Business news 7 January 2022
James Salmon, Operations Director.
Cost of living squeeze could ‘be worse than the financial crisis’. Omicron spread hits services sector. Manufacturing output index rises. And more business news.
Cost of living squeeze could ‘be worse than the financial crisis’
Analysis by the House of Commons Library reveals that an extra 1.2m people are set to be dragged into the higher rate tax band over the next four years compared to if the Government were to raise the 40p higher rate tax threshold in line with forecast inflation. If it did so, the higher rate band would rise from £50,070 to £56,270 by 2026. Additionally, an extra 1.5m low paid earners will be pushed into the 20p basic tax rate, which starts at £12,570.
The research comes amidst warnings that Britain is facing the biggest cost of living crisis for a generation, with both Conservative and opposition MPs calling for plans to keep the thresholds frozen to be revisited. Meanwhile, the Chancellor, Rishi Sunak, is coming under increasing pressure to drop a 1.25% hike in National Insurance which comes in from April – the same time people are facing an increase of as much as 56% in their energy bills.
Combined with inflation, which is currently running at 5.1%, economists such as Paul Johnson, the director of the Institute for Fiscal Studies, say people face a squeeze this year that “could well be worse than the financial crisis”. However, Mr Sunak insisted the increase was “the responsible thing to do” amidst “unprecedented backlogs in the NHS.”
Omicron spread hits services sector
Service sector activity fell to a ten-month low in December, according to the monthly IHS Markit/CIPS purchasing managers’ survey. The index fell to 53.6, from 58.5 in November, as the Omicron coronavirus variant took its toll on demand for travel, hospitality and leisure services. “Firms reported weaker rises in costs and prices, mirroring an easing in supply/demand imbalances in the manufacturing survey,” said Martin Beck, chief economic adviser to the EY Item Club. “But disruption from the current scale of infections risks worsening supply bottlenecks, particularly labour shortages. And combined with a deterioration in high-frequency indicators, the latest PMIs reinforce the likelihood that GDP fell in December.”
Manufacturing output index rises
Output and jobs in the manufacturing sector continued to grow at the end of last year as supply chain disruptions began to ease, according to survey results from the IHS Markit/CIPS manufacturing PMI. The output index rose to 53.6 in December, from 52.7 in November, indicating that the spread of the Omicron coronavirus variant had not yet hit the sector’s recovery.
HMRC extends tax return deadline by 30 days
HM Revenue & Customs has effectively pushed back the annual tax return deadline to the end of February after saying fines for late filing this year would be waived for 30 days. The decision comes as almost half of self-assessment taxpayers are yet to hand in their paperwork ahead of the January 31 deadline. Additional penalties for late payment, which normally apply a month after the January 31 deadline, will also be waived for a month, HMRC said. Accountants had this week warned of widespread staff shortages caused by the spread of omicron which were making it impossible for professionals to meet the cut-off date. Financial Secretary to the Treasury Lucy Frazer said the Government understood omicron was “putting people under pressure” adding that the move would provide “breathing space” for millions of people.
Top CEOs surpass average yearly pay after just four days
Research by the High Pay Centre reveals that by 9am today FTSE 100 chief executives will have made more money in 2022 than the average UK worker will earn in the entire year. The average CEO’s pay fell 17% in the 2020 financial year as many bosses took a temporary pay cut at the start of the pandemic and first national lockdown and many of their bonuses were cancelled. But the fact that CEOs still earn about 86 times the average UK salary has led to repeated calls for firms to be forced to appoint a frontline worker to their executive pay committee. Frances O’Grady, the general secretary of the TUC, said: “The pandemic has shown us all who keeps the country going during a crisis….As we emerge from the pandemic we need to redesign the economy to make it fair, and that means big reforms to bring CEO pay back down to earth.”
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