Business news 7 December 2021
James Salmon, Operations Director.
UK jobs boom poses inflation risk, Bank of England official warns.FSB urges more support for small businesses in budget. UK business investment expected to rebound strongly in 2022. UK construction recovers. Over 1m workers do not plan to retire. And UK tax revenues dropped by £33bn last year.
UK jobs boom poses inflation risk, Bank of England official warns
Ben Broadbent, a deputy governor of the Bank of England, said on Monday that the UK’s unexpectedly tight labour market posed a risk to future inflation if workers demanded higher wages to offset rising living costs. The Bank’s monetary policy chief said inflation is likely to soar “comfortably” above 5% next spring when Ofgem raises the energy price cap. Speaking to Leeds University Business School, Broadbent said: “The aggregate rate of inflation is likely to rise further over the next few months and the chances are that it will comfortably exceed 5% when the Ofgem cap on retail energy prices is next adjusted.” He went on to predict that the recent jump in inflation for goods is “more likely to subside than intensify” over the next couple of years as the squeeze on global supply chains eases.
FSB urges more support for small businesses in budget
The Federation of Small Businesses (FSB) has written to Scotland’s Finance Secretary Kate Forbes saying that the budget on December 9th should be “designed specifically to help smaller businesses finally turn the corner” after suffering “significant setbacks” over the last two years. Andrew McRae, FSB’s Scotland policy chair, said: “Almost 20,000 Scottish enterprises vanished over a single year of the Covid crisis. And the statistics suggest the bulk of these businesses were the very smallest operators, like self-employed individuals and new-start businesses.” In its letter to Ms Forbes, the FSB urges the Scottish Government to earmark funds for grants to help Scottish small businesses build their digital skills and reduce their environmental impact. The group also wants the Scottish Government to commit to another year of business rates relief for the firms hit hardest by the Covid crisis.
UK business investment expected to rebound strongly in 2022
Business investment is expected to be a “major growth driver” in 2022, according to Thomas Pugh, an economist at tax consultancy RSM UK, driven by a generous government tax incentive and a build-up of cash.
UK construction recovers
Britain’s construction industry saw growth hit a four-month high in November as the worst of supply chain difficulties subsided for the sector. The IHS Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) rose to 55.5 last month from 54.6 in October. “Port delays and a severe lack of transport availability due to haulage driver shortages continued to hold back supplier performance, although firms noted an improvement in the availability of specific items, especially timber,” IHS Markit said. However, looking ahead, the end to a moratorium on commercial property evictions may reduce demand for new space and a likely rise in interest rates and lower disposable income could hurt housing demand, causing problems for the sector in 2022.
Over 1m workers do not plan to retire
A study by Canada Life has found that 6% of UK workers, equivalent to over a million people, believe they will never retire. The research also found 44% of workers, equivalent to 17.1m people, think that they will work beyond state pension age. Of those expecting to work beyond state pension age, 43% believed that their pension would not be sufficient to retire fully and will need to continue earning money. Meanwhile, 22% said they would continue to work as they were unsure how long their retirement savings would last, while 10% felt prepared but were concerned that they current lifestyle meant it would be too expensive for them to retire.
UK tax revenues dropped by £33bn last year
Data from the Organisation for Economic Co-operation and Development (OECD) show the UK’s total tax revenue fell by £33.4bn last year, to £692.2bn. The OECD say that the impact of the pandemic on tax revenues was less pronounced than during previous crises, partly due to support measures introduced by the Government to support households and businesses. The UK ranked 23rd out of the 38 OECD countries in terms of the tax-to-GDP ratio during 2020/21 with a tax-to-GDP ratio of 32.8% compared with the OECD average of 33.5%. Tax structures in the UK are characterised by higher revenues from taxes on personal income, profits & gains; property taxes; and value-added taxes, the OECD said.
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