Business news 11 May 2023
James Salmon, Operations Director.
High street banks tighten small business lending. UK losing £2,300 per minute to fraud. The Working Time Directive, UK Consumer protections, BOE forcast to raise rates, UK firms trim permanent hiring and more business news.
High street banks tighten small business lending
Data from fintech firm Iwoca shows high street banks are reining in small business lending with some 77% of brokers reporting a reduction in appetite for funding SMEs. Just under two-fifths of brokers have seen an increase in applications for funding being rejected over the last quarter. That said, according to over half of brokers, the most common reason for SME loan applications was to expand the business. Richard Davies, chief executive of SME lender Allica Bank, suggests proposals from the Prudential Regulation Authority to implement Basel 3 standards forcing banks to hold more capital against loans to the sector will only add to the difficulties in raising cash. “Today’s data highlight the importance of choice in SME lending and we hope the regulator hears our call for action in amending the current proposals,” he added.
UK losing £2,300 per minute to fraud
People in the UK lost £1.2bn to fraud in 2022, the equivalent of £2,300 every minute, according to bank industry group UK Finance. It said around three million scams took place – slightly less than the previous year – with frauds involving payment cards being the most common. UK Finance said losses were not always reimbursed and urged tech firms to “share the burden” of covering costs. UK Finance boss David Postings said drugs gangs, criminal groups abroad and “state-sponsored bad actors” were responsible for the majority of fraud. He added that while banks were legally obliged to refund so called unauthorised fraud, they did not have to cover the costs of authorised scams – where victims are tricked into agreeing to send sending money to fraudsters. As a result, banks only refunded about 59% of the losses from this type of fraud on a voluntary basis, amounting to £285.6m of the £485.2m stolen. A separate report from the Home Office, written in 2020 but published only last week, reveals that one in five UK companies fell victim to fraud between 2018 and 2020 but the majority did not report it to the police.
Government to consult on changes to Working Time Directive
The Business Secretary has announced that the Government will consult on changes to the Working Time Directive as part of its “drive for greater deregulation”. Kemi Badenoch told the Telegraph “improvements to employment law could help save businesses around £1bn a year, while safeguarding the rights of workers.” She explained: “We will consult on cutting unnecessary red tape on recording working hours, streamline engagement with workers when a business transfers to new owners, and provide up to five million UK workers greater freedom to switch jobs by limiting non-compete clauses.”
FCA pledges ‘robust action’ to enforce new UK consumer protections
The Financial Conduct Authority warned firms on Wednesday that they face tough action if they are not ready for the regulator’s new “consumer duty” package, which obliges banks, asset managers and other providers of regulated financial services to prove they are acting in customers’ best interests.
Bank rate forecast to rise to 4.5%
The Bank of England is widely expected to raise interest rates for a 12th consecutive time today as it tries to control inflation, which currently stands above 10%. The Bank rate, which is already at its highest level for 14 years, is forecast to go up from 4.25% to 4.5%.
The decision is due at 12 p.me, with a press conference led by Governor Andrew Bailey following at 12:30pm.
Meanwhile, the National Institute of Economic and Social Research is predicting that inflation will not return to the Bank of England’s 2% target until the third quarter of 2025. This is a more pessimistic outlook than the BoE and the Office for Budget Responsibility, who think price growth will fall rapidly in the coming months. Leaza McSorley, head of macroeconomic research at the think tank, said interest rates could peak at 4.75% or above and would only fall slowly as inflation persists in the coming year.
UK firms trim permanent hiring
A survey by the Recruitment and Employment Confederation and KPMG found that in April businesses in the UK reduced hiring of permanent staff via recruitment agencies at the fastest pace in more than two years. However, temporary hiring rose at the fastest pace in seven months. “Firms are hedging their bets,” REC Chief Executive Neil Carberry said. “After a better month in March, in April we saw permanent hiring fall back quickly and businesses turn to temps to help them through. London had a particularly difficult month.” Staff availability increased for the second month in a row in April while salaries for people starting permanent roles increased at the fastest pace in four months.
Google
Google announced at an annual conference the launch of an enhanced search engine featuring it’s AI chatbot. Queries on google will now trigger responses powered by PaLM2, its large-language mode. The new search will initially only be rolled out in the US.
