Business news 7 February 2023
James Salmon, Operations Director.
Britain must shift to economic “war footing” business leaders say. Construction, Retail, Jobs market, new BBB fund for SMEs, funding for professional service exports, wage erosion, mortgage war and more business news.
Britain must shift to economic “war footing” business leaders say
A letter to the Prime Minister Rishi Sunak from UK business leaders is calling for a serious response to Joe Biden’s US Inflation Reduction Act, arguing that Britain must shift to an economic “war footing” with a wave of reforms of its own or risk being left behind by the US President’s massive programme of subsidies. Members of the Global Britain Commission, a business group chaired by the Tory MP Liam Fox and including the chief executives of Virgin Atlantic, Coutts, Heathrow Airport and Rolls-Royce’s nuclear power project, are calling for tax credits for exporters, formal secondments between the civil service and business and a merger between the Business Department and the Department for International Trade. They also suggest making it easier for pensions to be invested in smaller, high-risk enterprises, enabling £105bn of investments in government bonds and slow-growth large companies to shift into newer enterprises.
Construction
UK Construction PMI’s worsened unexpectedly, amid weaker client demand and the start of fewer new project in recent months. The UK construction purchasing managers’ index fell to 48.4 in January, from 48.8 in December, signalling the contraction in the sector has worsened. The reading was the weakest in just over two and a half years. Market consensus had been expecting an improved reading of 49.5.
UK construction outside London shows resilience
The Deloitte Regional Crane Survey, which covers Birmingham, Manchester, Leeds and Belfast, showed 74 new construction projects started across the four cities last year, compared with 72 in 2021. The volume of office, residential and student housing construction increased on the year, although for the hotels sector it declined by 25%. “Developer confidence is a key indicator for economic health and, despite many market uncertainties over the last few years, construction in our surveyed UK regional cities remained remarkably resilient,” said John Cooper, partner at Deloitte.
Retail sales and spending up, driven by inflation
Total retail sales in Britain rose by 4.2% in January, according to a report from the British Retail Consortium (BRC) and KPMG. That was some way below the 11.9% increase reported in January 2022 and was down from 6.9% in December. The BRC emphasised that “the rise in sales masked a much larger drop in volumes once inflation is accounted for”. Paul Martin, head of retail at KPMG, said it was “likely we will continue to see casualties both online and on the high street this year”, given the challenging consumer backdrop. Separate research from Barclays shows that, due to inflation, Britons spent more in January than they did in the same month last year. Spending on debit and credit cards rose by 9.7% last month compared with a year ago.
Mismatches in jobs market ‘put pressure on inflation’
A mismatch in the number of workers available to take up jobs and vacancies that need filling may keep inflation higher for longer, economists have warned. Vacancies have fallen back from a record of 1.3m last spring but remain at historically high levels. The unemployment rate is near a record low, but not because more people are in work. Businesses are struggling to fill job openings because there are not enough workers in the right industries or locations or with the right skills, according to Sanjay Raja, chief UK economist at Deutsche Bank. The issue is said to a particular problem in the hospitality, health and social care, manufacturing and finance sectors. Employment remains below pre-pandemic levels, while an extra half a million workers have left the jobs market and are classed as “inactive”, meaning that they are neither in work nor available to take up jobs.
BBB chief launches new SME fund for Scotland
British Business Bank chief executive Louis Taylor met with fund managers in Scotland recently to discuss a new £150m fund to assist small businesses. The Investment Fund for Scotland is one of a series of nations and regions investment funds being introduced by the Bank which will deliver a £1.6bn commitment of new funding to smaller firms across the UK. Alongside the investment for Scotland, funds are planned for Wales, Northern Ireland and the south west of England, along with follow-on funds for the Midlands and the north of England. The Investment Fund for Scotland will encompass two microfinance funds offering loans of between £25,000 and £100,000. Meanwhile, a debt fund will offer loans from £100,000 up to £2m and an equity fund will provide equity investment of up to £5m.
Further funding to grow professional services exports announced
More funding to grow British exports by making it simpler for UK professionals to work abroad has been announced by the Business Minister Kevin Hollinrake Grants of up to £75,000 will be awarded to UK regulators and industry bodies to help them develop agreements with their international counterparts for UK professional qualifications to be recognised overseas. The Financial Reporting Council (FRC) successfully secured funding for round one of the programme. Sarah Rapson, Executive Director of Supervision, said: “The FRC is very pleased to hear that a further round of grant funding will be available from BEIS. The availability of previous funding has enabled us to bring in the additional expertise required to support our international recognition work. We would encourage UK professional accountancy bodies engaged in international recognition work to consider applying for a grant and make use of this valuable source of funding support.”
Wage erosion is the forgotten factor in cost of living crisis
David Cabrelli, professor of labour law at the University of Edinburgh, discusses in the Times Thunderer the impact of wage erosion in the cost of living crisis. He writes: “If wages are falling relative to capital returns, people may not notice. But where goods and services are becoming more expensive, the suppression of wages becomes more evident. And that is the territory we have now entered; the end result being a “double whammy” on living standards, with increased economic and income inequality.”
