Business news 10 February 2023
James Salmon, Operations Director.
Recession narrowly avoided . Small firms reduce energy use. CBI demands Budget tax breaks to fuel economic growth. Bailey ‘very uncertain’ about inflation. FTSE 100 hits record high . And more business news.
Recession narrowly avoided!
The latest figures for the end of 2022 show the UK economy narrowly avoided falling into recession, after the economy saw zero growth between October and December.
Although there was a sharp 0.5% fall in economic output during December, caused partially by strike action, this was not enough to put the quarter into negative territory according to the Office for National Statistics (ONS).
And the ONS also revised up its figures for the July to September quarter, to show that the economy shrank by 0.2% instead of previous estimate of a 0.3% fall. As we haven’t had 2 quarters of shrinking GDP, we are not in a technical recession.
On an annual basis, GDP rose by 0.4% in the fourth quarter, slowing from a 1.9% increase in the third.
Chancellor Jeremy Hunt said the figures showed “underlying resilience” but said “we are not out of the woods”. The Bank of England still expects the UK to enter recession this year although they now think it will be shorter and less severe than previously forecast.
London economy bounces back fastest
London has recovered faster and pulled away from the rest of the country since the pandemic, despite Government’s attempt to level up the regions.
London’s economy is 2.7% bigger than it was pre-Covid, according to the Office for National Statistics (ONS), while the rest of the country has shrank, with the whole English economy is 1.7% smaller.
Small firms reduce energy use as costs climb
A poll commissioned by Smart Energy GB shows that two-thirds of small business owners have adopted more cost-saving working practices to reduce their energy usage over the last 12 months. The survey saw 19% of small businesses say they have reduced their opening hours in a bid to cut their energy costs, while 33% are “very likely” to consider moving to different premises. Just over a quarter (26%) have turned off radiators in some rooms, while 24% have turned down their thermostat. The poll also found that 29% check their energy usage at least once a day, and 32% check several times a week.
CBI demands Budget tax breaks to fuel economic growth
The Institute of Directors and Make UK, the trade body for manufacturers, have joined the Confederation of British Industry (CBI) in calling on the Government to introduce a replacement for the super deduction measure. CBI director-general Tony Danker said the end of the scheme alongside the sharp rise in corporation tax “will have a huge impact on investment and leave the UK falling behind its global competitors”. He added that the Chancellor’s spring statement was “an opportunity to get the UK out of any recession sooner rather than later and transform the UK into a high-growth, innovation-first economy.”
Bailey ‘very uncertain’ about inflation
Bank of England governor Andrew Bailey says he is “very uncertain” about whether inflation will decline, telling MPs on the Commons Treasury Select Committee he wants to see “more evidence” of the rate of price increases falling this year before easing measures to tackle inflation. He said: “I’m very uncertain, particularly about pricing and wages, and we have the largest upside force we’ve ever had on inflation,” adding: “We do put weight on the persistent risks, but there are also very powerful downside forces this year.” Huw Pill, the Bank’s chief economist, said a series of shocks that have hit the UK economy – the pandemic, supply chain issues and Russia’s invasion of Ukraine – mean rate setters “will fall short” of hitting their inflation target, adding that he is cautious of “over steering” the economy into a downturn via higher interest rates. Meanwhile, Silvana Tenreyo, an external member of the Bank’s Monetary Policy Committee, said a fall in inflation “is pretty much guaranteed” this year, barring “another big development that we do not or cannot know about, such as a new energy shock.” The Bank is forecasting that the Consumer Price Index will fall to around 4% by the end of the year, from its current level of 10.5%, with this based on a lack of additional shocks for the UK and wider global economy.
FTSE 100 hits record high
The FTSE has closed at a record high for the second time this year, having climbed 0.3% to 7,911.15. The index of Britain’s biggest companies is up more than 6% so far in 2023, with investors increasingly optimistic amid hopes that the economy may be heading for a shallower recession than had been initially feared and that inflation may have peaked. Richard Stone, chief executive of trade body the Association of Investment Companies, said: “Markets are forward-looking. We may still be heading into a recession, but markets believe inflation has peaked and are looking ahead to when rates may start falling.”
Lockdowns ‘biggest driver’ of rising joblessness
An executive at one of the country’s largest recruitment agencies has told MPs that pandemic lockdowns made people scared to leave their homes and have driven Britain’s out of work crisis. Rhodri Thomas, an executive at the Reed Group, told the Commons work and pensions committee that many unemployed people now do not want to take posts “where they are in busy working environments”. A large number are also reluctant to return to the labour force post-pandemic unless they can find part-time roles in which they can work from home, he said.
MPs pay to climb 2.9%
MPs will get 2.9% pay rise worth £2,400 this year, the Independent Parliamentary Standards Authority has confirmed, saying the increase is in line with the average public sector workers’ rise in 2022/23. This will take salaries from £84,144 to £86,584.
AstraZeneca snubs Britain due to ‘discouraging’ taxes
AstraZeneca chief executive Pascal Soriot says the firm overlooked Britain for a new $400m drug factory because of its “discouraging” tax regime. Mr Soriot said AstraZeneca had wanted to open a new state-of-the-art plant near its existing manufacturing sites in the North West of England, but instead switched to Ireland “because the tax rate was discouraging.” He added: “You need an environment that gives you good returns and incentive to invest.” The corporation tax rate is scheduled to rise to 25% from 19% in April, while a generous tax relief scheme for businesses is expected to end. Sir John Redwood, a former Trade Secretary, said: “Britain is a great place to come to but we must not tax ourselves out of the game,” while former Conservative leader Sir Iain Duncan Smith said AstraZeneca’s decision was “a serious reminder to the Government about the risks of high tax rates.”
FRC chief exits to lead HS2 project
Financial Reporting Council (FRC) chief executive Sir Jon Thompson is to step down to take up a new position as the chair of HS2. He has handed in his notice at the audit regulator and will now serve out his six-month notice period, serving as CEO of the FRC on a part-time basis. The FRC has announced that Sarah Rapson has been appointed deputy CEO on an interim basis. Mr Thompson’s exit comes as the Government pushes forward with plans to replace the FRC with a new, more powerful regulator – the Audit, Reporting, and Governance Authority.
Property demand and prices fall
Data from the Royal Institution of Chartered Surveyors (Rics) shows that UK property sales and house prices continued to fall in January, with buyer demand and fresh listings also down. A net balance of -47% for new buyer inquiries was reported, down from -40% in December, with this the weakest monthly reading since April 2009 in a survey measuring the difference between the number of estate agents and property surveyors reporting increases and those experiencing decreases. A net balance of -14% respondents reported a decline in new instructions during January, while data on house prices shows the net balance weakened further to -47% compared with a reading of -42% in December.
First-time buyer numbers fall
Coventry Building Society analysis of HMRC data shows that fewer than one-in-five homes bought in the first nine months of last year were bought by first-time buyers. The study calculates that the number of people getting on to the property ladder in 2022 is likely to have fallen to a five-year low. Between January and September last year, 142,600 people claimed first-time buyer relief on their house purchases, making up 18% of transactions. By comparison, 217,700 people bought their first home in 2018, while 223,400 did so in 2019.
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.