Business news 12 June 2023
James Salmon, Operations Director.
We are back after a short break. UK dodges recession. Services upbeat. Manufacturing gloomy, sick days in the heat and other business news that we thought would interest our members.
UK dodges recession but only weak growth forecast
A new report by KPMG has found that the economy has enjoyed a better start to the year than expected and is now predicted to grow by 0.3% this year, compared with its previous forecast of an uplift of just 0.1%.“We’ve seen a slightly stronger momentum for the UK economy,” said Yael Selfin, chief economist at KPMG UK. “The UK economy has so far avoided a technical recession. But risks are still elevated. A stickier inflation will see monetary policy tightening even further, increasing the risk of unwelcome side effects, among other potential headwinds.” Meanwhile, the CBI, which previously projected a decline of 0.4% in GDP, now expects it to expand by 0.4%. Both expect growth to pick up next year, with KPMG forecasting a 1.1% rise in GDP and the CBI projecting an increase of 1.8%. Rain Newton-Smith, CBI director-general, said: “Businesses and consumers alike will be relieved that the UK economy has avoided recession and will re-enter growth territory in the second half of this year. But firms want to see growth – and productivity – pick up pace. We want to see the UK at the top of the global league tables once again.”
UK services sector upbeat, manufacturing gloomy
A study by BDO has reported that a 10-month high in output from the services sector delivered a confidence boost for businesses in May, while recruitment activity remained resilient. However, the contrast between the services and manufacturing sectors remains, with the manufacturing optimism index falling to 91.56, the lowest score since February 2021, while output plunged to the lowest score since June 2020. Kaley Crossthwaite, a partner at BDO, said the growing output gap between the sectors was “concerning” and urged the Government to rethink policies to help businesses tackle supply issues.
Sick days for hot weather to cost £1bn this week
Seven in 10 workers could call in sick next week so they can enjoy the fine weather, according to research by the Chartered Institute of Personnel and Development, costing the economy £1bn. A study by PwC showed the number of sick days taken always soars in hot weather. The Federation of Small Businesses has said: “Employees’ days off in hot weather do happen and can be a big problem.”
Arena fraud saga plays on
Sam Chambers in the Sunday Times reviews the Arena TV case. The outside broadcaster collapsed in November 2021 and administrators from Kroll uncovered an alleged £250m fraud. The company’s two directors, Richard Yeowart and Robert Hopkinson, went on the run but Hopkinson was found last year in France. Kroll is now understood to suspect Lloyds for a possible failure to perform anti-money laundering checks and is also weighing up whether to take legal action against McKenzies, Arena’s auditors. The Serious Fraud Office is investigating the Arena fraud.
AI’s threat to jobs should not be regulated away – Bootle
Writing in the Telegraph, Roger Bootle argues that the threats of artificial intelligence (AI) are real but not in the way some doom-laden prophecies suggest. Rather than wiping out jobs for humans en masse, Bootle believes we’ll see “a drawn-out process in which jobs for humans are lost in one sphere and then later in another, giving time for the system to adapt and for new jobs to be created.” The development of AI will see new jobs created too, particularly in the services sector, he adds. “AI offers one of our best hopes for higher living standards in the future,” Bootle continues, and although the worst repercussions of AI should be regulated, “we really shouldn’t be trying to regulate away its threat to jobs.”
Is it time for businesses to stop playing happy families?
In the Independent (Sunday), Katie Rosseinsky considers the propensity for some companies to claim a “family” culture and how this can prove off putting for some people, who prefer to keep their private and professional lives separate. Psychologist Lee Chambers explains that such a culture can become exploitative and feel like “an emotional burden” and even act as a smokescreen for bad behaviour. The pandemic has catalysed a shift in attitudes to work, says Rosseinsky, citing Deloitte’s latest Gen Z and Millennial Survey. The study, which collated the response of 22,856 people born between 1983 and 2004, found work-life balance is the top consideration when choosing a new employer. “Against this backdrop, perhaps businesses will stop playing happy families altogether.”
Family business owners need tax relief certainty
Family business owners need certainty on tax relief to ensure that they can pass their companies to their children, according to the Institute for Family Business (IFB) lobby group. Without the relief, inheritance taxes may deter people, bringing the continued family ownership of many companies into doubt. “Business property relief needs to be protected. If it is removed, it raises questions over companies’ futures,” said IFB CEO Neil Davy. There are an estimated 4.8m family-owned businesses in the UK, who are believed to account for 85% of all private sector firms. They employ about 14m workers and pay £200bn in taxes.
