Business news 9 June 2022

James Salmon, Operations Director.

UK growth set to be weakest in developed world. It’ll be ok, honest, says Chancellor. PM makes boosting economic growth his top priority. Hospitality firms warn rail strikes will be devastating. Price of petrol rises by largest daily amount for 17 years.  Overlooking IP unwise for SMEs in long run. And more business news.

UK growth set to be weakest in developed world, OECD says
The Organisation for Economic Co-operation and Development (OECD) has urged the UK Government to cut tax rises in order to revive the stagnating economy. The body predicted that the UK will be the worst-performing economy of any nation in the developed world apart from Russia in 2023. In its bi-annual economic outlook, the club of rich nations said recent increases in income and business taxes will contribute to a slowdown that will see GDP fail to advance in 2023. “The Government should consider slowing fiscal consolidation to support growth,” it said. The economy will expand 3.6% this year – the second-fastest rate among the G7 after Canada – before sinking to zero growth in 2023. Every other G7 country will grow by more than 1% in 2023, the OECD forecasts. Inflation is expected to average 8.8% this year and fall to 7.4% in 2023. Ruth Gregory, chief UK economist at Capital Economics, said Britain was now “dangerously close” to a recession but was more upbeat that the OECD, forecasting an expansion of 1.5% with inflation falling from 10% this year to 4.8% next year as price pressures on energy begin to relent. But Rachel Reeves, the shadow chancellor, called the figures a “shameful indictment of the chaos and incoherence of this Conservative government,” adding: “It reveals a Tory economic strategy centred around low growth and high taxes.”

It’ll be ok, honest, says Chancellor
The Chancellor takes to the pages of the Telegraph in an attempt to reassure the public that the Government will “make the right moves to get families through the cost of living crisis.” Rishi Sunak says rising inflation, and energy and food price shocks are not intractable problems and that “we have the tools at our disposal to fix the problems.” He claims government leadership has already led to transformative change, in the Tees Valley for instance, and there is more to come. In the autumn, the Chancellor promises to set out “a range of tax cuts and reforms to help and incentivise businesses to invest more, train more and innovate more” with Mr Sunak adding that he is “confident we’ll see the fruits of this plan in no time.”

PM makes boosting economic growth his top priority
Boris Johnson will use a speech today to declare that boosting Britain’s economic growth rate is his top priority as he attempts to move on from the bruising rebellion by Tory MPs. The Prime Minister will use a speech in Blackpool to insist he has a plan for “generational investments in infrastructure, skills and technology” as he seeks to build a platform for the income tax cuts that Tory MPs and ministers are demanding. Mr Johnson will say: “We have the tools we need to get on top of rising prices. The global headwinds are strong. But our engines are stronger.”

Hospitality firms warn rail strikes will be devastating
The national rail strikes planned for later this month will have a devastating impact on the theatre, live music and hospitality industries, trade bodies have warned. In a joint statement, hospitality leaders said a strike would be “hugely damaging” and felt “counterintuitive when we are facing so many other challenges”. Michael Kill, chief executive of the Night Time Industries Association, which represents night clubs, bars and festivals, said the strike announcement had sent a “shockwave throughout the industry”.

Price of petrol rises by largest daily amount for 17 years
A litre of petrol rose to an average of 180.7p on Tuesday – a 2.2p increase on the previous day and the largest daily increase for 17 years. The RAC warned that the price of a full tank for a 55-litre family car is expected to exceed £100 for the first time today. Diesel drivers are already paying £102.61 to fill up a full tank of fuel. Simon Williams, the RAC’s fuel spokesman, said: “These are unprecedented times in terms of the accelerating cost of forecourt fuel. Sadly, it seems we are still some way from the peak.” The comments come as Asda hiked its average petrol price nearly 5p a litre in a single day, which is unheard of. Meanwhile, the Competition and Markets Authority (CMA) is monitoring to see if petrol stations have been passing on the 5p cut to fuel duty introduced in March.

Overlooking IP unwise for SMEs in long run
In City AM, Dorothy Agnew expounds on the wisdom of dealing with trade mark and other IP issues early on in a small businesses’ life, to avoid costly legal fights with big business. SMEs that file at least one of the main types of IP – a patent, trademark or design – are 21% more likely to grow over three years than one without, according to a 2019 study from the European Union Intellectual Property Office. Despite this, at the time only an estimated 9% of SMEs had a registered IP asset, compared to 40% of large companies. Often it is the cost that puts off an SME from exploring registered IP properly, but this can be a false economy, Agnew says.

