Business news 10 August 2022
James Salmon, Operations Director.
Worst case energy supply crisis could see blackouts in Britain. Royal Mail workers to strike. Businesses suffer reputational hit from supply chain disruption. Thousands of whistleblowers report bosses for ‘furlough fraud’. Retiring over-50s driving up inflation, John Lewis boss claims. And more business news.
Worst case energy supply crisis could see blackouts in Britain
Scenario planning conducted by government officials raises the possibility that Britain could be plunged into darkness this winter if the “worst case” energy supply crisis hits. An extreme drop-off in UK energy supply could result in organised blackouts for industry and households as the Government attempts to conserve gas, the exercise found.
Below-average temperatures and reduced electricity imports from Norway and France could expose four days in January to such a scenario, according to the report. However, a government source played down the likelihood of the scenarios becoming reality.
Meanwhile, the consultancy Cornwall Insight has warned that energy bills for a typical household could hit £4,266 next year or £355 a month, up from £164 a month currently. Cornwall cited regulator Ofgem’s decision to change the price cap every three months instead of six and higher wholesale prices for its high forecast.
Royal Mail workers to strike
The Communication Workers’ Union has said 115,000 Royal Mail workers will strike over the last four days of August and for two days in September – the first walk-out by Royal Mail staff since 2009.
Postal workers have demanded a “dignified, proper pay rise” in the face of rising inflation, rejecting the 5.5% wage increase offered by the company so far. Royal Mail’s offer includes a 2% increase backdated to April 1 that has already been implemented and another 3.5% rise that would be dependent on improvements in productivity and changes to postal worker rosters.
However, the CWU has said these would amount to a real-terms pay cut. The strike will leave the service paralysed with letters and prescription medicines undelivered.
Businesses suffer reputational hit from supply chain disruption
More than a third, or 38%, of companies that struggled with supply chain disruptions this year have said that their reputation is deteriorating as a result. Simon Hart, lead international partner for RSM UK, said that businesses working directly with consumers were worst affected by the disruptions. “The closer a business is to the customer on the supply chain, the more likely it is to take some reputational hits,” he said. “They are the ones that are going to be confronted [by customers] about the delays or non-delivery, and that is when reputations become eroded and ultimately their business profitability declines.”
Thousands of whistleblowers report bosses for ‘furlough fraud’
Thousands of workers have reported their employers to HMRC for committing furlough fraud, according to a freedom of information request by Pinsent Masons. Some 13,775 employees have used HMRC’s reporting system so far. Arun Chauhan, of the Institute of Chartered Accountants, said the high number of whistleblower reports suggested workers had “woken up” to the true impact of fraud. He said: “Employees who were forced to work under duress have moved jobs, they’re safe now, but are seeing how much taxpayer money is needed right now and are looking back and thinking: ‘What happened to me in the pandemic – that wasn’t right’.” HMRC estimates that of the £70bn given out as part of the two-year scheme, approximately £3.46bn was lost to fraud and error.
Retiring over-50s driving up inflation, John Lewis boss claims
The chairwoman of John Lewis, Dame Sharon White, told the BBC yesterday that an exodus of over-50s from the workforce since the pandemic has led to an increase in inflation and wage growth. It is also having major long-term implications for businesses struggling to fill jobs, Dame Sharon added. She said flexible retirement options or retraining over-50s for a different occupation could encourage some to return to work. The Mail cites a study by PwC from May, which notes that almost a fifth of UK workers said they expect to leave their job for a new employer in the next 12 months.
Truss dismisses criticism over tax cuts
Dominic Raab’s claims that Liz Truss’s tax cutting plans were an “electoral suicide note” have been dismissed by the Foreign Secretary. The Tory leadership frontrunner described the deputy prime minister as a “portent of doom” and his views as “declinist” while on a campaign visit to Huddersfield. She said: “I believe our country’s best days are ahead of us. What I’m going to do, if selected as prime minister, is keep taxes low, get the economy growing, unleash the potential right across Britain. That’s what I’m about.”
Meanwhile, Rishi Sunak has pledged billions more to help households with energy bills. He said that if he became prime minister, he would extend the package of support he announced earlier this year, which gave every household £400 off their energy bills, while those on means-tested benefits received a further £650.
Retailers urge leadership candidates to cut business rates
The Retail Jobs Alliance has warned Tory leadership candidates Liz Truss and Rishi Sunak that companies are facing a rise in their business rates bill next April of around 10% from inflation alone. In a letter, the alliance, whose members include Tesco, Greggs, Waterstones, Claire’s Accessories, Co-op, Kingfisher and Sainsbury’s, said: “The next government must prioritise fundamental changes to the ‘shops tax’. A permanent reduction in business rates for all retailers, regardless of their size, would make a big difference to retailers’ ability to invest more in shops and stores as well as to create jobs.”
The letter added: “While much of the discussion in this campaign has focused on corporation tax, it is business rates that are killing our high streets – a pre-profit tax which inhibits investment and disproportionately impacts those communities most in need of levelling up.” The alliance warned: “We fear that without urgent action many more shops, restaurants and pubs will struggle to keep their doors open.”
Used cars sales fall by nearly a fifth
Supply chain issues that put the brakes on the new car market have now impacted the availability of second-hand vehicles. The number of used cars sold fell by 18% in the second quarter, figures from the Society of Motor Manufacturers and Traders show. Some 407,820 fewer vehicles changed hands compared with the same period last year. Chris Knight, UK automotive partner at KPMG, said: “With the rate of new cars entering the market significantly down on previous periods as manufacturers grapple to solve supply issues, consumers are holding on to their vehicles for longer, resulting in fewer used car transactions. Prices remain significantly higher than pre-pandemic as consumers are willing to pay a premium to avoid having to wait. There is, however, evidence that price growth is cooling amidst a cost of living squeeze, and a rise in the cost of driving.”
Zuckerberg’s metaverse a threat to the financial system, BoE warns
The Bank of England has warned that financial problems within a cryptoasset-linked virtual world such as Mark Zuckerberg’s metaverse could have severe real-world financial consequences. Researchers said cryptoassets could enable an open metaverse by allowing for digital items and money to work across different platforms. But an increased reliance on metaverse-based revenue streams by corporates could pose a material risk should there be volatility in crypto markets.
Prudential
Prudential increased operating profit to £1.6bn and cut costs by 32 per cent during the first half of 2022 amid market volatility and dampened economic outlook. The insurance company’s life and asset management profits rose despite the challenges of the pandemic in its markets which contributed to the volatility. It announced the first interim dividend of the year at 5.74 cents and looks to cut head office costs by $70m at the start of 2023.
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.