Opinion: WFH has been a catastrophe
The Telegraph’s Matthew Lynn contends that the work from home experiment has been a “failure on an epic scale” and those who espoused the revolution in work brought on by the pandemic owe everyone an apology. Lynn says: “As company after company insists that their staff return to work, as unhappy workers quit the labour market in record numbers, and as productivity plummets in the sectors that embraced it most enthusiastically, it is surely time to admit that it has been a catastrophe.”
Workers retiring early ‘could push up taxes for young’
Catherine Mann, an external member of the Bank of England’s Monetary Policy Committee, has warned that the raft of older workers leaving the labour market could push up taxes for younger workers. In an essay for the Resolution Foundation think tank, Mann said: “Who will bear the societal burdens of older workers who do not return to the labour market? If it is presumed that younger workers will pay through higher taxes, then intergenerational tensions could worsen.”
Ukraine conflict deepens Britain’s food price woes
The destruction of the Kakhovka dam in southern Ukraine threatens to worsen Britain’s food inflation crisis, the Sunday Telegraph reports. Experts say the flooding could knock out 2-3% of Ukraine’s farmland and a resultant rise in wheat prices will be felt by British shoppers. In the UK, groceries cost 19.1% more than a year earlier and have kept overall inflation higher than expected leading to predictions that the Bank of England will be forced to raise interest rates to 5.5%. James Walton, chief economist at the Institute of Grocery Distribution, believes food inflation will still slow down, but the latest crisis will delay its return to normal levels. Yael Selfin of KPMG says the Chancellor’s target of halving inflation by December should still be within reach, provided food price rises don’t persist for too long.
BoE’s Mann sees case for UK carbon tax
Bank of England policymaker Catherine Mann has said in an essay for the Resolution Foundation that Britain and other rich nations should consider introducing carbon taxes and emission trading schemes as they would give clear incentives for people and businesses to reduce their emissions as well as raising revenue, and complemented potentially costly government spending on green technology. “Fossil-fuel prices need to rise from their 2010s average to address climate change,” Mann said. “As wholesale energy prices level off, now is the time to put in place a longer-term strategy for both greater use of market mechanisms and revenue redistribution,” she added.
Airbus and Lockheed compete for £6bn Skynet contract
A £6bn Ministry of Defence satellite contract is up for grabs, the Times reports, with Airbus and Lockheed Martin the main likely contenders. In a project known as Skynet Enduring Capability, three or four geostationary craft, each the size of a bus, will be ordered by the UK Government in one of the most valuable government research, development and manufacturing contracts of recent times.
MTD five times over budget
A report from the National Audit Office reveals that HMRC’s long-awaited Making Tax Digital scheme will cost £1.3bn – five times its original £229m budget in real terms. The programme has been beset by delays and complaints from some professional bodies and taxpayers over unexpected costs. Gareth Davies, NAO head, said: “The repeated delays and rephasing of [MTD] have undermined the programme’s credibility and increased its costs.” Meg Hillier, chairwoman of the Commons public accounts committee, said HMRC “needs to demonstrate its plans add up”. But HMRC said the scheme would “deliver a strong return on investment for the taxpayer” and questioned the NAO’s analysis.
Building societies call for PSA to be raised
Nationwide has joined Skipton, Coventry, Yorkshire and Leeds building societies in calling on the Government to increase the Personal Savings Allowance – the tax-free threshold for savers. Currently, any interest earned on savings over £1,000 – or £500 for those in the higher rate income tax bracket – is subject to tax, but rising interest rates mean many with only modest savings will end up paying the levy. A basic rate taxpayer would only need about £20,000 – or £10,000 for a higher rate payer – to be dragged into paying tax. Tom Riley, director of retail products at Nationwide, said: “We are supportive of raising the tax-free threshold for savers, particularly at a time many households are struggling financially.”
Mortgage market facing complete reset
Figures indicate that only a third of borrowers on cheap fixed-term deals had come off them so far, and, according to analysis by Capital Economics, a third of those households, equivalent to 3.2m, are paying interest rates of 3% or more. By the end of next year that will have risen to 5.8m households. On average, mortgage repayments for borrowers coming off existing deals are about 26% a month higher, according to broker London Money. The Centre for Economics and Business Research is now expecting the average two-year fixed mortgage rate to reach 5.1% this year. A City source said: “There’s going to be a big reset of mortgages for the next nine months. Only a third has come through so far, two thirds is to come.”
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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.
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.