Fertiliser factory closure leaves UK food supply ‘vulnerable’
Domestic fertiliser supplies are now under threat after the permanent closure of one of only two major fertiliser plants in Britain, farmers and meat processors have warned. CF Fertilisers will shut down its Ince manufacturing plant near Chester, which provides crucial supplies of nitrogen fertiliser and carbon dioxide, after energy bills and high environmental taxes made the plant unsustainable. CF Industries will keep its Billingham facility open after the Government secured a rescue deal with the company’s suppliers. Jo Gilbertson, head of fertilisers at the Agricultural Industries Confederation, said: “This is very sad and disappointing news,” adding that the closure will “affect everything from the cost of milk and meat products on the shelves to the price of bread.” On top of that there’s a shortage of grain because of the crisis in Ukraine.

Three in four Londoners will never return to the office full-time
Three-quarters of London’s workers think they will never go back to commuting every day again, according to a study from the Policy Institute and King’s College London. The main reason cited was an aversion to rush-hour travelling. Six in 10 London staff are still working from home at least once a week, the research found. Former government adviser Mark Kleinman, a professor of public policy who worked on the study, said he was surprised the respondents showed such an “attachment” to home working “regardless of politics, age [and] seniority” as well as personality type, with little difference in answers between introverts and extroverts. Additionally, just 16% of the respondents agree with the proposition that home workers don’t work as hard as those who commute into a workplace and 66% disagreed with the idea that employers should pay home workers less than those who go into the office.

UK steel jobs at risk as judge rules GFG winding-up bid can proceed
Three UK businesses in the GFG Alliance could be shut down after Citibank was given the go ahead to issue winding-up petitions, on behalf of creditors including Credit Suisse, over unpaid debt. A London judge said the companies couldn’t rely on rules designed to protect companies during the coronavirus pandemic. A spokesperson for GFG Alliance says: “This judgement on Covid protection qualification does not mean that the UK companies in question will be wound up. There will now be a further hearing likely to be in autumn or winter this year at which the merits of the winding up proceedings will be heard in their own right.” Liberty Speciality Steel UK, the largest entity that could be wound down, employs more than 1,800 people across several sites in the UK, including at Rotherham in Yorkshire.

Ukrainian Grain

Hundreds of millions are at risk of “hunger and destitution” because of food shortages caused by Russia’s invasion of Ukraine, warned António Guterres, the chief of the UN.  Multiple obstacles remain to getting Ukrainian grain into the global market. The Black sea is heavily mined and the mines near Ukraine’s key ports would have to removed and that could take months. Peter Adams, special advisor on maritime security at the International Maritime Organization, said “Even if the ports wanted to reopen tomorrow it would take some time until ships could enter or depart,”  Yet Russian ships are still blocking Ukraine’s Black Sea accesss with no sign of progress from Turkey’s efforts to broker a deal as Russia insists delivery to international markets depends on the end of sanctions.

UK generators warn windfall tax threatens green investment
Chancellor Rishi Sunak has been warned by electricity companies that a windfall tax on their profits would jeopardise investments to build more generating capacity and could lead to the collapse of more suppliers. “The next decade will be critical in ensuring sufficient investment to reach both our climate change and domestic energy security targets,” said Energy UK deputy director Adam Berman. “Generation is a long-term industry, with investment horizons that span decades and a windfall tax on generators could delay and raise the cost of these investments – at the very time that we need to increase spending to meet the Government’s own aims.”

Sunak to rule out tax cuts in autumn
The Chancellor has poured cold water on hopes of income tax cuts anytime soon after he told Tory MPs on Wednesday that tax cuts were “ultimately the reward for a growing economy and strong public finances” and that responsible management of borrowing and the national debt must come first. Rishi Sunak insisted he would never as “an act of blind faith” bring in cuts at the expense of the “fundamental soundness of our economy or public finances”. Downing Street has also ruled out income tax cuts in this autumn’s budget, with a source arguing that it “would be completely irresponsible when our absolute No 1 priority is controlling inflation.” They added: “We can survive a year’s worth of inflation but if it becomes self-fulfilling we’re right back to the 1970s and it’s over.”

