Business news 13 May 2022

James Salmon, Operations Director.

Chancellor’s tax raids risk triggering recession. UK economy shrinks in March as GDP falls. BoE censured by senior Tories over soaring inflation. Brexit critic appointed to key Bank of England role. MPs want dodgy bosses to go to jail. Demand for staff remains robust.  Over 90k civil service jobs to be axed.  Business investment declines over first quarter of 2022. And more business news.

Chancellor’s tax raids risk triggering recession .

The head of economics at the British Chamber of Commerce has warned there is a “real chance the UK could be in recession by the third quarter of this year” due to cost pressures and the national insurance rise squeezing consumer spending and business investment.

Suren Thiru called on the Chancellor to scrap the extra tax for at least the rest of this financial year. The increase pushed NICs up for households and businesses by 1.25 percentage points at a time when energy bills jumped by 54%. Barret Kupelian at PwC said the NI rise and the freeze to tax thresholds “amplified” the pressure on households, while Kitty Ussher at the Institute of Directors said the bills add to “the huge shock to economic confidence stemming from Russia’s invasion of Ukraine”.

UK economy shrinks in March as GDP falls.

The UK economy contracted in March, as the cost-of-living crisis hits families and threatens to push the country into recession. New data released by the ONS on Thursday showed that GDP fell by 0.1% in the month, slightly worse than the 0% growth forecast. “It appears as though the economy is dangerously close to a recession,” Paul Dales, chief UK economist at Capital Economics, said. Yael Selfin, chief economist at KPMG, adds: “After a relatively strong growth at the start of the year, the outlook looks increasingly fraught. While we do not yet see a recession coming this year, weak growth means that additional shocks or spillovers from other economies make this scenario increasingly likely.”

BoE censured by senior Tories over soaring inflation.

Tory MP and former cabinet minister Liam Fox has called for the Treasury select committee to launch an investigation into the Bank of England’s handling of inflation amid rising anger among lawmakers about the Bank’s loss of control of prices. Speaking in Parliament, Dr Fox said: “I believe it is fundamentally wrong for Governments to engage in structural profligacy, spending excessively across the economic cycle and passing ever-larger amounts of debt on to the next generation.” He went on: “I also believe it is the duty of central banks to safeguard the value of our money and our savings. The Bank of England persisted beyond any rational interpretation of the data to tell us that inflation was transient, then that it would peak at 5%. It has consistently underestimated the threat.”

Brexit critic appointed to key Bank of England role.

The Chancellor has appointed Dr Swati Dhingra, an associate professor at the London School of Economics, to sit on the Bank’s rate-setting Monetary Policy Committee (MPC). Rishi Sunak’s pick is known to be a fierce critic of Brexit and previously said it should be cancelled. Dr Dhingra will replace Michael Saunders, one of the Bank’s most hawkish rate-setters in August, meaning a more dovish stance could edge the MPC away from more aggressive action to tame inflation.

MPs want dodgy bosses to go to jail.

A group of MPs including Kevin Hollinrake and Dame Margaret Hodge have said business executives and accountants should be held responsible for failings in their checks and balances and go to jail if they fail to prevent economic crime. Dame Margaret said: “It is tragic that it has taken the war in Ukraine to bring the dirty money crisis to a head. We must act in a determined and effective way.” The lawmakers have published a manifesto on economic crime urging the Government to step up the fight against fraud and money laundering. The group praised the Government for pushing ahead with its Economic Crime Bill but urged ministers to strengthen it in the four key areas of transparency, enforcement, accountability and regulation.

Demand for staff remains robust.
The latest research from KPMG and the Recruitment and Employment Confederation (REC) indicates continued robust demand for staff combined with a shortage of candidates and increased competition has driven many firms to up pay offers for permanent and temporary workers. Employers added permanent staff at the weakest rate in over a year, however, suggesting the labour market might be cooling a bit. Neil Carberry, CEO of the REC, explained: “The number of job placements being made is still growing, but at a more stable rate.” He went on to add: “The labour market has been tightening for months on end, driving near-record growth in starting salaries for new staff . With vacancy numbers also historically high, this is a great time to be looking for a job – and a pay rise to help meet the rising cost of living.”

Over 90k civil service jobs to be axed.
Boris Johnson has ordered ministers to identify where department jobs can be cut as the PM calls for the size of the Civil Service to be slashed by a fifth. Hinting that the savings could help pay for future tax cuts, the Prime Minister used a Cabinet meeting in the Midlands on Wednesday to demand the cost of government be lowered to reduce the cost of living.

Business investment declines over first quarter of 2022.
Business investment fell 0.5% in the first quarter and was 9.1% below its pre-pandemic level, reflecting high business uncertainty. Investment levels were 8% below that of the first quarter of 2016 before the Brexit referendum, despite a two-year tax break on investment – the Government’s super-deduction policy – which has been in place since April 2021. Sandra Horsfield, economist at Investec, said: “Boosting productivity through higher investment will be a crucial ingredient in containing cost pressures for businesses in light of surging wage bills. So, a further shortfall in this regard is a concerning signal.”

Unpredictable windfall taxes would put energy security at risk – BP chief .

BP CEO Bernard Looney has warned that Britain’s energy security will be put at risk if Rishi Sunak imposes a windfall tax on oil companies. “A stable and competitive fiscal environment is an important element in any investment decision. – and that is what we have in Britain today,” Looney explained. The Chancellor is understood to be increasingly tempted to mount a raid on the industry after weeks of pressure from Labour and the Liberal Democrats. BP is committed to investing £18bn in the UK by the end of 2030, windfall tax or not, but further spending may be affected. Looney said: “By definition, windfall taxes are unpredictable – and so would challenge investment in home-grown energy. We know that from past experience for the whole of the North Sea sector and supply chain.”

Nuclear fund.

The Government is putting £120 million into a fund to develop nuclear power as the UK looks to gain energy security by putting nuclear power at the heart of its energy policy. The Future Nuclear Enabling Fund will help the government meet its goal of approving eight new reactors by 2030 and aims to encourage private investment in UK projects

JD Sports.

JD Sports Fashion said its sales have grown in the early weeks of its financial year, shaking off supply chain pressures. In addition, the company has lifted profit guidance for its financial year which ended on January 29.


Rolls-Royce Holdings said its performance for its financial year to date has been in line with expectations, allowing the group to keep its guidance for 2022 unchanged. The London-based jet engine maker said it is well positioned for anticipated growth in its end markets and continues to expect positive momentum in its financial performance despite ongoing macroeconomic risks.


Sage Group has reported 5% year-on-year organic revenue growth in its half-year results, alongside an 8% boost in recurring revenues. The strong performance was driven by the growing popularity of Sage Business Cloud, which enjoyed 21% growth over the six month window . Strategic investment continues to power the group’s performance, alongside new customer acquisitions, with organic operating profits rising 4% to £184m.

UK’s accountancy sector sees turnover soar.

New figures from the Office of National Statistics show UK accountancy firms generated more cash in March than in any other month on record. Turnover in the sector jumped 14% from February to March to record highs of £4.13bn. Professor Atul Shah said the results were no surprise as the major firms are “highly diversified” through various streams of income on top of their “income base from audit”. But Julie Mathieson, a partner at Kingsley Napley, said the sector should be preparing for “upcoming regulatory headwinds” considering plans to replace the Financial Reporting Council with a new, tougher regulator called the Audit, Reporting and Governance Authority. The accountancy sector’s record high comes as turnover across the whole of the UK’s services sector jumped by a 20% to £243.4bn in March this year. The UK’s legal services sector also saw turnover increase 19% between February and March, to £4.05bn.

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