business news 13 October 2021
James Salmon, Operations Director.
IMF expects economic growth to hit 6.8%. Latest GDP figures. Brexit. Online tax switch raises costs for small firms. Job vacancies hit record high. And more business news.
IMF expects economic growth to hit 6.8%
The International Monetary Fund (IMF) expects the UK economy to see growth of 6.8% this year. Although this is slightly lower than the 7% predicted in July, it would still represent the fastest growth in the G7.
The IMF also believes the UK will see growth of 5% in 2022, a 0.2% increase on its previous forecast. The IMF said the global economy is set to grow 5.9% this year and 4.9% next year – with these 0.1 percentage points lower than previously suggested.
The IMF expects most advanced economies to return their pre-pandemic growth trends next year as supply chain issues ease, and to exceed it by about 1% in 2024, while merging and developing economies (excluding China) could fall back and remain 5.5% below their pre-pandemic forecast by 2024.
Despite outlining the levels of growth it expects, the IMF’s latest World Economic Outlook warns that there is “great uncertainty” about economic performance, pointing to the potential impact of inflation. The report said issues “could materialise if pandemic-induced supply-demand mismatches continue longer than expected”, adding that this would lead to “more sustained price pressures and rising inflation expectations”, forcing “faster-than-anticipated” rises in interest rates.
“Monetary policy will need to walk a fine line between tackling inflation and financial risks and supporting the economic recovery,” the IMF said. Chancellor Rishi Sunak commented: “These new forecasts show the strength of our recovery, with the UK having the fastest growth forecast in the G7 this year.”
GDP figures
UK GDP grew 0.4 per cent in August 2021, according to the latest figures, remaining 0.8 per cent below its pre-pandemic level. Though the Office for National Statistics (ONS) has since revised its forecast for GDP growth in July – switching from 0.1 per cent growth to a 0.1 per cent fall. Services output grew by 0.3 per cent in August, with output in consumer-facing services lifting by 1.2 per cent, the ONS found.
Brexit
Renewed negotiations over a revised Northern Ireland protocol are about to kick off. The EU is to publish its proposals to reduce border and customs checks between Great Britain and Northern Ireland. The government’s negotiator, Lord Frost, sayshe will propose a new Northern Ireland protocol to replace the current one, which he said is harming the region and “has to change.”
Online tax switch raises costs for small firms
Analysis by the Federation of Small Businesses (FSB) suggests an overhaul of the tax system that introduced compulsory online filing has increased costs and administrative burdens for small companies.
The FSB found the average annual cost for participating businesses is £4,562, with this considerably higher than the £2,960 for those yet to migrate.
Those within the Making Tax Digital system must purchase compatible software and the FSB said subscription costs may grow as the initiative is extended to cover more taxes.
The FSB says that of those that have switched, 70% said costs and time lost to learning new processes has increased. Mike Cherry, national chairman of the FSB, said: “For many of those who’ve already taken the plunge, the programme has so far yielded higher costs and greater complexity.” VAT-registered businesses with taxable turnover over £85,000 are required to keep digital records and use software to submit their VAT returns, while VAT-registered businesses with a taxable turnover below the threshold will be required to follow the regime from April next year.
Job vacancies hit record high
Office for National Statistics (ONS) figures show that job vacancies hit a record high of almost 1.2m in September. The data also reveals a 207,000 increase in the number of people on payrolls, with the total hitting a record 29.2m. This is 120,000 above pre-pandemic levels and up 207,000 on the previous month. The report shows that vacancies grew across most sectors in the three months to September. While unemployment continued to fall, hitting 4.5% in September on the back of a 0.4% decline, the rate is likely to increase due to the furlough scheme winding up at the end of last month. The analysis found that average weekly earnings in the June-August period were 7.2% higher than in the equivalent three months of 2020, down from the previous reading of 8.3%. Excluding bonuses, earnings rose by 6.0%. Chancellor Rishi Sunak said: “The number of expected redundancies remained very low in September, there are more employees on payrolls than ever before and the unemployment rate has fallen for eight months in a row.” Darren Morgan, director of economic statistics at the ONS, said: “The jobs market has continued to recover from the effects of the coronavirus, with the number of employees on payroll in September now well exceeding pre-pandemic levels.” Reflecting on the ONS data, Yael Selfin, chief UK economist at KPMG, said the end of the furlough scheme “could briefly raise the headline unemployment rate, which could average 4.9% for 2021 as a whole, representing a smaller impact than originally expected.”
Apple
Apple is reported to have reduced its manufacturing target for the new iPhone 13 from 90m to 80m due to being hit by the global chip shortage.
