Business news 14 June 2022

James Salmon, Operations Director.

ONS figures reveal shock contraction of UK economy. Inflation threat a barrier to tax cuts, PM says. Brexit latest. S&P in Bear Market. Chancellor opens London Tech Week.  And more business news.

ONS figures reveal shock contraction of UK economy

Figures from the Office for National Statistics (ONS) on Monday showed the UK economy shrunk by 0.3% in April, missing forecasts of a rise of 0.1% and fuelling fears that the UK economy could be heading into recession.

Darren Morgan, director of economic statistics at the ONS, said: “A big drop in the health sector due to the winding down of the test and trace scheme pushed the UK economy into negative territory in April. Manufacturing also suffered with some companies telling us they were being affected by rising fuel and energy prices. These were partially offset by growth in car sales, which recovered from a significantly weaker than usual March.”

The news sent the pound tumbling to a two-year low against the US dollar of $1.215. Despite the lack of growth, with inflation forecast to increase further in the autumn markets expect the Monetary Policy Committee to increase interest rates for the fifth consecutive time when it meets on Thursday.

“We expect the MPC to tread cautiously,” said Thomas Pugh, economist at RSM UK. He forecasts a series of 25bp rises taking interest rates to 2% by the end of the year, rather than big jumps, “which could tip the economy over into recession”.

Yael Selfin, chief economist at KPMG UK, said the economy is likely to keep on shrinking. “The overall outlook remains downbeat as the squeeze on consumer income is expected to weaken demand, and external headwinds intensify due to the deteriorating outlook among the UK’s main trading partners,” she said.

Inflation threat a barrier to tax cuts, PM says
Boris Johnson is resisting pressure to introduce tax cuts with Downing Street and the Treasury arguing that to do so before inflation is brought under control would risk sending soaring prices even higher.

Discussing calls to cut tax, Mr Johnson told LBC on Monday: “Yes, of course I understand that we need to bear down on taxation and we certainly will.” But he said there was an “inflationary spike that we’ve got to get through right now, looking after people as we go through that. And that is what we’re going to do”.

Separately, Levelling-up Secretary Michael Gove said further devolution could see local authorities given the power to set tax rates to stimulate economic activity. Mr Gove pointed to the US city of Nashville which was “booming” because state bosses had gone for a “low-tax approach which has seen talent flow in.” Using Tees Valley in the North East as an example, Mr Gove said if district mayor Ben Houchen was given the freedom to set taxes, “it would undoubtedly be the case that Redcar would become the Nashville of England.”


The UK unveiled legislation to override parts of the Brexit deal it signed with the European Union, risking a trade war with the bloc and pitting Prime Minister Boris Johnson against opponents in his own fractured party. The plan, which was published Monday and would give ministers the power to unilaterally rewrite the bulk of the Northern Ireland protocol, was immediately condemned by the EU, panned by legal experts as illegal and looks set to face stiff opposition in Parliament. The European Union said it will consider new infringement proceedings against the UK. Boris Johnson dismissed it as “relatively trivial” changes that are needed to the trade deal. Ireland’s foreign minister, Simon Coveney, attacked the plan, telling his British counterpart, Liz Truss, that it would be “deeply damaging to relationships on these islands and between the UK and EU”.

Bear Market

The S&P500 fell 3.9% on Monday to take it into official bear market territory for the first time in two years as markets braced themselves for 0.75% interest rate rise in the US. Cryptocurrencies have been hammered in trading.  Bitcoin was down about 20% this week, falling to as low as $22,000 today.

Chancellor opens London Tech Week
The Chancellor Rishi Sunak opened London Tech Week on Monday praising Britain’s reputation as a global tech centre. Mr Sunak told tech leaders the UK wanted to do more to make sure the UK’s tax regime for innovation was “globally competitive” and created “proper incentives for all of you to invest and invent.” He said: “We need to do more to support private sector R&D (research and development). And that includes tax. On the face of it, we have one of the most generous tax regimes for R&D investment anywhere, measured by how much we spend on it. But despite spending huge and rapidly growing sums, clearly it is not working as well as it should. In the UK, business spending on R&D amounts to just three times the value of the R&D tax relief. The OECD average? 13 times.” He also pledged to reform R&D tax credits and to consider whether to make R&D expenditure credit more generous.

