Business news 9 March 2022
James Salmon, Operations Director.
MPs seek to toughen up Economic Crime Bill. Fast food giants shutter businesses in Russia. Britons face catastrophic hit to living standards. Conflict pushes short-sighted energy policies into reverse. And more business news.
MPs seek to toughen up Economic Crime Bill
MPs are looking to toughen up the Economic Crime Bill, which went through the House of Commons on Monday, to ensure oligarchs selling property to avoid it being listed in a new public register will have to declare their details upon sale anyway. The bill will reform Companies House in an attempt to verify the identity of every company director and beneficial owner, with the aim of preventing all criminals or kleptocrats from hiding behind a UK shell company. However, lawmakers are concerned that with existing owners granted up to six months to register their ownership many bad actors could dispose of or transfer illicit assets. Tory MP Kevin Hollinrake said kleptocrats have probably transferred ownership of their properties already while Tom Keatinge, director at the Centre for Financial Crime and Security Studies at the Royal United Services Institute, said the UK had suffered a lack of leadership on addressing illicit finance.
President Volodymyr Zelensky of Ukraine addressed Britain’s House of Commons via video-link from Kyiv, repeating calls for tougher sanctions against Russia and a no-fly zone over his country. “We will continue fighting for our land, whatever the cost,” he said, echoing Winston Churchill, Britain’s prime minister during the second world war. “We will fight in the forests, in the fields, on the shores, in the streets.”
Fast food giants shutter businesses in Russia
PepsiCo, Coca-Cola, McDonald’s and Starbucks have bowed to boycott threats and pledged to temporarily close their businesses in Russia in the wake of Vladimir Putin’s attack on Ukraine. The move will put more pressure on KFC and Burger King to act as they weather criticism for staying largely silent about the war. The decision by the food groups comes after other multinationals like Apple, Microsoft and Samsung, along with businesses including Visa, PayPal and Netflix, shuttered operations in Russia over its invasion of Ukraine. Meanwhile, French food and drink giant Danone has defended its decision to keep doing business in Russia stating: “We have a responsibility to the people we feed, the farmers who provide us with milk, and the tens of thousands of people who depend on us.” EY and Deloitte have also severed ties with Russia amid its invasion of Ukraine, following KPMG and PwC. Additionally, Shell has announced plans to withdraw from Russian oil and gas, and Unilever has said it will stop selling its products in Russia.
Britons face catastrophic hit to living standards
The Centre for Economics and Business Research predicts UK economic growth will halve this year to 1.9% and fall to zero in 2023. The consultancy expects inflation to stay above 7% until the beginning of next year and go as high as 8.7%in the spring. Soaring inflation combined with steep tax hikes leads the CEBR to estimate living standards in the UK will drop at the worst rate since records began in the mid-1950s – by an estimated £71bn – which amounts to £2,553 per household. The CEBR said the projections will put the Chancellor under more pressure “to put the economy on a semi wartime setting on 23 March”. Separately, the Bank of England is set to send rates to the highest level since just after the financial crisis in a bid to tame runaway inflation triggered by the Russia-Ukraine conflict. According to Bank of America, the BoE will focus on eradicating an average inflation rate of 7% this year by hiking rates at each of its next five meetings, taking borrowing costs to 1.75% by November. Poor wage growth coupled with elevated inflation will erode real incomes at the worst rate since at least 1955, Bank of America said, adding that household consumption, which accounts for around 60% of UK output, will stagnate for the next 18 months.
Shell
Shell said that it will withdraw from involvement in all Russian hydrocarbons, including crude oil, petroleum products, gas and liquefied natural gas, following Russia’s attack on its neighbouring country, Ukraine. The London-based oil and gas company said the withdrawal would be done in a “phased manner” in alignment with new government guidance.
Conflict pushes short-sighted energy policies into reverse
Boris Johnson has said Britain will phase out Russian oil imports by the end of the year while Joe Biden has banned both gas and oil imports from the country following Vladimir Putin’s military action in Ukraine. Britain’s plan will give firms and supply chains nine months to switch to buying oil stocks from the US and Middle East. European countries have said they plan to reduce their reliance on energy from Russia over time – natural gas from Russia accounts for one-third of Europe’s consumption of the fuel. The bans will almost certainly drive up energy costs in the West as consumers already face record prices. As the crisis in Ukraine highlights the merits of self-reliance, Mr Johnson has reopened the door to fracking in the UK as part of efforts to diversify the country’s energy supply. Mr Biden faces anger at home over policy changes that took the country from energy independence under Donald Trump to buying 700,000 barrels of crude per day from Moscow in little over a year. Republican senator Marco Rubio has criticised Biden for turning to Saudi Arabia, Venezuela and Iran to replace Russian oil. But the Guardian notes that Saudi Arabia and the UAE have refused to arrange calls with the US president, while China has announced plans to develop three new pipelines with Russia. On top of this, the Chinese Foreign Ministry has demanded the US disclose details about its military bio labs in Ukraine and elsewhere.
Metals attract investors as supplies tighten
The price of gold has broken through the $2,000 an ounce barrier as geopolitical uncertainty revives demand for the metal as a store of value. Rising inflation and high demand has also boosted the price, says Dan Fisher, CEO of broker Physical Gold. Additionally, the London Bullion Market Association has suspended all six Russian gold and silver refineries, with other precious metals such as palladium also being impacted by a crunch in supplies from Russia. Joe Brusuelas, chief economist at consultancy RSM, explained: “The best example of how the crisis might spark another supply chain crunch is in the palladium market, where Russia’s share of the global production is just over 45%. Palladium is used to produce the advanced microchips used in vehicle production, so this will impact manufacturing firms. But all middle market businesses should be prepared to scour their downstream supply chains for areas that may be vulnerable to supply disruptions from Russia.” Meanwhile, the price of nickel has doubled, and platinum and silver have seen a 10% rise in prices over the last week.
Construction workers owed £1.5bn following pandemic property boom
According to the tax refund firm RIFT almost £1.5bn is owed to Britain’s construction workers by the taxman following the pandemic property boom. CEO of RIFT Tax Refunds, Bradley Post, said there’s “a very strong chance that those working within the industry could be owed a tax refund if they paid for their own travel or wider expenses while working on site, regardless of whether they did so on a full-time or self-employed basis.”
Direct Line
Direct Line Insurance earnings fell last year, the company revealed on Tuesday, though it said 2021 brought ‘significant strategic progress’. Pretax profit fell 1.2% to £446.0 million in 2021 from £451.4 million in 2020. Gross written premiums declined by 0.3% to £3.17 billion from £3.18 billion.
Prudential
Prudential enjoyed a bump to new business profit last year, as the pandemic-era drive to get one’s affairs in order rolls on. New business profit lifted 15 per cent to $2.5bn in the year to 31 December, up from $2.2bn in 2020. The London-headquartered company’s gross premiums for 2021 inched slightly higher than in 2020, up from $23.4bn to $24.2bn, it announced in its latest financial update today.
Legal & General
Legal & General reported a surge in profits and hiked its dividend payouts today as it felt the lift of a post-pandemic boom across its divisions. Profits after tax jumped 28 per cent to £2.05bn, up from £1.60bn last year, with bosses saying the firm had now returned to its long-term target growth rate after a pandemic slowdown.
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.