation of British Industry (CBI) has cut growth forecasts for next year, saying concerns about rising costs, shortages and the possibility of more coronavirus restrictions may hinder Britain’s economic recovery. CBI economists are predicting 6.9% growth in GDP this year and 5.1% in 2022, down from its June forecasts of 8.2% and 6.1%, respectively. The CBI has called on ministers to introduce new incentives to boost business investment, saying a recovery in business investment will be brief, with capital spending falling from mid-2023 as the super-deduction incentive comes to an end and the rise in corporation tax comes into play. Tony Danker, director-general of the CBI, said that “pro-investment and pro-innovation regulation”, a competitive tax regime that incentivises business investment, and new market-making interventions could boost productivity

New restrictions could halve growth
KPMG economists have warned that GDP growth could more than halve next year if fresh Covid restrictions are introduced. They have cut their growth forecast for 2022 from 5.4% six months ago to 4.3% at best; 2.6% if moderate measures such as social distancing are required; and 1.8% if new lockdowns are imposed in January and February. Yael Selfin, chief economist at KPMG UK, said that “the potential reintroduction of social distancing measures could see output fall this month and during the first quarter of 2022”. Jon Holt, chief executive of KPMG UK, said: “Long-term economic growth remains reliant on the UK’s ability to increase productivity, decrease uncertainty and give businesses the confidence to invest.”

Job ads hit record 3.5m
With around 210,000 new jobs posted in the last week, the number of vacancies advertised in the UK has hit a record high of 3.5m – double the 1.7m recorded in the summer. The Recruitment and Employment Confederation (REC) said the UK’s labour shortage shows no sign of easing, with chief executive Neil Carberry saying: “The growth in job adverts shows no signs of slowing as we reach the Christmas peak.” He added: “This is very much a candidate’s market now. Firms need to think about how they will attract staff facing greater competition than ever before.” Mr Carberry said the market will have to “wait and see” what impact the Omicron coronavirus variant has, noting that the hospitality sector is the “most likely to bear the brunt of any slowdown in consumer confidence.”

Christmas crucial for many small firms
A poll conducted by Simply Business shows just how important the festive season is for self-employed workers and small business owners, with 36% saying that they make 20% of their annual revenue over the Christmas period. The survey saw 16% of small business owners say their business will not survive 2022 unless they have a successful Christmas sales period, with 43% still struggling to recover financially from the impact of the pandemic. While 21% said the ongoing supply chain issues will hit their business, 52% are concerned over future lockdowns and tighter restrictions, as well as the impact these would have on their businesses. Considering the findings of the research, Andy Chamberlain, director of policy at the Association of Independent Professionals and the Self Employed, has called for greater state support for struggling freelancers. He also reflected on how changes to IR35 in the private sector “have added uncertainty”, with many hiring organisations wrongly applying IR35, causing freelancers to pay more tax than is due, “making it extremely difficult for them to do business”.

Service sector growth slows in November
Growth in the UK’s services sector eased slightly last month, while sentiment dropped to a 12-month low amid ongoing staff shortages and supply chain pressure. However, the IHS Markit CIPS UK Services PMI also shows that firms in the sector saw the fastest rise in new business in five months in November, while employment numbers were up for the ninth consecutive month. It was also shown that prices rose at their fastest pace in the survey’s 25-year history due to higher wages and supply chain problems increasing the cost of raw materials, energy and freight. The PMI recorded a reading of 58.5 last month, dipping from 59.1 in October on an index where a figure above 50 represents growth. Tim Moore, economics director at IHS Markit, said: “Surging price pressures have done little to dent business and consumer spending across the UK economy, according to the latest PMI data.” “The overall speed of recovery looks to have accelerated in comparison to the third quarter of 2021,” he added. The composite PMI – a combination of the services survey and the manufacturing PMI – eased to 57.6 in November from 57.8 in October. Martin Beck, chief economic adviser to the EY Item Club, believes that the services sector is set to “lose some momentum in December” because of the new Covid-19 variant.

Only a quarter of small companies ready for new Brexit border checks, says trade body
A Federation of Small Businesses poll shows that just a quarter of small UK importers are ready for new border controls on imports from the EU that come into force on January 1.