HMRC workers ‘up for the fight’ as they strike over pay
Civil servants at HMRC are striking over pay and conditions, with targeted action taking place in East Kilbride and Newcastle. The union is calling for a 10% pay increase and warns of a severe impact on services.
Harbour confirms job cuts due to windfall tax
Harbour Energy has reiterated its plan to cut hundreds of jobs ahead of its AGM today. The North Sea’s largest oil and gas producer has suffered heavily from the windfall tax since it was introduced last May – which has effectively established a 75% tax on profits in the North Sea for the next six years. Harbour already announced plans to cut 350 onshore jobs last month due to a restructuring of its UK activity following the introduction of the Energy Profits Levy.
UK energy taxes too high, says Nissan boss
Makoto Uchida, the chief executive of Nissan, has urged the Prime Minister to cut energy taxes warning that a levy on heavy energy users and high prices were hampering the Britain’s competitiveness. Mr Uchida told an audience at the Financial Times Future of the Car Summit that his company was in dialogue with the Government about increasing production at its Sunderland plant. He described the site as “key” but urged lawmakers to promote “competitiveness, especially in the supply chain.”
Hunt should review VAT rebate decision – Leadsom
Dame Andrea Leadsom, the former Tory business secretary, has joined calls for Jeremy Hunt to bring back tax-free shopping for overseas tourists. The Chancellor should look again at the policy and assess if the UK is losing out to other destinations. Despite the Treasury’s assertions that scrapping the VAT rebate is saving the taxpayer £2bn a year, research suggests there would be a net gain of around £350m a year if it was reintroduced.
Political instability harms FDI in UK tech projects
A survey of Europe’s foreign direct investment (FDI) carried out by EY reveals that foreign investment in UK tech projects fell by a quarter last year. The number of UK tech projects funded from overseas dropped to 234 last year, a 23.3% decline compared with 2021. However, Britain still remains the biggest destination for overseas investment in the tech sector in Europe, but now has a smaller share of the overall market at 19.8%, down from 29% in 2021, EY’s figures show. Peter Arnold, chief UK economist at EY, said political instability in the UK impacted investors’ short-term perceptions, “which dropped the UK from the second most attractive investment destination in Europe to the third, behind France and Germany.”
VC investment drops sharply
Figures from KPMG show total venture capital investment into UK businesses fell to £2.9bn in the first quarter of this year. This is compared with £12.3bn raised in Q1 2022 and £8.2bn raised in the opening quarter of 2021. Two-thirds of VC investment coming into UK businesses in the first quarter flowed into London, KPMG’s Venture Pulse report shows, with more than half of the deals completed (219) by businesses based in the UK capital. KPMG’s Amy Burnett said investor sentiment in the UK is “starting to turn slightly with some cautious positivity that the worst of the market turbulence might be over.”
Global super-rich head to Italy
The Guardian reports that billionaires are turning their backs on the likes of Switzerland, Dubai or the Cayman Islands and moving to Italy to take advantage of what is described as a “tantalising” tax regime. Italy launched a little-heralded incentive, which applies to the super-rich of all nationalities, in 2017. In exchange for paying an annual fee of €100,000, those who take up residency in the country are entirely exempt from paying tax on income generated overseas. The initiative also extends to family members for a yearly payment of €25,000 per person. The measure attracted 98 people in its first year before jumping to 549 by 2020 and more than doubling to 1,339 in 2021. Marco Cerrato, a tax lawyer who has handled the financial affairs of several new billionaire residents in Italy, observes that foreign nationals who once had non-domicile status in the UK had been leading the way. “Brexit is one aspect, as the UK, especially London, started to feel less hospitable,” he said.
US Inflation
US Inflation rose in April at 0.4%, equal to annual rate of 4.9%, its slowest pace since April 2021 and below the estimated 5%, providing some hope that the cost of living will drop further into 2023.
JD Wetherspoon
JD Wetherspoon hailed its ‘highest-ever’ sales in the Easter period. The Watford, Hertfordshire-based pub and hotel chain said like-for-like-sales in the 13-weeks to April 30 rose 12% from a year ago and were 9.1% higher than in the same period in the last full financial year before the pandemic.
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.