Business news 14 October 2022
James Salmon, Operations Director.
Loan defaults expected to increase. IMF criticises Government for ‘undermining’ BoE. Truss set to make corporation tax U-turn. Fraud a ‘persistent threat to businesses, consumers and economic growth’. And more business news.
Loan defaults expected to increase
The Bank of England’s Credit Conditions Survey suggests more households and businesses will default on loans in the coming months, with lenders expecting the availability of mortgages and consumer and corporate credit to decline. This is likely to see default rates on mortgages, credit cards and other household loans and business loans increase.
The poll asked banks and building societies to forecast changes they expect to see between September and November, compared with the three months between June and August. Lenders said mortgage availability had already decreased and is expected to fall further, with the availability of non-mortgage credit to households down slightly and set to continue to fall.
While the overall availability of credit to businesses has remained unchanged, it is predicted to decrease slightly in the months ahead. Lenders expect demand for mortgages from home-buyers to fall in the next few months, while demand for re-mortgaging is predicted to increase.
IMF criticises Government for ‘undermining’ BoE
International Monetary Fund (IMF) managing director Kristalina Georgieva has criticised the Government’s mini-Budget, saying that fiscal policy “should not undermine monetary policy.”
She added that if it does, “the task of monetary policy becomes only harder and it translates into the necessity for an even further increase of rates and tightening of financial conditions.”
Ms Georgieva added: “Don’t prolong the pain. Make sure that actions are coherent and consistent.” She also revealed that she has spoken with Chancellor Kwasi Kwarteng and Bank of England (BoE) governor Andrew Bailey, stressing the need for “policy coherence and communicating clearly … so in this jittery environment there would be no reasons for more jitters.”
Meanwhile, the IMF’s chief economist, Olivier Gourinchas, said the mini-Budget “complicated matters” for the Bank of England as it battled to bring down inflation. He warned that tax cuts announced by Mr Kwarteng threatened to cause “problems” for the UK economy, with the cuts coming at a time when the BoE was attempting to raise interest rates.
Truss set to make corporation tax U-turn
Liz Truss is reportedly set to announce a U-turn on corporation tax in a bid to restore market confidence.
While the Prime Minister and Chancellor Kwasi Kwarteng last month cancelled a planned rise in the tax on company profits from 19p to 25p, reports suggest the decision could be fully or partially scrapped. The Sun cites a Downing Street source as saying a rise in corporation tax was “on the table”, with it noted that the increase may not take the levy to the 25p rate planned by former Chancellor Rishi Sunak.
Reports of a U-turn come despite Ms Truss’ official spokesperson yesterday denying that further changes to plans outlined in the Chancellor’s mini-Budget were on the way. At Prime Minister’s questions on Wednesday, Ms Truss ruled out a hike in corporation tax, telling MPs: “I feel it would be wrong at a time when we are trying to attract investment into our country at a time of global crisis to be raising taxes.”
However, Mr Kwarteng was yesterday asked whether people should expect a U-turn on corporation tax and replied: “Let’s see.”
Responding to reports of a U-turn being on the cards, shadow Chancellor Rachel Reeves described the matter as a “mess” which “shows the utter chaos this government is in.” She added: “Labour has said repeatedly that they need to reverse the kamikaze budget and restore confidence,” arguing that the Government “cannot allow the chaos caused by their mini-Budget to continue any longer.” Liberal Democrat leader Sir Ed Davey believes Mr Kwarteng should resign or be sacked, saying: “His botched Budget then needs to be scrapped altogether and replaced with a fair and responsible plan.”
Markets
Sterling jumped more than 2% on speculation that the government was working on plans to U-turn on some of the recently announced tax cuts in the ‘mini-budget’. US inflation data weighed on sentiment, as the figure came in higher than expected (8.2% rather than 8.1%) , adding more fuel to the argument that the Federal Reserve will become more hawkish on interest rate rises. US Unemployment Claims also rose 9,000 to a seasonally adjusted 228,000 for the week ended October 8th. Economists had forecast 225,000 applications for the latest week. Overnight, the S&P 500 rose 2.60% and the NASDAQ rose 2.23%. But that hides the bizarre moves as the S&P started with a 2.4% drop before reversing back to a 2.6% rise. A quite unprecedented swing in one day. The FTSE 100 is at 6920.
