Business news 9 August 2023
James Salmon, Operations Director.
UK ‘at risk of recession next year’ & 5 years of lost growth. Global tensions spur supply chain adjustments. Drivers hit with largest fuel price rise in 12 months. And more business news that we thought would interest our members.
UK ‘at risk of recession next year’ & 5 years of lost growth
A new report from the National Institute of Economic and Social Research (NIESR) predicts that the UK economy is at risk of a recession next year after suffering five years of lost growth as the government has failed in its goal to “level-up” the regions and reduce inequality.
The triple blow of Covid, the Ukraine invasion and Brexit have hit the UK economy more than any of the other major economies.
The think tank’s latest quarterly outlook said GDP was currently 0.5% below the level it was before the pandemic, and would not pass that level for another year. In fact, there was a 60% risk of a recession at the end of 2024 with inflation persisting above the 2% target rate.
The weak “stuttering growth” over 5 years has widened the gap between the rich and poor, despite the much proclaimed government leveling up initiative. In London, NIESR expects real wages will grow by 7% in the five years from the end of 2019, but in the West Midlands, home to Britain’s third-largest city Birmingham, NIESR is projecting a 5% drop in inflation-adjusted pay.
Professor Stephen Millard, NIESR’s deputy director for macroeconomic modelling and forecasting, said: “The triple supply shocks of Brexit, Covid and the Russian invasion of Ukraine, together with the monetary tightening that has been necessary to bring inflation down, have badly affected the UK economy. As a result, we expect stuttering growth over the next two years and GDP to only recover to its 2019 fourth quarter level in the third quarter of 2024.”
Prof Adrian Pabst, deputy director for public policy at Niesr, said low-income households would be hit hardest, with real disposable incomes in this group falling by about 17% over the five years to 2024. “For some of the poorest in society, coping with low or no real wage growth and persistent inflation has involved new debt to pay for permanently higher housing, energy and food costs,” Prof Pabst added.
Global tensions spur supply chain adjustments
A new report by the Institute of Directors reveals that over a fifth of UK importers have had to alter their supply chains due to geopolitical tensions, with China being a major focus. The report states that 20.5% of importers have already made changes, while 15% are considering doing so. The majority of firms, however, have not been affected by global tensions. The report highlights that businesses are seeking stability in their supply chains and are willing to increase costs in the short-term to achieve this. The report also suggests that the UK should adopt a more cautious approach to China. UK-China relations have soured in recent years, with tensions rising over issues such as China’s military exercises near Taiwan and its refusal to criticise Russia’s invasion of Ukraine.
Drivers hit with largest fuel price rise in 12 months
Fuel prices in the UK have risen for three straight weeks as oil production cuts by Russia and Saudi Arabia drive up wholesale prices. Average petrol prices fell steadily from late October 2022 until late June, when prices began to rise. The latest increase, at 2.1p per litre, is the steepest rise since then. In a letter to the Competition and Markets Authority, the Energy Secretary Grant Shapps claimed households are “not getting a fair deal on fuel and are being overcharged” and reiterated his support for the introduction of a voluntary system for retailers to publish fuel prices by the end of the month.
EVs dominate car market in Q2
Electric vehicles made up more than half of the total car market in the second quarter, with 250,638 EVs sold, a 33% increase from the same period last year. PwC’s manufacturing and automotive lead, Cara Haffey, highlighted the importance of investing in supporting infrastructure, such as public charging points, to accommodate the growing number of EVs on the road.
Return-to-office crackdown could backfire
Moves by US financial firms to enforce strict return-to-office mandates could drive employees to leave, according to a study published by Deloitte. Of 700 financial executives surveyed, 66% who worked remotely part time said they would likely quit if ordered to return to the office five days a week. “Professionals – men and women alike – whose work and personal lives have been reshaped by remote work largely want to maintain flexibility even if it comes at a personal cost,” Deloitte said. Companies that insist on five days of in-office work are likely to face resistance, higher resignation rates, and difficulties recruiting talent. The study also showed that caregivers with remote or hybrid arrangements were 1.3 times more likely to leave their jobs if that flexibility was taken away. Almost half of women in senior leadership roles were likely to leave their current employer over the next 12 months.
Britain’s largest pawnbroker to expand following rise in profit
Shares in H&T edged up on Tuesday after Britain’s largest pawnbroker revealed a 31% rise in pre-tax profits to £8.8m. The business in now looking to cash in on the cost-of-living crisis by expanding its presence both online and with new stores.
Gordon Brothers weighs rescue bid for Wilko
The specialist investment group Gordon Brothers is exploring a bid to rescue Wilko, which is teetering on the brink of collapse. The offer could involve the Laura Ashley owner providing funding to the general merchandise retailer to implement a restructuring that would involve significant numbers of store closures and job losses. The chances of a deal being reached are “relatively low” insiders said. PwC is seeking binding offers within days, with liquidation a possibility if no deal is made.
