Business news 8 June 2022
James Salmon, Operations Director.
World Bank warns of recession risk. London’s recovery outstrips rest of UK in blow to leveling up agenda. Cost-of-living pressures hurt services outlook. Tax Freedom Day the latest since the early-1960s. And more business news.
World Bank warns of recession risk
The World Bank lowered its forecast for global growth for 2022 by 1.2 percentage points, from 4.1% to 2.9%. Countries around the world are facing recession as the Ukraine war hits economies already rocked by the Covid pandemic, the World Bank has warned. Less developed countries in Europe and east Asia face a “major recession”, it said. “The war in Ukraine, lock-downs in China, supply-chain disruptions, and the risk of stagflation are hammering growth. For many countries, recession will be hard to avoid,” World Bank President David Malpass said. The bank’s “Global Economic Prospects” report warned that the world is entering a “protracted period of feeble growth and elevated inflation”
London’s recovery outstrips rest of UK in blow to leveling up agenda
ONS data show London’s economic output grew 1.2% in the first three months of 2022 compared with the previous quarter – the highest of any UK region and outstripping the national average of 0.8%.
Cost-of-living pressures hurt services outlook
New data from the S&P Global/CIPS purchasing managers’ index (PMI) show growth fell in Britain last month. The PMI score for the manufacturing and services sectors fell from 58.2 in April to 53.1 in May, its lowest level in 16 months. “Service providers are increasingly concerned about the near-term business outlook, with price resistance among consumers and escalating cost-of-living pressures set to dampen spending during the second half of 2022,” Tim Moore, economics director at S&P Global said. “Growth expectations have dropped each month since the invasion of Ukraine.” Martin Beck, of the EY Item Club think tank, said the figures “reinforce our expectation that GDP growth will slow significantly in Q2”.
Tax Freedom Day the latest since the early-1960s
The Adam Smith Institute (ASI) has revealed that 8th June is “tax freedom day”, when the average earner has worked enough to pay off their annual tax bill. UK taxpayers will work an average of 159 working days this year just to pay their tax and spend a higher proportion of their incomes on taxes than at any other point since the early-1960s. The ASI figures show that UK taxpayers will pay out £869.4bn in taxes this year, equivalent to 43.29% of the UK’s net national income. Dr Eamonn Butler, Founder and Director of the Adam Smith Institute said: “If people were forced to work two full days a week for the Government, they would regard it as a form of serfdom. But that is what they actually do, as the Government takes over 40% of their earnings in tax, and then it borrows because it still can’t keep its book balanced.”
PM urged to cut taxes to survive
Boris Johnson is under renewed pressure to cut taxes following Monday’s damaging confidence vote. Sir Graham Brady, head of the backbench 1922 Committee, which oversaw the vote, called on Chancellor Rishi Sunak to bring forward his plan to cut income tax by 1p in the pound in 2024. “The best contribution a government can make to tackling inflationary pressures on family budgets is to take less money off people in the first place in the form of tax,” he said. “I hope we will turn a corner soon and see the tax burden falling.” Former Brexit negotiator Lord Frost told the BBC: “It is not Conservative to be raising taxes, and it is undermining growth and prosperity. We need to improve productivity and investment, not weaken it.” Elsewhere, Esther McVey, a former cabinet minister, said the pandemic had turned the Government into socialists…” removing even the most basic freedoms, spending money as if there was no tomorrow and putting up taxes to the highest levels in 70 years.” The Government needed “to find their way back to the Conservative path”, she added. Current cabinet ministers Kwasi Kwarteng and Liz Truss also called for tax cuts as soon as possible. Meanwhile, Penny Mordaunt, the trade minister, emphasises the importance of delivering the post-Brexit reforms expected by the electorate.
House prices
UK House Prices hit a record high of £289,099 in May, but the pace of growth in values is slowing, according to an index this morning. Russell Galley, managing director of Halifax, said: “The average cost of buying a home in the UK is up 1 per cent, or £2,857, on last month, and has now risen for 11 consecutive months.
Brexit
Despite only narrowingly surviving the no-confidence vote, Boris Johnson shows no signs of abandoning any of his more controversial policies. He is due to present his draft bill overriding the Brexit deal sometime this week. The problem the with Northern Ireland Protocol is that when they signed the deal, the Government didn’t expect the EU to actually want to enforce it.
Charging
By 2024 all mobile phones, tablets, e-readers, cameras etc sold in the EU must have a common type of charging point – the USB type C. Even Apple, which uses its own design, will have to conform.
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.