Business news 8 April 2022
James Salmon, Operations Director.
Productivity rises, boosted by digital transformation. Workspace bustles as small businesses return. Scale of Covid loan fraud leaves UK struggling to reclaim billions lost. Soaring Starting Salaries. UK households face “historic fall” in living standards. And more business news.
Productivity rises, boosted by digital transformation
New figures from the Office for National Statistics (ONS) show productivity rose by 1.3% in the final three months of last year and is above pre-pandemic levels. Output per hour worked, the headline measure, was 2.6% higher than the 2019 average while output per worker, another measure of productivity, rose by 1.4% at the end of last year to exceed 2019 levels for the first time since the pandemic began. Bart van Ark, professor of productivity studies at University of Manchester, points out that the digital transformation that companies were forced to undergo during the pandemic had led to better use of technology, which improved productivity.
Workspace bustles as small businesses return
London-focused commercial landlord Workspace has reported that like-for-like occupancy levels had risen by 3% to 89.6% in its fourth quarter to the end of March, edging closer to pre-Covid levels as small and medium-sized companies return to the workplace. Graham Clemett, chief executive, said in an update: “Our strong performance in the fourth quarter demonstrates further evidence that whilst [small and medium-sized companies have always appreciated flexible working, they also place enormous value on working together.”
Scale of Covid loan fraud leaves UK struggling to reclaim billions lost
The sheer volume of Covid loan fraud and the UK’s lack of capacity to pursue the criminals involved means many fraudsters will escape prosecution, experts say, while relatively little will be recovered.
Soaring Starting Salaries
According to a survey published by the Recruitment & Employment Confederation and consultancy KPMG, the average salary awarded to new permanent members of staff joining companies rose more last month than at any time since October 1997 when the survey commenced. Companies are raising the starting salaries on offer at the fastest pace on record due as worsening labour shortages give new recruits unprecedented bargaining power. The rise in salaries reflects both the huge contrast in demand for labour and the supply but also raising inflation,with businesses increasing pay rates for all staff to compensate for the fastest inflation seen in the UK in three decades.
UK households face “historic fall” in living standards
The latest UK economic outlook from PwC predicts inflation will hit 8.4% later this year. The rise in living costs will wipe 2% off household incomes, equivalent to about £900 or as much as £1,300 for the poorest families. If the Ukraine crisis worsens, inflation could peak at 11%, PwC warns. The economy will grow at a slower-than-expected rate of 3.8% in 2022, down from the 4.5% previously expected and last year’s record 7.4% expansion, the report suggests. Nick Forrest, UK economics consulting leader at PwC, said: “It is clear that many households and businesses will be feeling great pressure from rising costs this year. Were further sanctions introduced in response to pressure to rapidly curtail the use of Russian oil and gas, the UK economy would continue to grow but the pace of growth would be significantly slowed. The UK is not yet facing a growth crisis, but it is facing an inflation crisis.”
Retail Footfall increases, but tough road ahead
Footfall across the UK continued to improve last month, although it remains over 15% down on the same period three years ago. British Retail Consortium chief executive, Helen Dickinson, said: “As the first full month without restrictions in England and Northern Ireland, consumers were able to shop with a greater sense of normality, spurred on by some spring sunshine.” But she cautioned: “The impact on retail footfall and sales across stores and online is yet to be seen, but as belts continue to tighten and prices rise, it will be a difficult road ahead.” Meanwhile, figures from BDO show retail recording its 13th consecutive month of positive like-for-like sales, although non-store like-for-like sales fell. BDO head of retail and wholesale, Sophie Michael, also warned some discretionary spending was supported by record levels of borrowing.
Energy and raw material costs hit Food producers
Britain’s food and drinks producers are the worst hit industry when it comes to energy and raw materials inflation according to the Office for National Statistics. The dramatic surge in inflation points at huge food inflation coming down the pipeline to consumers and will be a further blow to the already struggling household budgets of those on low incomes.