Italy softens surprise windfall tax on banks
The Italian government has rowed back on its plans for a 40% windfall tax on banks’ profits after news of the levy sent shares down sharply. Intesa Sanpaolo and UniCredit dropped 8.6% and 5.9%, respectively, by close on Tuesday. Shares in state-owned Monte dei Paschi di Siena fell 10.8%, while Banco BPM, the country’s third-largest bank, shed 9.1%. Italian officials suggested the tax could raise €2bn to €3bn, but analysts say the figure could be as high as €4.5bn. The country’s finance ministry now says the levy would not exceed 0.1% of each bank’s total assets to ensure financial stability. One banking source said the limit would make the levy “much more manageable” and would raise an estimated €1.8bn.
Wegovy reduces heart attacks too
A late-stage trial of Danish pharmaceutical Novo Nordisk’ weight-loss drug Wegovy, showed that it also reduces the risk of heart attacks and strokes by up to 20%. The share price jumped 16% on the news.
China deflates
China slipped into deflation territory as consumer prices contracted annually last month, for the first time in more than two years, as slowing domestic spending weighs on the country’s post-pandemic economic recovery. The consumer price index fell 0.3% on-year in July, the National Bureau of Statistics said, having flatlined in June. Analysts polled by Bloomberg had anticipated a 0.4% decline in the index for July.
Severn Trent
Severn Trent Plc faces an environment class action lawsuit over the allegations that it abused its dominant position in the utilities market and under-reported the times where it pumped sewage into open water according to a statement issued today by Law firm Leigh Day. The case is the UK’s first ever competition abuse case focused on environmental laws and reporting to regulators.
WeWork
Shareholders of WeWork are preparing to dump the stock after the company said there’s “substantial doubt” about its ability to continue operating due to sustained losses.
Amazon & Arm’s IPO
Amazon is reportedly in talks to join other tech companies such as Intel and Nvidia as an anchor investor in Arm’s $10 billion initial public offering (IPO), as the SoftBank-owned chip designer looks to go public.
High-paid civil servants add £6bn to the wage bill
The number of civil servants earning more than £100,000 has nearly doubled, with 2,050 mandarins now taking home six-figure pay. This increase of 88% since 2016 suggests that promotions have been used to bypass pay constraints. Meanwhile, the number of front-line workers in lower wage brackets has declined by over 11%. Despite pay freezes and caps on wage rises, median pay has risen by 26% in the past seven years. The TaxPayers’ Alliance report highlights grade inflation as the main reason for the salary increase. The total Whitehall workforce has grown by 101,440 since 2016, a 24.2% increase. The increase in high-paid civil servants has added £6bn to the Civil Service wage bill, which now stands at £15.5bn. John O’Connell, of the TaxPayers’ Alliance, said: “With the tax burden at near-record levels, taxpayers are paying through the nose for the boom in public sector employment. What’s more, there is a growing sense that public services are worse than before, not better.”
Over half a million families to pay inheritance tax in next 10 years
Over half a million families will be forced to pay inheritance tax in the next ten years, according to analysis by wealth manager Quilter. The tax, already considered the most hated in Britain, is set to affect 533,220 families by 2033, a 60% increase. Households paid a record £7.1bn in inheritance tax in the year to March, and this is expected to rise to £11bn annually by 2033. The frozen nil-rate band and rising house prices have contributed to the growing number of middle-class households being caught by the tax.
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Why should you become a CPA member!
The Credit Protection Association (CPA) has been assisting thousands of UK businesses to get paid, since 1914. We have seen many financial crises, this one will be particularly deadly for suppliers for some time to come.
CPA eases cash from tardy debtors – Efficiently, Effectively, Economically and Ethically. And we provide credit information so you can monitor and assess your key customers.
Unlike other credit management companies, we offer our members a fixed annual subscription regardless of how high the debt value maybe!
No face-to-face meeting required – just call Peter Uwins, CPA’s National Sales Manager, on 020 8846 0000 (business hours) or email nsm@cpa.co.uk today.
When you see your money come in, you will be so glad you used CPA.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
Do you have a commercial late payer that is causing you grief? Use CPA’s no-win, no-fee, commercial debt recovery service!
If you have a particular business customer who is late paying and causing you sleepless nights, why not offer it to CPA for purchase on recourse?
CPA’s collection department will then pursue the debt. We will be liable for any costs incurred and then when we have recovered the debt, we will pay you the net principle debt recovered less our percentage.
Once you have enjoyed that success then you can consider the more cost effective membership which includes our Overdue Account Recovery service and Status/Credit reports as well as a range of other complimentary services.
Just call 020 8846 0000 and ask for Godfrey Nelson or Cris Shirley (business hours) or email debtpurchase@cpa.co.uk today.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.
Get compensated for previous late payments
Have you been paid late by business customers in the last six years?
Maybe you no longer work with them. Under legislation, you are entitled to compensation you for those late payments you have suffered.
You put up with the PAIN – now claim the GAIN!
Claim late payment compensation (LPC) from former business customers who paid you late in the last six years!
CPA (LPC) Recoveries is using our bespoke software and decades of experience to do just that for our clients
Check our compensation calculator to see how much your business could be owed!
Discover NOW the potential value of late payment compensation hidden in your sales ledger!
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.