Barratt Developments
Barratt Developments said it had continued to see strength in customer demand amid rising home prices. For 1 July to 10 October 2021, home completion fell to 3,699 from 4,032 last year, which benefited from the ‘significant increase in home completions after the disruption created by the initial national lockdown,’ the company said.
Marstons
Marston’s said it had seen a return to sales growth in the fourth quarter of its financial year compared to the same period in 2019 following an easing of lock-downs. In a trading update for the year through 2 October, Marston’s said sales in the final three months of that year had risen 2% across its managed and franchised pubs compared to 2019.
Just Eat Takeaway
Just Eat Takeaway’s financials were boosted in the third quarter of 2021 as Brits swapped home-cooked meals for takeout. The takeaway website processed 266m orders in the third quarter of 2021, representing a 25% jump compared with the same period of 2020 which helped the UK branch of the company reach the milestone of 1bn orders since its foundation.
Regulator to test firms’ remote working arrangements
The Financial Conduct Authority (FCA) is to evaluate firms considering remote or hybrid working on a case-by-case basis, saying firms will be required to prove that the remote working does not – or is unlikely to – cause detriment to consumers, damage the integrity of the market, increase the risk of financial crime and reduce competition. The watchdog said firms should be able to prove that a hybrid working model will not prevent the FCA receiving information about a company, nor will it reduce the accuracy of the Financial Services Register. Firms must also prove there is appropriate governance and oversight by senior managers under the Senior Managers regime. The FCA notes that under Principle 11 of the its Principles for Businesses, any material changes to how a firm intends to operate may require the company to notify it first.
Businesses giving bonuses and dividends should not expect support
Cabinet Office Minister Steve Barclay says firms facing high energy prices could be refused government support if they have paid out big dividends and bonuses, saying Treasury officials would scrutinise whether any interventions represented “value for money”. While the Government is set to provide long-term loans to companies threatened with closures due to soaring energy costs, Mr Barclay told Times Radio: “It’s right from a taxpayer point of view, mindful of the huge amount of support that has already been given to businesses, that we look at that in terms of what is value for money and what is proportionate. Have they recently paid dividends? Are they paying big bonuses? We’ll need to understand the detail rather than just knee-jerk to a taxpayer response. It’s about balance and engagement.” The High Pay Centre has backed Mr Barclay’s stance, with the think-tank’s Andrew Speke saying that while ministers are right to support firms, “help should absolutely be conditional on these companies’ recent behaviour.” However, Julian Jessop, economics fellow at the Institute of Economic Affairs, questioned the position, saying it is “not obvious why previous dividends or bonus policies are relevant, as these relate to the past performance of the business.” He added: “There might be a stronger case for imposing a moratorium on future dividends and bonuses until any state loans have been repaid.”
Treasury to revamp capital raising rules
The Government has announced a review of rights issues and other forms of fundraising in a move that could see an overhaul in the way London-listed companies tap shareholders for cash. The Treasury has appointed Mark Austin, a lawyer with Freshfields Bruckhaus Deringer, to chair a group that will examine how to revamp capital raising. The Treasury said the review will look at rule changes designed to make it easier for companies to tap investors and examine fundraising models used in other countries. It will also consider the role that technology can play. The Times’ Ben Martin says the review comes as the Government seeks to boost the appeal of London, noting that following a review of Britain’s listing rules by Lord Hill of Oareford, the Financial Conduct Authority announced rule changes to try to encourage more companies to float in London. Mr Austin commented: “Improving the efficiency of secondary capital raisings by listed companies is an important element of making the UK an even more attractive place for businesses to list.”
£10,900 a year needed to retire
Calculations for The Pensions and Lifetime Savings Association suggest a single person will need post-tax annual income of £10,900 for a minimum standard of living in retirement, with this spending budget climbing to £16,700 for a couple. The calculations for retirement living standards are pitched at three different levels and housing costs are not included on the assumption that most pensioners have paid off mortgages. The minimum level would generally be made up of a full state pension of £9,339 per year, as well as some workplace pension savings. The moderate retirement living standard requires a budget of £20,800 for a single person and £30,600 for a couple. The annual budget needed for a comfortable retirement living standard is £33,600 for one person and £49,700 for a couple. About one in six single employees is projected to have an income between moderate and comfortable.
Doing accounts little and often makes them less taxing
Jo O’Connell, founder of JellyRock PR, says the key to keeping on top of your accounts is to do them little and often, advising: “Setting aside regular time to enter and upload receipts makes everything far less painful, compared to doing it all in one annual splurge.” Ms O’Connell, who uses FreeAgent tax software, completes her return as soon as she can and pays her tax early, saying: “It means there are no scary surprises leading up to deadline day and everything is far less stressful.”
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