Demand for workers continues to rise
The latest survey by the Recruitment and Employment Confederation and KPMG reveals vacancies increased for the 14th month in a row in March and at the quickest rate since last September. Neil Carberry, chief executive of the REC, said: “ Starting salaries for permanent staff are growing at a new record pace, partially due to demand for staff accelerating and partially as firms increase pay for all staff in the face of rising prices.” He added that “record Covid infection levels are also pushing up demand for temporary workers, particularly in blue-collar and hospitality sectors, underpinning the ability of temps to seek higher rates”. Claire Warnes, of KPMG, added: “There’s no end in sight to the deep-seated workforce challenges facing the UK economy. Once again this month, job vacancies are increasing while there are simply not enough candidates in all sectors to fill them. With fewer EU workers, the effects of the pandemic, the economic impacts of the war in Ukraine and cost-of-living pressures, many employers will continue to struggle to hire the talent and access the skills they need.
Ukraine
The “world must prepare for a long haul conflict” said Jens Stoltenberg NATO Secretary General adding the war may last for weeks, months even years more”. NATO is ready to do more to supply the Ukrainians. Meanwhile the European Union agreed to ban coal imports from Russia in its first move targeting Moscow’s crucial energy revenue after reports of Russian atrocities. and Volodymyr Zelensky, Ukraine’s president, has said that Russian forces’ destruction of Borodyanka was “much more horrific” than what they did in Bucha, its fellow suburb of Kyiv. Earlier the United Nations General Assembly voted to suspend Russia from the UN’s 47-member Human Rights Council over the “gross and systematic violations and abuses of human rights”. Ukraine warned that the battle for the Donbas region will remind the world of the Second world war. Thousands of people are trying to escape the country’s east, where Russian forces are focused on the region.
HMRC uses new powers to name avoidance scheme promoters
HMRC has for the first time named tax avoidance scheme promoters as part of a campaign to warn the public not to get caught up in tax avoidance. HMRC advised anyone involved in Absolute Outsourcing’s or Purple Pay Limited’s Equity Participation Scheme to withdraw from them as soon as possible to prevent building up a large tax bill. Mary Aiston, Director of Counter Avoidance, HMRC, said: “These schemes are cynically marketed as clever ways to pay less tax. The truth is they rarely work in the way the promoters claim and it’s the users that end up with big tax bills.”
Chancellor hits back at non-dom ‘smears’
The Chancellor has come out in defence of his wife after she was attacked for adopting non-domiciled status in the UK. Indian born Akshata Murty is a victim of political smears, Rishi Sunak said, insisting that the Infosys heiress and multi-millionaire pays all the taxes she should in the UK. But tax experts have said Murty’s claim that she had to take non-dom status because India prohibits its citizens from holding dual nationality is disingenuous – she was not forced to take the status and had to actively claim it, resulting in lower taxes on income from her shares in Infosys while inheritance tax on any money passed down from her tech billionaire father would be avoided. Regardless, allies of the Chancellor say it is clear that the leak about his wife’s status is part of a coordinated attack – an attempt to “undermine his credibility” with some supporters alleging the leak came from No 10 following clashes with the PM over spending policy.
House price growth close to average UK earnings
The average UK house price hit a new record high of £282,753 in March, according to the Halifax. Property values increased by 1.4% month on month, or £3,860 on average in cash terms, and were 11.0% higher than a year earlier. Russell Galley, managing director of Halifax, said: “The new record price of £282,753 is up some £28,113 on a year ago, not far off average UK earnings over the same period (£28,860). The story behind such strong house price inflation remains unchanged: limited supply and strong demand, despite the prospect of increasing pressure on households’ finances.” Martin Beck, chief economic adviser to EY Item Club, said: “While mortgage rates have picked up from last summer’s low point, that rise has merely returned rates to the level of a year ago…making buying look attractive relative to renting.”
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.