Business news 13 April 2022
James Salmon, Operations Director.
UK wage rises fail to keep pace with inflation. Fourth rate rise in a row looms as jobs market sees record vacancies. Cost-of-living crisis dampens financial services optimism. Dover chaos harming UK’s reputation. And more business news.
UK wage rises fail to keep pace with inflation
Figures from the Office for National Statistics show average earnings, including bonuses, grew 5.4% in February – below the 6.2% rise in the consumer prices index for the month. For those who did not receive a bonus, average wages increased by only 4%. Public sector workers faced the sharpest fall in pay in 20 years in February compared with the same month in 2021, with the shortfall between wages growth and CPI widening to 4.2%. Jake Finney, an economist at PwC, said: “The worst is yet to come. The pay squeeze is likely to tighten, with real wages expected to fall by around 2% this year as inflation rises further.” Additionally, the ONS said the unemployment rate fell slightly last month from 3.9% to 3.8%. Darren Morgan, the director of economic statistics at the ONS, said: “While unemployment has fallen again, we are still seeing rising numbers of people disengaging from the labour market, and as they aren’t working or looking for work, are not counted as unemployed. The number of job vacancies reached a fresh high of 1.29m between January and March – a rise of 492,400 roles compared with the pre-pandemic first three months of 2020.
Fourth rate rise in a row looms as jobs market sees record vacancies
Economists are predicting another rate rise after fresh labour market data pointed to a red-hot jobs market. Thomas Pugh, an economist at RSM, said: “The drop in the unemployment rate to 3.8% in February and the rise in pay growth to 5.4% suggests the labour market is continuing to tighten. Combined with soaring inflation, this probably gives the Monetary Policy Committee all the justification it needs to raise rates again at its next meeting on May 5.”
Cost-of-living crisis dampens financial services optimism
A new survey by the CBI and PwC has found that financial services firms are holding back investment due to reduced sentiment. Isabelle Jenkins, head of financial services at PwC UK, added: “Financial services organisations are right to be careful and cautious as their resilience is once again put to the test. As the cost-of-living crisis mounts for households, it’s likely that we may see an increase in non-performing loans, another challenge financial services firms will have to respond to ensure consumers are supported through this difficult time. Despite some investment plans reined in for now, this is not the time to batten down the hatches completely, rather firms should continue to look at how they can best use the insight they are gathering to respond quickly and decisively in changing market conditions.”
Dover chaos harming UK’s reputation
Business and logistics chiefs have said delays in getting lorries across the channel is damaging for the economy and reputation of the UK. Chaos at Dover have been blamed on the suspension of sailings by P&O Ferries – but the failure of the Brexit IT system and the burden of new customs checks have also added to the hold-ups. The transport problems come as new data from HMRC show that the number of UK firms exporting to the EU fell 33% during 2021. “These are really worrying numbers and show the scale of the difficulties UK businesses now face in exporting their products to the EU,” said Michelle Dale of UHY Hacker Young.
Stenn looks to fill funding gap for trade SMEs
London based financing fintech Stenn, which helps smaller trade firms access growth capital, has secured $50m in fresh funding, bringing its valuation to $900m. The raise was led by US backer Centrebridge, whose Co-Head of European business Jed Hart said: “We have been impressed with Stenn’s disruptive approach to addressing the challenges of global trade finance supply and believe that Stenn has a highly scalable proposition. We are excited to be partnering and supporting Stenn’s growth at an important time in its evolution and during a period of uncertainty in the world.”
Ukraine
The US is to provide a further $750m in military assistance to Ukraine said President Biden. The equipment will be sent from US stockpiles and will not require Congressional approval. Russian President Vladimir Putin said the Ukraine invasion will achieve ‘clear and noble aims’. It has emerged that Russia is resettling Ukrainian refugees 5,500 miles away in Siberia. Ukraine has requested financial support from the west, its finance minister said government spending exceeded revenues by $2.7bn in March and Ukraine expects that gap to expand to $5bn – $7bn in April and May 2022. Russian parliament is discussing nationalising foreign companies that have abandoned the country. Nokia announced today it was suspending shipments of mobile network infrastructure to Russia. United Nations said that 10m Ukrainians have become refugees as a result of Russia’s invasion.
Partygate
The PM Boris Johnson, his wife and the Chancellor Rishi Sunak are to be fined as part of the UK police probe into illegal gatherings and parties during the lockdown in 2021. Mr Johnson had told the House of Commons he had not broken the lockdown laws his government had implemented. No standing PM has been found guilty of breaking the law before. Lying to Parliament is usually a sacking offence; the leader of the opposition demanded he resign. But Johnson and the Tories look set to try and ride it out.
Tesco
Tesco reported FY22 prelims with revenues of £61.3bn and profit before tax of £2.03bn. Net debt fell to £10.5bn down £1.5bn. The board expect strong free cash flow of between £1.4bn to £1.8bn for FY23 and operating profit of between £2.4bn to £2.6bn.
Time Out
Time Out the well known London magazine print copy is to be axed after 54 years and will shift to online delivery only.
Opinion: Britain’s tax system favours the rich
Writing in the i paper, Andrew Fisher, former executive director of policy for the Labour Party, says the UK’s tax system needs overhauling and the recent outcry over Akshata Murty’s tax status illustrates how much tax the wealthy can get away with not paying. “In his Spring Statement, [Rishi] Sunak could have raised taxes on the top 1% of earners, increased capital gains tax or inheritance tax, and closed many of the loopholes that enable the rich to avoid even these taxes. Instead, he increased national insurance and VAT.”
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