UK’s new Digital Strategy welcomed by CBI
Speaking at London Tech Week on Monday, Digital Minister Chris Philp said the Government’s new Digital Strategy will create more than 650,000 new jobs and grow the UK tech sector by £41.5bn by 2025. The strategy focuses on three key themes: ideas – the Government will identify key areas for investment, such as artificial intelligence, semiconductors and quantum computing; people – which means nurturing talent, upskilling and attracting the brightest from around the world; and finally, investment – the Government will encourage UK capital through pension funds, as well as investment from overseas. The strategy also points to the importance of rolling out world-class digital infrastructure, encouraging businesses across the country to adopt new technologies and collaborating on international tech governance systems. The plans were praised by the Confederation of British Industry (CBI). Naomi Weir, CBI Director of Innovation, said: “We can’t waste a moment in bringing this strategy to life.”


The UK Unemployment Rate has remained stagnant since February, according to official figures, after it dropped slightly to 3.8 per cent. The country’s employment rate inched 0.2 per cent higher to a total of 75.6 per cent, as it continues to chase pre-pandemic levels, the Office for National Statistics has found today. It comes amid sluggish wage growth and recession concerns, as inflation flirts with a 40-year high.

Top restaurants see losses soar
Analysis from UHY Hacker Young reveals the UK’s top 100 restaurants saw their losses swell by 24% from £673m to £832m in just the past six months. Many restaurants had overextended themselves “significantly” in the years leading up to the pandemic and were now struggling with “inflation running out of control,” Peter Kubik, partner at UHY Hacker Young said. “With economic dark clouds still gathering and the UK facing a cost of living crisis, there are still strong headwinds facing the casual dining sector,” he added. However, Kubik was confident that “the worst is over,” with restaurants having divested underperforming branches and entered into CVAs.

Demand for new offices shifts to the north
Sirius Real Estate, which owns flexible office properties and warehouses, is reporting an uptick in inquiries from small businesses for its properties in the north of England, even as demand remains flat in London and in the south east. The shift in demand to the north of the country comes after the coronavirus pandemic prompted thousands of people to relocate from London.

HBOS Reading victims to be offered £3m compensation
Victims of the HBOS Reading scandal could be offered £3m each in compensation in exchange for settling their claims in a bid to bring a long drawn out review process to a conclusion. If all the remaining cases chose to accept the lump-sum offer it would cost Lloyds in the region of £600m. The bank set aside £790m last year for costs relating to the fraud. A group of bankers at the bank’s Reading branch were found by a court to have ran an “utterly corrupt scheme” that left hundreds of small business owners “cheated, defeated and penniless”. The scheme drained the bank and small businesses of about £245m.


Heathrow Airport said passenger numbers continue to rise as it recovers from the Covid-19 pandemic. Some 5.3m people traveled through the west London hub in May – an increase of 1.1m compared to March. It represents nearly an eight-fold increase on last year when the UK’s Covid-19 travel restrictions were in place.

Go-Ahead Group

Go-Ahead Group said it has received two takeover proposals at terms it “would be minded to recommend” should a firm offer materialise. The Newcastle, England-based public transport operator said it has received a takeover proposal from Sydney-listed transport Kelsian Group Ltd and another from a consortium consisting of Kinetic Holding Co Pty Ltd and Globalvia Inversiones SAU.

Modest earners to face 55% pensions tax when they retire
Analysis by PensionBee reveals workers aged between 18 and 21 on salaries of around £22,000 will exceed the lifetime limit on pension savings by the time they reach their late 50s, leaving them at risk of being stung with “punishing” 55% tax bills. The calculation assumes monthly pension contributions of 15% of salary, annual market returns of 7%, typical wage growth and no change in the lifetime cap, which currently stands at £1.07m. The allowance, designed to affect only the wealthiest in society, has been frozen since 2020 and has been reduced by close to £800,000 from a high of £1.8m. Romi Savova, of PensionBee, said the strict savings limit “punishes those who have saved diligently throughout their working life and contradicts the Government’s message that everyone should be saving for retirement”.

NWIs flee Russia as wealthy spurn Putin’s regime
Data compiled by New World Wealth show roughly 15,000 millionaires are expected to leave Russia this year. This is 15% of all Russians with $1m or more in ready assets. Ukraine is projected to suffer the greatest loss of high net worth individuals (HNWIs) as a proportion of its population, with 2,800 millionaires (42% of all HNWIs in Ukraine) expected to have left the country by the end of 2022. The United Arab Emirates is expected to overtake the US and the UK as the No 1 destination for millionaire emigrants, according to Henley & Partners, a London-based firm that acts as matchmaker between the super-rich and countries selling their citizenships.

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