Business news 9 August 2022
James Salmon, Operations Director.
July sales bump could be ‘lull before storm’ . The heat is on. Early retirement fueling inflation. More on Truss and Sunak and the cost of living crisis. Energy bills to exceed £4000 by January. And more business news.
July sales bump could be ‘lull before storm’
Figures from the British Retail Consortium (BRC) and KPMG revealed sales rose 2.3% in July, compared with a 6.4% rise the year before. The report said sales growth was largely down to inflation which masked a much larger drop in the number of items sold. Helen Dickinson, the BRC chief executive, said: “Consumer confidence remains weak, and the rise in interest rates coupled with talk of recession will do little to improve the situation. Paul Martin, the UK head of retail at KPMG, added: “The summer could be the lull before the storm with conditions set to get tougher as consumers arrive back from summer breaks to holiday credit card bills, another energy price hike and rising interest rates.” Meanwhile, Barclaycard said spending on essential items was up 7% in July compared with a year before, up from the 4% rise recorded in June, driven by fuel and supermarket shopping.
The heat is on
A heatwave is set to hit the UK and northern and central Europe this week testing the nations workforce and infrastructure
Early retirement fueling inflation
The one million people who have left the UK work force since the pandemic started – mostly over 50’s taking early retirement – are fueling wage inflation, says the boss of John Lewis.
Dame Sharon White said any government must think “really hard” about how to get more older people back into work to fill the vacancies seen in almost every sector of the economy.
A terrible error
Norman Lamont, former chancellor has said it would be a terrible idea for Liz Truss to abandon the BOE’s inflation target and move to controlling money supply instead.
Businesses scramble to hire workers
Competition between companies to lure talent is intensifying as a shortage of workers persists, new figures show. An employment index produced by consultancy BDO climbed to 114.79 in July, its highest level since January 2019 and up 0.23 points from June. “Although it’s encouraging to see recruitment intentions remain strong, we know that talent shortages are an issue, with many businesses reporting they are struggling to find people with the right skills,” Kaley Crossthwaite, partner at BDO, said.
Energy bills to exceed £4000 by January
Consultancy Cornwall Insight has warned that the average household energy bill will hit £4,266 by January next year. That’s £650 higher than estimates from just last week for households in England, Scotland and Wales. Cornwall blamed regulator Ofgem’s decision to change the price cap every three months instead of six and higher wholesale prices for the massive jump.
Boris Johnson rejects calls for emergency measures on cost of living crisis
Boris Johnson has no plans to introduce tax and spending measures before he leaves office to ease the cost-of-living crisis, Downing Street has said. Mr Johnson’s spokesman argued it would be up to his successor to make any decisions on further help. The statement comes after the CBI joined calls by Gordon Brown, former Labour prime minister, for Johnson to start work now on a package to help vulnerable households. Tony Danker, the CBI director general, said: “The economic situation people and businesses are facing requires all hands to the pump this summer. We simply cannot afford a summer of government inactivity while the leadership contest plays out followed by a slow start from a new prime minister and cabinet.”
Truss’s tax and spend plans could cost £50bn a year
Liz Truss claims her promised tax cuts and defence spending would cost £30bn but economists say the bill could go as high as £50bn. The foreign secretary has pledged to cancel the national insurance rise and scrap a planned increase in corporation tax, along with removing green levies and increasing the married tax allowance. The Resolution Foundation thinktank said the tax cuts had a big price tag and were “not a serious answer for the current crisis”. It said scrapping the corporation tax rise could cost £19bn, while Treasury figures suggest reversing the national insurance rise would cost around £13bn. The defence spending pledge could cost an extra £10bn a year by 2025-6, while the married tax allowance increase could cost £6.7bn. Taking green levies off bills could cost as much as £11bn. Stuart Adam, senior research economist at the IFS, said Truss’s tax cuts “basically don’t do much for those at the bottom of the distribution who are struggling most to cope.”
