Business news 14 September 2023
James Salmon, Operations Director.
Economy shrinks more than expected in July. UK’s EU exports, long term sick, older workers, retirement finances, renewables, oil, house prices, insolvencies and more business news that we thought would interest our members.
Economy shrinks more than expected in July
Office for National Statistics (ONS) data shows that the economy shrank more than expected in July, with some sectors subject to strike action and others hit by poor weather. While the economy contracted by 0.5% – more than the 0.2% that analysts had predicted – the ONS said the “broader picture” looked “more positive.”
Chancellor Jeremy Hunt said the latest ONS figures showed “many reasons to be confident about the future,” adding that the UK economy is on course to grow faster than Germany, France and Italy.
Paul Dales, chief UK economist at Capital Economics, said July’s economic figures could mean a “mild recession” has begun, adding that July’s decline would mean the Bank of England’s forecast of 0.4% growth in Q3 was unlikely to be met.
James Smith, developed markets economist at ING, said that while a recession “can’t be ruled out,” the economy “seems to be still growing, albeit fractionally.”
Yael Selfin, chief economist at KPMG, warned the UK economy “could struggle to keep its head above water in the remainder of the year,” while Martin Beck, chief economic advisor to the EY Item Club, argues that it is now “looking more touch-and-go whether output will expand in Q3.”
With the data coming ahead of a Bank of England decision on whether to increase interest rates again, Kitty Ussher, chief economist at the Institute of Directors, has urged Bank to forego another rate rise “rather than risking an overdose,” while Suren Thiru, economics director at the ICAEW, said the Bank is at risk of “overshooting on rate hikes.”
UK’s EU exports increase in July
The UK saw a steady expansion in exports of goods to the EU in July, according to the Office for National Statistics (ONS). Data shows that exports to the EU increased by £500m in July, with this driven by a £400m increase in fuel exports and a £200m increase in machinery exports. Meanwhile, imports from the EU declined 1.8%. The ONS figures show that in total, the value of goods exported rose 0.8% in July. William Bain, head of trade policy at the British Chambers of Commerce, has voiced concern over the continued downturn in services exports, which account for just under half of the UK’s overseas trade. In the three months to July, export of services fell 2.9% compared to the three months to April.
Long-term sick leave poses a ‘serious’ threat to public finances
The Institute for Public Policy Research (IPPR) think-tank has warned that the levels of long-term sick leave from work could damage Britain’s public finances. The IPPR’s Commission on Health and Prosperity conducted an audit of health and care services and has warned that long-term sickness has become a “serious fiscal threat,” adding there is “no road to prosperity for this nation without tackling the tide of sickness head-on.” The report comes with the number of people out of work due to poor health at an all-time high of 2.6m.
800,000 older people face barriers to working
A report from think-tank Demos and housing and care provider Anchor shows that around 800,00 older people want to return to work but face barriers including inflexible working, access difficulties and age discrimination. The study shows that as many as 330,000 retirees stopped working because they were unable to access flexible working. It was found that the number of UK workers aged 50-64 has fallen by 182,000 since 2019. Andrew O’Brien, director of policy and impact at Demos, said: “The UK is facing severe labour shortages and slow economic growth. One of the ways we can tackle these twin challenges is through helping older people to stay in work.” Anchor chief executive Sarah Jones has urged ministers to “empower our ageing population,” saying there is a need to “reverse the social and economic impacts of older people being excluded or overlooked to ensure they are supported to remain in work for as long as they choose.”
6 in 10 adults anxious over retirement finances
A poll from asset manager Abrdn shows that 58% of UK adults over 40 are anxious about the prospect of retiring, with many having to dip into savings as the cost-of-living climbs. It was found that almost 40% are concerned they might not have enough money to last them through retirement, with 13% delaying their retirement plans because of the cost-of-living crisis. Shona Lowe, financial planning expert at Abrdn, said: “The prospect of retiring can be a daunting one, whatever your age, particularly against a backdrop of rising interest rates, high inflation levels and an ongoing cost of living crisis.”
