Business news 11 February 2022
James Salmon, Operations Director.
UK economy bounced with 7.5% GDP growth in 2021. SMEs need support. Insurer says SMEs must consider protecting their borrowing. Hospitality bosses call for VAT freeze. HMRC denies it is soft on fraud. And more business news.
UK economy bounced with 7.5% GDP growth in 2021
The UK economy bounced last year with growth of 7.5% despite falling back in December due to Plan B restrictions that were imposed because of Omicron, according to the Office of National Statisitics.
The 7.5% growth the UK economy recorded in 2021 is the highest of the G7 major economies and that does indicate a major bounce. However, that followed the 2020 fall of 9.4% as the pandemic forced parts of the economy to shut.
Chancellor Rishi Sunak said the economy had been “remarkably resilient”.
SMEs need support
ACCA chief executive Helen Brand writes in City AM on the importance of delaying the 1.25% rise to National Insurance contributions to help small businesses more fully recover from the pandemic. An ACCA survey reveals SMEs are also facing problems such as surging inflation, interest rate rises, heightened supply chain issues, the energy crisis, and complications gaining access to finance. One in four UK SMEs, and 40% in Wales, will struggle to meet increased payroll costs for April when the rise in NICs comes in, Brand says.
Insurer says SMEs must consider protecting their borrowing
Research by Legal & General indicates that about £672bn of corporate borrowing by SMEs is unprotected. Robert Betts, market development manager at Legal & General, says over half of UK SME business owners have also given personal guarantees to secure their borrowing. When taking personal guarantees and other forms of credit into account the overall business protection gap is estimated to extend into the trillions.
Hospitality bosses call for VAT freeze
Restaurant bosses have written to the Chancellor calling for a VAT freeze at 12.5%. In an open letter, they said businesses need tax relief to continue in order to fully recover from the side effects of the Covid pandemic, especially as firms and consumers battle soaring costs this year. They claimed the imminent return to a 20% VAT rate will “exacerbate the squeeze on household finances.” Kate Nicholls, CEO of UKHospitality, said a freeze was about “so much more” than extending temporary pandemic measures. “It’s about working to establish the right tax level for our world-class hospitality and tourism industries. It is vital, in the interests of competitiveness, job creation, growth and ensuring hospitality and tourism play their full part in driving the economic recovery.”
HMRC denies it is soft on fraud
HM Revenue and Customs has responded to the assertion in a report from the Public Accounts Committee (PAC) that inaction over tracking down fraudulent claims for Covid support risked “rewarding the unscrupulous”. Meg Hillier, who chairs the committee, said: “The level of fraud and error in furlough that employers will get away with is a real concern. What signal does it send when HMRC rolls over on billions of pounds of fraud and error directly related to Covid support packages?” The Government had already disputed that it had written off £4.3bn of loans, and HMRC said that nothing had been written off. “While we acknowledge lessons that need to be learned in this report, we reject many of the statements made by the PAC. No fraudulent payments have been written off and we are taking action on multiple fronts to recover overpayments,” a spokesman said.
Winding-up order filed against Specialty Steels UK
HMRC filed a petition at the High Court this week to wind up Specialty Steels UK, part of Sanjeev Gupta’s Liberty Steel. The move puts about 2,000 jobs are at risk if the four affected businesses are pushed into insolvency. According to the FT, Gupta’s companies owe £26m in tax. A spokesman for the Business Secretary, Kwasi Kwarteng, said the Government is closely monitoring developments.
Huge demand sees starting salaries soar in the capital
Starting salaries are rising at their fastest rate on record in London with employers faced with a shortage of skilled staff and rising demand. A KPMG/REC survey revealed that 59% of London employers found that starting salaries increased during the month while 41% saw no change. This is the highest reading for the index since it was first compiled in October 1997. Pay for newly qualified lawyers rose by up to 50% to as high as £150,000. Other roles proving particularly hard to fill included chefs, accountants, security guards, compliance officers, software engineers, nurses, social workers and shop assistants. Anna Purchas, London office senior partner at KPMG, said: “As the capital looks to recover, the severe candidate shortage has driven starting salaries in London to an unprecedented level. This, combined with the other rising cost challenges, is placing pressure on the profitability of businesses in the capital, and risks hampering their ability to grow.”
House price boom reveals north-south divide
The average price tag on a home has doubled in parts of southern England over the past decade, while further north some percentage increases have been in single digits, analysis has found. Margate was identified as the top house price hotspot, with the typical asking price there having increased by 102.5% from £145,311 in January 2012 to £294,209 in January 2022, Rightmove analysis found. Across Britain, the average asking price for a home has risen by more than £100,000 over the past 10 years, up by 53% to £341,019. Southeast England dominates the top of the list; by contrast, many northern towns have missed out on the boom. In Middlesbrough house prices have risen only 6% to £132,792 compared with £125,000 in 2012
Experts comment on freezing of pensions AE earnings trigger
Pensions experts have welcomed the Government’s decision to freeze the earnings trigger for auto-enrolment at £10,000. They have also added suggestions, with Becky O’Connor, head of pensions and savings at interactive investor, saying: “The Government needs to consider ways of reaching people who can afford to make pension contributions and are not doing so because they do not currently reach the threshold for auto enrolment.” Helen Morrisey, senior pensions and retirement analyst at Hargreaves Lansdown, noted that the Government would be hesitant to pile extra costs on people in times of a significant living cost squeeze. Meanwhile, Tom Selby, head of retirement policy at AJ Bell, said that while workers’ minimum contributions could be hiked, they should still be allowed to choose to pay less into their workplace pension in case they cannot afford it.
US inflation
US Inflation accelerated in January, with prices across a wide range of goods and services soaring further amid lingering shortages and supply chain disruptions. The US Consumer Price Index registered a 7.5% annual gain in January. Consensus economists were looking for a 7.3% rise, according to Bloomberg data. This represented the fastest rise since 1982, as well as an acceleration from the 7.0% year-over-year increase seen in December.
Crypto M&A value soared 5000% in 2021
A report from PwC reveals the total value of M&A deals in the crypto industry in 2021 was $55bn, up from $1.1bn the previous year. The average deal size reached $179.7m from $52.7m. Henri Arslanian, PwC’s crypto leader, says the wave of deals shows no sign of slowing in 2022 adding that valuations have hit levels “that are often difficult to justify.”
Tate & Lyle
Tate & Lyle reported a rise in third-quarter revenue, led by double-digit growth in its food and beverage division.For the three months ended 31 December 2021, revenue was up 18%, with food & beverage and sucralose businesses growing by 19% and 8% respectively.
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