Drop in older workers could lead to taxation on pensions
The rise in people retiring at 50 and not returning to the workplace post-pandemic could result in higher taxation on pension pots and further rises in the state pension age, a senior economist has warned. Ian Stewart, Deloitte’s chief economist in the UK, analysed employment and immigration trends and warned that because “Britain’s labour has seen significant and unexpected change since 2020”, there may be actions taken by government to make up for the loss of productivity. He said: “The relatively high levels of personal wealth enjoyed by the over-50s could face increased levels of taxation and a further increase in the age at which the state pension becomes payable.”
M&Co collapse will cost 2,000 jobs
M&Co, the clothing retail chain formerly known as Mackays, revealed on Monday that it would close all its 170 stores by April with the loss of 2,000 jobs. AK Retail Holdings bought the brand and intellectual property of the collapsed Scottish company last week. Teneo Financial Advisory, the administrator, said it does not expect to find a buyer for the remaining assets and will wind them down over the next few weeks.
BP
BP reported record annual profits, more than doubling last year’s total as fuel prices soared following Russia’s invasion of Ukraine. The oil giant posted underlying replacement cost profit, used as a proxy for net profit, of $27.7 billion for 2022. That compared with $12.8 billion for the previous year. For the fourth quarter, BP posted net profit of $4.8 billion, narrowly beating analyst expectations of $4.7 billion.
Mortgage rates fall as price war breaks out
Despite the Bank of England raising the base rate by 0.5 percentage points to 4% on Thursday, an escalating price war between banks and building societies has pushed mortgage costs down for borrowers. The average two-year fixed-rate mortgage has dropped from 5.44% to 5.43% since Thursday, and the average five-year fix has fallen from 5.2% to 5.15%, according to analyst Moneyfacts. Craig Fish, of broker Lodestone Mortgages and Protection, said: “When one lender announces a rate reduction, the others tend to follow. The rate war is well and truly on and it’s now a race to see who is going to be the first to offer five-year fixed rates below 4%.”
House Prices
UK House Prices remained stable in January, according to Halifax’s house price index. This follows a 1.3% monthly fall in December and a 2.4% drop in November. The typical UK property now costs £281,684, little changed from £281,713 in December. On an annual basis, prices were 1.9% higher – the lowest level of growth in the last three years. In December, prices saw annual growth of 2.1%. Compared to the peak back in August, UK house prices are 4.2% lower.
Truss: Free market Tories have lost ground
Liz Truss has continued her media round defending her policies with an interview with the Spectator. The former PM vowed to fight on for lower taxes warning the current administration against raising corporation tax. Ms Truss warned that free-market Tories have “lost ground in the battle of ideas” and urged the party to challenge economic “orthodoxy” and strive to “do things differently”. She said the solution to the low economic growth of the past decade “isn’t, in my view, putting up taxes or restricting business, [rather] the solution has to be about Britain growing faster and becoming more competitive.” Meanwhile, the Telegraph’s Tim Stanley agrees with the position that Truss was defeated by “undemocratic forces”. He says we “are now governed by the Treasury under the watchful eye of international institutions that apparently believe G7 countries must no longer compete but retire into genteel poverty.” To cement his position, Stanley reminds readers that last week the IMF said British recovery would be limited by its tax rises…”And that, you silly people, was Truss’s entire point.”
Why should you become a CPA member!
The Credit Protection Association (CPA) has been assisting thousands of UK businesses to get paid, since 1914. We have seen many financial crises, this one will be particularly deadly for suppliers for some time to come.
CPA eases cash from tardy debtors – Efficiently, Effectively, Economically and Ethically. And we provide credit information so you can monitor and assess your key customers.
Unlike other credit management companies, we offer our members a fixed annual subscription regardless of how high the debt value maybe!
No face-to-face meeting required – just call Peter Uwins, CPA’s National Sales Manager, on 020 8846 0000 (business hours) or email nsm@cpa.co.uk today.
When you see your money come in, you will be so glad you used CPA.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
Do you have a commercial late payer that is causing you grief? Use CPA’s no-win, no-fee, commercial debt recovery service!
If you have a particular business customer who is late paying and causing you sleepless nights, why not offer it to CPA for purchase on recourse?
CPA’s collection department will then pursue the debt. We will be liable for any costs incurred and then when we have recovered the debt, we will pay you the net principle debt recovered less our percentage.
Once you have enjoyed that success then you can consider the more cost effective membership which includes our Overdue Account Recovery service and Status/Credit reports as well as a range of other complimentary services.
Just call 020 8846 0000 and ask for Godfrey Nelson or Cris Shirley (business hours) or email debtpurchase@cpa.co.uk today.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.
Get compensated for previous late payments
Have you been paid late by business customers in the last six years?
Maybe you no longer work with them. Under legislation, you are entitled to compensation you for those late payments you have suffered.
You put up with the PAIN – now claim the GAIN!
Claim late payment compensation (LPC) from former business customers who paid you late in the last six years!
CPA (LPC) Recoveries is using our bespoke software and decades of experience to do just that for our clients
Check our compensation calculator to see how much your business could be owed!
Discover NOW the potential value of late payment compensation hidden in your sales ledger!
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.