Renewables
For the first time, Britain has more wind capacity than natural gas hooked up to the power grid
Prepaid meters
The energy regulator has banned energy suppliers from forcibly installing prepayment meters in the homes of vulnerable consumers.
Arm
UK Tech company Arm Holdings was priced at its initial public offering (IPO) at the top end of its range to raise $4.87 billion in the largest listing of the year. The chip designer, which is owned by Japan’s SoftBank, sold 95.5 million American depositary shares at $51.
oil
Oil climbed toward a 10-month high after the International Energy Agency added to warnings of a supply shortfall. Demand is reportedly 1.2 million barrels per day above supply after OPEC+ cut production. Brent and WTI may be hovering around $90 per barrel, but the price of Saudi oil is nearing $100.
Insulation
The government is offering £1 billion worth of home energy efficiency upgrades in a move that comes after a series of policy flops to improve the country’s leaky housing. Homes with poor energy efficiency and in low council tax bands are set to be offered upgrades to their roof, loft or cavity wall insulation under a new program called the Great British Insulation Scheme.
House Prices
UK House Prices declined at their fastest rate since 2009 in August, according to surveyors. The Royal Institution of Chartered Surveyors said net balance of 68% of property professionals reported house prices falling rather than rising, marking the most negative reading since 2009, according to Rics, which pointed to the impact of high mortgage rates.
John Lewis
John Lewis Partnership Plc has pushed back its plan to be profitable by two years as stubbornly high inflation and weak online sales have hampered the Store’s turnaround. The retailer, which also owns upmarket grocer Waitrose, said additional cost increases and extra investment meant it would remain loss-making until 2028.
Fraud charges over Patisserie Valerie collapse
Four people have been charged with fraud connected to the collapse of bakery chain Patisserie Valerie. The Serious Fraud Office (SFO) has charged Christopher Marsh, former director and chief financial officer of Patisserie Holdings; his wife, accountant Louise Marsh; financial controller Pritesh Mistry; and financial consultant Nileshkumar Lad. They are accused of inflating the amount of cash the bakery chain had and hiding debts of £10m. They are also accused of providing false documentation to the company’s auditors and giving the chain’s investors and creditors false information. Patisserie Valerie collapsed in 2019 following the discovery of a £94m black hole in its finances. The firm fell into administration, leading to the closure of 70 stores and about 900 job losses. Grant Thornton was fined £2.3m in 2021 for failures relating to its audits of Patisserie Valerie, with the Financial Reporting Council saying the audit firm had “missed red flags” and failed to “question information provided by management” of the chain
US Inflation
US Inflation surprised with its biggest monthly increase this year in August as consumers faced higher prices on energy and a variety of other items. The consumer price index, which measures costs across a broad array of goods and services, rose a seasonally adjusted 0.6% for the month, and was up 3.7% from a year ago, the US Department of Labor reported Wednesday. Economists were looking for respective increases of 0.6% and 3.6%.
Wealth taxes on the increase amid cost-of-living crisis
Analysis by the Organisation for Economic Co-operation and Development (OECD) has flagged a “notable” rise in countries increasing wealth and property taxes. Spain has imposed a temporary “solidarity tax” on residents worth more than €3m, while Norway has increased its higher rate for those worth between £130,000 and £1.5m from 0.95% to 1%. Many governments have also introduced property tax reforms, raising top property tax rates or targeting individuals who use property as an investment vehicle. The report comes the week after a group of nearly 300 millionaires wrote to the G20 calling for a tax on the super-rich, saying: “Decades of falling taxes on the richest, based on the false promise that the wealth at the top would somehow benefit us all, has contributed to the rise in extreme inequality.” Meanwhile, TUC general secretary Paul Nowak, argues that there must be a “national conversation about taxing wealth,” with TUC analysis showing that a tax on the richest 0.3% of the population could deliver £10.4bn for Treasury coffers. Robert Salter of Blick Rothenberg said the TUC is right to call for a national debate of taxation but warned that the UK tax system is “already extremely complicated and introducing a new tax could just compound the difficulties and complexity of the system and are unlikely to solve the UK’s financial and structural problems.”