Supply chain disruption to drive up prices
A BDO survey of 500 businesses shows that a third of smaller businesses are preparing to increase prices over the Christmas period due to pressures brought about by rising costs and supply chain disruption. Around four in five mid-sized firms say they are expecting supply-chain strains, rising costs and pandemic-related restrictions to hamper trading in the next month. Ed Dwan, a partner at BDO, said: “Many businesses will have been hoping for a strong finish to 2021 and a fresh start for 2022. The harsh reality is that continued supply chain issues, rising energy prices and increasing costs mean that many are taking further drastic measures to stay afloat.” He added: “These issues could also be exacerbated by the new Covid-19 variant

Experts warn over soaring personal inflation
Experts have warned that amid a climate of climbing inflation, some households may be seeing prices climb far higher than official inflation figures suggest. With inflation at a decade-long high of 4.2% and the Bank of England predicting it could hit 5% in early 2022, it has been noted that for some people, the surge in prices will be far steeper. While the Office for National Statistics collates the prices of 700 everyday items and services to come up with the Consumer Prices Index (CPI), the rate masks the broad variation in price rises among different items and services. Rob Burgeman of wealth manager Brewin Dolphin says: “I think some people currently have a personal inflation rate of several times the average CPI figure. They are likely to be those on low incomes as they spend money on the basics and not on things coming down in price like technology.” Doug Brodie, director of retirement income specialist adviser Chancery Lane, believes that personal inflation rates vary depending on individual lifestyles, while wealth managers Rathbone Investment Management and St James’s Place say their wealthiest clients have particularly high rates of personal inflation.

Think-tank: Night workers need rest centres
Think-tank Autonomy has urged employers to work with local authorities to fund all-night city rest centres, saying night workers require safe spaces to visit between shifts and during quiet periods. The report says the rapid rise of the gig economy has left many workers without access to staff rooms, canteens and toilets. It points to concerns over the treatment of drivers, who are often foreign nationals of colour working zero-hour contracts. The report found that one-in-nine employees in the UK now work at night, the highest proportion since records began.


US non-farm payrolls disappointed markets on Friday, missing expectations by a long way. Figures showed a gain of 210,000 versus expectations for 573,000 and last months figure of 546,000. Wall Street dropped, with technology shares leading the losses. A positive takeaway from the US jobs data was a drop in the unemployment rate from 4.6% to 4.2%. London struggled too as investors digested news on omicron

HMRC shuts phone lines to tackle post pile
HMRC is closing phone lines for three days this month to deal with a backlog of post built up during the pandemic. VAT and corporation tax lines were closed yesterday and will be shut again for the next two Fridays as call centre staff are switched to mail-opening duty. This comes amid a backlog which means those who wrote to HMRC last week can expect a reply by June 23. The tax office says it will look to address this and aims to be back to pre-pandemic service levels by April. Tim Stovold of Moore Kingston Smith believes that phone lines might have to close again in the run-up to the self-assessment deadline at the end of January if HMRC is to hit the target. Suggesting that HMRC is expecting fewer people to call their business tax helplines on the Fridays in Christmas party season, Mr Stovold said: “This should give the tax office the scope to reallocate people to deal with a year’s backlog of post and will be welcome news for businesses that have waited months for replies to letters.”

Chancellor plans to slash taxes before the next election
Chancellor Rishi Sunak is preparing to cut income tax by 2p in the pound or to slash VAT rates before the next election, reports the Times’ Steven Swinford. A cut to inheritance could also be on the cards. Mr Sunak has reportedly told officials to draw up detailed plans to reduce the tax burden, with the Chancellor said be in favour of cutting income tax over the next three years. The Conservatives are also said to be considering a manifesto pledge to do away with the 45p higher rate of income tax and a VAT cut centred on the headline rate of 20%. Plans to increase the threshold for inheritance tax are also under consideration, with the £325,000 level having been frozen since 2009. Mr Swinford says Mr Sunak is determined to shed his reputation as a “high-tax, high-spend” Chancellor, with Boris Johnson also aiming to be a tax-cutting Prime Minister. This comes with increases in corporation tax and national insurance set to take the tax burden to the highest level since the early 1950s. Reflecting on the potential cuts, Paul Johnson, head of the Institute for Fiscal Studies, said that cutting income tax after increasing national insurance to fund health and social care would be “indefensible”. He said: “To introduce the health and social care levy, which essentially only affects workers, then to cut income tax, which also benefits people who receive their income from rent, occupational pensions and other holdings, discriminates in favour of the wealthy.”

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