Business news 11 July 2022
James Salmon, Operations Director.
Inflationary pressures dampen outlook for labour market. UK companies braced for recession as spending slows and costs soar. Small developers at risk of collapse . Thousands to bunk off work during heatwave. Whoever wins power, rates are likely to rise and promised tax cuts will not pay for themselves. And more business news.
Inflationary pressures dampen outlook for labour market
A monthly survey from BDO showed an eighth consecutive rise in private sector recruitment last month, underscoring the strength of the labour market even as the broader economy slows. The unemployment rate has fallen to 3.8% but surging inflation and squeezed disposable income pushed down BDO’s wider output index to the lowest level since early 2021. “Despite recent resilience, inflationary pressures and fears of a recession look to dampen the outlook for the labour market as economic activity is predicted to decline in the second half of this year,” Kaley Crossthwaite, a partner at BDO, said. Crossthwaite added that businesses faced “a perfect storm of staffing shortages, an expected increase in the energy price cap and weakened consumer spending”.
UK companies braced for recession as spending slows and costs soar
The FT has been told by multiple companies that they had begun “war gaming” for a recession in recent weeks, with some adjusting medium-term plans for a period of low or no economic growth.
Small developers at risk of collapse
Insolvency Service data analysis by Price Bailey reveals that 360 small housebuilders collapsed in the year to the end of March as costs soar and planning system delays continue to stall projects. Developers of all sizes are frustrated with the planning system, the Times reports, which one chief executive described as “the worst planning regime I’ve seen in nearly 40 years”. Smaller builders had been “disproportionately harmed” by a number of factors, Price Bailey said, including cost inflation and spiralling wages. If smaller developers kept going under, Matt Howard, of Price Bailey, said that the Government’s target of building 300,000 new homes every year “looks increasingly unobtainable”.
Thousands to bunk off work during heatwave
Hundreds of thousands of workers are expected to take days off this week as temperatures soar to over 30 degrees centigrade in parts of the UK. Around 70% of workers are tempted to call in sick in hot weather, Chartered Institute of Personnel and Development research showed. Employers are braced for £200m of costs daily this week from staff dodging work, the Daily Star reports. Sick days cost an average of £139m per day for employers covering staff’s roles, with numbers spiking in hot weather, according to a study by PwC. Bookmakers Coral have cut odds on breaking the 38.7C UK temperature record set in 2019 to 4-5 odds-on. Spokesman John Hill said: “The odds say the records will be fried, along with the rest of us.”
Whoever wins power, rates are likely to rise
Despite all the power plays by Tory leadership contenders, the Bank of England will face inflationary pressures whoever wins, says Jill Treanor in the Sunday Times. Meanwhile, economists including Gerard Lyons and Julian Jessop are asserting that tax cuts will not add to the inflationary burden significantly; but Bank governor Andrew Bailey will be fighting an inflation rate at its highest for 40 years. Therefore, says Paul Dales, chief UK economist at Capital Economics, whoever gets the keys to Downing Street will be facing a weak economy, the cost-of-living crisis is going to be at its greatest and they will want to make a very good first impression. “So it seems sensible that they will do something to help households and businesses. And if they do, then they’re essentially saying: ‘OK, Bailey, we’re going to do what we need to do politically, but you need to do what you need to do to get inflation back down.’”
IFS: Tory tax cuts will not pay for themselves
Responding to a plethora of tax promises from Tory leadership candidates, Paul Johnson, director of the Institute for Fiscal Studies think-tank, said that the scale of the pledges by several of the candidates would not be straightforward to fund. “Everyone would like lower taxes but [the candidates] need to be clear about consequences,” he said. He added that the contenders would face two difficult choices to fund their pledges. “Using that headroom on tax cuts almost certainly means big real terms cuts in public pay, for example,” he said. “An alternative of course is to borrow more, contrary to Conservative manifesto.” Elsewhere, Richard Partington asserts in the Guardian that in focusing on ideologically driven tax cuts alone, the Conservatives are missing the point that a more fundamental rethink of Britain’s economy is needed to combat the cost of living crisis.
Energy bills forecast to hit £3,363 a year
Experts are predicting that the typical gas and electricity bill in England, Wales and Scotland could reach £3,363 in the new year. Dr Craig Lowrey, principal consultant at Cornwall Insight, said: “There is always some hope that the market will stabilise and retreat in time for the setting of the January [price] cap. However, with the announcement of the October cap only a month away, the high wholesale prices are already being baked in to the figure, with little hope of relief from the predicted high energy bills.”
Unions claim teachers and nurses ‘ready to quit’ over pay delays
Public sector workers seeking pay rises to keep pace with soaring inflation are worried the collapse of Boris Johnson’s government could mean wage deals are pushed back to the autumn. Teachers, NHS workers and others in the public sector have been demanding increases of at least the rate of inflation – currently 9.1% – while ministers had been insisting that pay restraint was necessary because the Treasury needs to limit spending and curb inflation. But unions are warning that pent up frustration over the delayed pay process could see many workers quit in frustration.
Businesses urged not to pay ransoms to cyber criminals
The National Cyber Security Centre (NCSC) and the Information Commissioner’s Office have urged businesses not to pay ransoms to cyber criminals amid a rise in payouts. In a joint letter to the Law Society, they warned solicitors that while ransomware payments were not unlawful, “law enforcement does not encourage, endorse nor condone the payment of ransoms. Payment incentivises further harmful behaviour by malicious actors and does not guarantee decryption of networks or return of stolen data.” John Edwards, the commissioner, and Lindy Cameron, the NCSC’s chief executive, said they were alarmed at the increase in recent months of such attacks, with significant sums of ransom money being paid by firms. They said the trend appeared to be based on a mistaken belief by the companies’ legal advisers that paying a ransom could protect the stolen data or result in a lower penalty from the Information Commissioner for the data breach
Twitter
Elon Musk has ended his interest in taking over Twitter due to claims of false and misleading statements made by Twitter. Both parties have appointed lawyers to argue over the $1 billion termination fee that had been agreed.
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