Cutting taxes challenging without reshaping state activities
Sir Charlie Bean, a former top forecaster at the Office for Budget Responsibility (OBR) and chief economist at the Bank of England, has warned that lower taxes would be difficult to sustain without reappraising the standard of public services delivered by the state. Professor Bean told LBC radio that the “underlying trends that have been driving up health spending” such as an ageing population and more complex healthcare provision “are still going to be there going forward.” Bean also said the Bank of England has left monetary policy too loose for too long, but the Bank had “belatedly” woken up to the imbalances in the jobs market that have dealt a supply blow to the economy.

Many in UK gig economy not getting pensions, regulator warns
The Pensions Regulator has admitted that, since a court ruled Uber drivers were not independent contractors, many gig economy employers have not introduced workplace pensions despite being urged to do so voluntarily.

House prices hit record high in May
The latest Halifax house price index shows the average house price hit a record high of £289,099 in May. Russell Galley, Halifax managing director, said: “The average cost of buying a home in the UK is up 1%, or £2,857, on last month, and has now risen for 11 consecutive months. Annual growth also remains in double digits, at 10.5%, although this is the slowest rate of growth seen since the start of the year.” Nicky Stevenson, managing director at estate agent group Fine & Country said that as “the imbalance between supply and demand continues to narrow, annual gains are expected to soften further in the months ahead.” Martin Beck, chief economic adviser to the EY ITEM Club commented: “The prospect of households seeing a fall in real incomes this year, as high inflation bites, means fewer people will be able to afford to borrow the necessary amount they need to buy at higher mortgage rates.”

Boris Johnson to announce right-to-buy plans for low-paid workers
Plans set to be announced by Boris Johnson today will see lower-paid workers able to use their housing benefits to buy homes. In a speech in Lancashire, the Prime Minister will argue that the £30bn in housing benefit which currently goes towards rent would be better spent in helping people become first-time buyers. One minister described the policy as “benefits to bricks” and said that it would enable young people to pass affordability checks needed to get a mortgage. The move comes as senior Tories fear that the decline in home ownership among young people is damaging to their long-term electoral policy. Steve Webb, former pensions minister and now a partner at LCP, said: “Government intervention could help to overcome [the barriers faced by low-income renters] but that support would have to be substantial and sustained for low-income households to be attractive to mortgage lenders.”

Gove vows to end ‘scourge’ of empty second homes
Levelling Up Secretary Michael Gove has promised to end the “scourge” of unoccupied second homes, as part of government plans to boost housing. Mr Gove said a new bill making it easier to charge higher council tax on empty properties in England would “bring life back” to communities. He also said new powers to force landlords to rent out empty shops would regenerate urban areas

Public sector pensions liability tops £2trn
The public sector pensions liability has exceeded £2trn for the first time and is bigger than the national debt, according to Government accounts. The liabilities for retirement payouts – not including the state pension – went up 16% year-on-year to hit £2.2trn for 2019-20, up from £1.89trn the previous year. Public sector pension liabilities amount to around 44% of the Government’s total liabilities. Danielle Boxall, media campaign manager at the TaxPayers’ Alliance, said: “These numbers are a wakeup call for the scale of the financial challenge facing us, not just today but for years into the future. The Government should stop kicking the can down the road and ensure that new public sector pensions are properly funded to protect future generations from footing the bill.”

British American Tobacco

British American Tobacco reported slow revenue growth this morning, up two per cent. In its half year results, the firm said its non-combustible product consumer base which reached 19.4m in the first quarter, with a strong performance in its New Category revenue and volume growth. British American Tobacco invested £1bn in the first half of the year.


Fuller’s is back in the black after posting an adjusted profit before tax of £7.2m, as the licensed trade recovers from the pandemic. In results for the year to 26 March, the pub operator saw profit back in growth after posting a £48.7m loss in 2021, when lockdowns enforced the closure of many pubs. While the period was still impacted by pandemic-related closures, restrictions and working from home guidance, Fuller’s raised a glass to revenue of £253.8m. This was a large leap from 2021’s sum of £73.2m.

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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.