The Range buys Wilko brand
Homeware retail chain The Range has struck a deal to buy the Wilko brand. The agreement, which is reported to be worth £5m, is the latest as administrator PwC looks to sell parts of the collapsed retailer. While The Range has acquired the Wilko brand and intellectual property rights, it has not bought any of its stores. Poundland’s owner, Pepco, this week struck a deal to acquire up to 71 Wilko sites that it intends to reopen under its own brand, while discount retailer B&M last week agreed a £13m deal to buy up to 51 Wilko properties that will also be rebranded.
HMRC staff increasingly opt for WFH
Thousands of HMRC staff are working remotely, with this said to be contributing to a decline in customer service. Figures obtained by RSM under Freedom of Information laws show that as many as two in five workers at regional HMRC centres did not go into the office at all in the year to March. This has resulted in unanswered letters and call waiting times exceeding 20 minutes on average. The low levels of office attendance have raised concerns about slumping productivity. The Government is considering options to get civil servants back to the office, including making it a requirement for them to seek permission to work remotely. The Public Accounts Committee has previously criticised the tax office’s customer service as “unacceptable.” HMRC has defended its hybrid working scheme, saying that performance in processing customer correspondence is better on average when staff work remotely.
Latest Insolvencies
Petitions to wind up (Companies) – REGAN PEGGS SOLICITORS LTD.
Appointment of Liquidators – INDUSTRIAL SCREW PRODUCTS LIMITED
Appointment of Liquidators – 321 IT SOLUTIONS LTD
Appointment of Liquidators – H.F. BATES AND SONS LIMITED
Appointment of Liquidators – COLEMAN BIRD ASSOCIATES LIMITED
Appointment of Liquidators – COLLSTREAM LIMITED
Appointment of Liquidators – SUNNYBANK ENTERPRISES LIMITED
Appointment of Liquidators – LAIRD TREASURY LIMITED
Appointment of Liquidators – CB SOFTWARE CONSULTING LIMITED
Appointment of Liquidators – KH PEOPLE CONSULTING LTD
Appointment of Liquidators – DJ CONSULTING SERVICES LIMITED
Appointment of Administrator – JACKSONS THE BAKERS LIMITED
Appointment of Administrator – FORMULA K INTERNATIONAL LIMITED
Appointment of Administrator – STERLING TRUST CORPORATION LIMITED
Appointment of Administrator – DEVELOPMENT THREE LTD
Appointment of Liquidators – PARALLEL PRIVATE EQUITY HOLDINGS LIMITED
Appointment of Liquidators – MALITHA CONSULTING LIMITED
Appointment of Liquidators – PARALLEL PRIVATE EQUITY LLP
Appointment of Liquidators – PARALLEL PRIVATE EQUITY MANAGERS LIMITED
Appointment of Liquidators – RCM COMMUNICATIONS LIMITED
Winding up Order (Companies) – HH BROTHERS LOGISTICS LTD
Petitions to wind up (Companies) – MOMALIKS LIMITED
Winding up Order (Companies) – CCL CONSULTANTS LTD
Winding up Order (Companies) – SC RETAIL LTD
Winding up Order (Companies) – PHOTONHOLDINGS GROUP LTD
Appointment of Liquidators – C.H. GREEN & SON (THRAPSTON) LIMITED
Appointment of Administrator – PH CRAWLEY LTD
Appointment of Administrator – PH LEICESTER LTD
Petitions to wind up (Companies) – ROLLINGS ELECTRICAL LIMITED
Petitions to wind up (Companies) – SYNERGY AGROSCIENCE LTD
Petitions to wind up (Companies) – CROSSLANE STUDENT DEVELOPMENTS LIMITED
Petitions to wind up (Companies) – KUSTOM KIT LTD
Petitions to wind up (Companies) – ENVIGEN LTD
Petitions to wind up (Companies) – FS DESIGN HOUSE LTD.
Petitions to wind up (Companies) – ARJUN BROTHERS LIMITED
Appointment of Liquidators – EDGE CONTROL LIMITED
Appointment of Liquidators – FIRESTAND LTD
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.
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