Raab: Liz Truss’s tax cut plans are ‘electoral suicide note’
The deputy prime minister Dominic Raab has warned that if Liz Truss pushes ahead with her proposed tax cuts it will be an “electoral suicide note” for the Tory party. Raab, who is a supporter of former chancellor Rishi Sunak, said in a piece for the Times: “If we go to the country with an emergency budget in September that fails to measure up to the task in hand, voters will not forgive us as they see their living standards eroded and the financial security they cherish disappear before their eyes. “Such a failure will read unmistakably to the public like an electoral suicide note and, as sure as night follows day, see our great party cast into the impotent oblivion of opposition.”
Plans to axe 91,000 UK civil servants would ‘cut public services’
Public services will have to be scaled back and £1bn paid out in redundancy payments under Government plans to return the size of the civil service to 2016 levels, a review by Steve Barclay reveals.
Homeowners seek out interest-only mortgages to cut costs
Inquiries for interest-only mortgages have jumped by about 20% in the last six months, experts say, as borrowers look to reduce their bills by cutting out the repayment element of their monthly mortgage bill. Ben Merritt, of Yorkshire Building Society, said that interest-only mortgages accounted for 5.4% of all new mortgage applications over the last six months, compared to 3.6% in the previous six months. But brokers urge caution, warning that switching to interest only can make it harder to pay off the loan long-term.
Law firm M&A drops to decade low amid legal services boom
The number of mergers between UK law firms has fallen to its lowest levels in a decade, according to research from Hazelwoods. A boom in demand for legal services has led to a drop in dealmaking, as law firm partners seek to enjoy bumper profits rather than selling their firms. However, the economic downturn forecast to hit the UK in coming months could reverse the trend. Hazelwoods partner Ian Johnson said: “As the economy slows and the boom for law firms ends, we expect to see more partners putting their firms up for sale.”
HMRC expresses concern over Premier League footballers’ contracts
New analysis from Pinsent Masons shows HMRC believes a “significant number” of Premier League football clubs and players are underpaying tax. Nearly two-thirds (64%) of Premier League footballers’ contracts now take a form which HMRC says is open to abuse, the law firm says. “HMRC believes a significant number of Premier League football clubs and players are underpaying tax because of the way the deal between the footballer, football club and agent has been structured as against the work actually carried out,” Ian Robothom, legal director of Pinsent Masons said of the research.
Premier League clubs bounce back from pandemic
A new survey by BDO reveals that Premier League football clubs have recovered from the financial effects of COVID-19 just a year after stadiums were reopened. BDO’s Annual Survey of Football Club Finance Directors reports that 71% of respondents from Premier League clubs rated their position as “very healthy”. A year ago the figure stood at just 29%. Things aren’t so rosy for Championship clubs, however, with just 18% rating their financial position as “very healthy”. The number who considered it “in need of attention” more than doubled year-on-year to 55%.
Legal & General
Legal & General has weathered the country’s worsening economic climate, having declared £2.5bn of dividends since 2020. The London-headquartered company, which offers pensions, life insurance and investment services, has navigated financial and economic crises in the UK for more than 180 years. Legal & General today reported operating profit growth of eight per cent, securing £1.16bn in the first half of this year, up from £1.07bn in the same period last year.
InterContinental Hotels
InterContinental Hotels Group has seen group profit more than double versus 2021 after a recovery in demand for travel. The London-listed firm said it was also reintroducing an interim dividend at a level 10 per cent higher than when last paid and launching an initial $500m share buyback. Revenue for the first half of the year hit $1,794m, compared to $1,179m in the same period in 2021.
Bellway
Bellway has boasted a record annual housing revenue of £3.5bn, bosses announced today. The figure has grown by more than £1bn since 2020, and some £400m since last year. Despite raw material and labour cost inflation, Bellway’s housing completions jumped by 10.5 per cent in the year to 31 July, to another record of 11,198 homes.
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