Fraud a ‘persistent threat to businesses, consumers and economic growth’
Banking trade association UK Finance has warned that fraud remains a persistent threat to businesses, consumers and the growth of the economy. It said criminal gangs are bypassing banks’ advanced security systems to directly target customers and voiced concern that fraud levels in the UK should be considered a national security threat.
UK Finance analysis shows that 56% of authorised push payment (APP) cases in the first half of this year were purchase scams. The report reveals that there were 95,219 incidents of APP scams in the period, with gross losses of £249.1m. Of this, £140.1m was returned to customers.
Natwest
NatWest Group has confirmed it is closing 43 bank branches across the UK in the latest move to transition its banking services online. Several branches in Scotland, including in Edinburgh, Glasgow and Aberdeen, are among the fresh wave of closures. The UK’s second-biggest lender said the vast majority of its retail banking services can be done digitally, and it is the quicker and easier way to bank.
International Consolidated Airlines
International Consolidated Airlines said its trading in the third quarter was “better than expected”. The company said it now expects its pre-exceptional operating profit for the third quarter to be around 1.2 billion euros due to passenger revenue strength. Forward bookings remain at expected levels for the time of year, the company noted. As a result, its fourth quarter expectations remain unchanged.
Royal Mail
International Distributions Services said its Royal Mail arm in the UK swung to a first-half loss, as it counts the cost of industrial action. For the six months to September, Royal Mail suffered a £219 million adjusted operating loss, swinging from £235 million profit a year earlier. Revenue fell 11% to £3.65 billion from £4.07 billion.
Cabinet minister urges firms to invest in their employees
Work and Pensions Secretary Chloe Smith has urged businesses to do more to support their workers’ health and well-being. With the number of people not in employment due to long-term sickness reaching a record high, she said it is “crucial” firms invest in their employees to prevent “even more people being inactive due to long-term poor health.”
Office for National Statistics data shows that the number of long-term sick people rose to just under 2.5m in the three months to August – an increase of almost 170,000 from the previous three months.
Ms Smith said a “healthy workforce supports a healthy and growing economy.” She also praised firms who offered private counselling sessions to support their workers’ mental health. Outlining Government efforts to help people back to work in a speech to the Policy Exchange think-tank, Ms Smith said: “We can pull out all the stops to help businesses fill their vacancies. We need employers to help people to start, and stay and succeed.” She noted that sickness absence was estimated to have cost employers an estimated £9bn a year, adding: “We know this holds businesses back and that in turn holds back growth.”
Housing market set for slowdown
The Royal Institute of Chartered Surveyors (RICS) has warned that the housing market could be set to see a slowdown, with house sales hitting their lowest levels since the height of the pandemic in September. New house buyer inquiries fell last month, marking the fifth month in a row they had fallen.
RICS chief economist Simon Rubinsohn said although house prices were still rising, “storm clouds” were gathering over both pricing and sales. He commented: “It is difficult not to envisage further pressure on the housing sector as the economy adjusts to higher interest rates and the tight labour market begins to reverse.” He added that while mortgage arrears and possessions remain at historic lows, “they are inevitably going to move upwards over the next year, as pressure on homeowners grows.”
Regulator: Pensions not at risk of collapse
Charles Counsell, chief executive of The Pensions Regulator, says UK defined benefit pension schemes were not – and are not – at risk of collapse due to recent sharp moves in the Government bond market. He told the Pension and Lifetime Savings Association’s annual conference: “We remain vigilant to the risks and expect trustees to do the same and plan accordingly.” Mr Counsell added that trustees and their advisers should review the resilience and liquidity of their investments, risk management and funding arrangements.
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.
Get compensated for previous late payments
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.