Business news 15 November 2021
James Salmon, Operations Director.
Job vacancies hit record high. No unemployment spike as furlough ends. City ‘is coming back to life’. Prices climb amid staff shortages and rising costs. And more business news.
Job vacancies hit record high
The number of job vacancies in the UK has soared to a record high, according to trade body the Recruitment and Employment Confederation (REC). The report shows that employers posted 221,000 job adverts last week, taking the total to 2.7m. The REC says the number of job ads does not look set to fall until next year, with this adding to pressure on firms that have been hit by labour shortages caused by the pandemic and the departure of European workers post-Brexit. Neil Carberry, chief executive of the REC, said: “The latest job advert numbers show recruitment activity staying strong in the run-up to Christmas.” He went on to call for a “revolution in the skills system, especially focused on helping those furthest from the labour market into work.”
No unemployment spike as furlough ends
An assessment of the Coronavirus Job Retention Scheme suggests that while staff that were placed on furlough are six times more likely to lose their jobs than other workers, the end of the scheme had little impact on the levels of unemployment. Official figures showed that 1.1m workers were still on furlough when the initiative came to an end at the start of October, but Resolution Foundation analysis shows that only around 136,000 workers moved to either unemployment or inactivity when the scheme was closed. This came amid major shortages of workers in a number of industries, with demand for staff high in sectors including hospitality and care. The data shows that 88% who were furloughed in September were employed in October, while 12% moved into either unemployment or inactivity. Charlie McCurdy, an economist at the Resolution Foundation, said: “While it is welcome that unemployment has remained low, recently furloughed staff did face a much higher risk of losing their job in October. This reinforces the need for Britain’s stuttering economic recovery to strengthen so that more of these workers can be helped back into work swiftly rather than leaving the labour market altogether.”
Lord Mayor of London says the City ‘is coming back to life’
Vincent Keaveny, the new Lord Mayor of London, has urged businesses to get more staff back to their desks as it was revealed the City remains half empty. A study by Orbital Insight shows that in mid-October, the City of London was at 51% of February 2020 levels of activity – while Canary Wharf was at 59% and Wall Street was at 66%. This comes with data suggesting that just 20% of office space is currently occupied in the UK and that the majority of people want a hybrid option mixing office-based and home working
Gen-Z expect flexible working and duvet days
A poll of 18- to 24-year-olds conducted by Ivory Research suggests that Generation Z expect to be offered flexible working, free food and an early finish on Friday when it comes to new roles – and also do not want to take part in face-to-face job interviews. The survey of 2,000 youngsters saw 87% say they would not consider a position that was 100% office-based, while 72% expect employers to provide free breakfast, lunch and dinner. Six in 10 said they would expect an employer to provide laptops and phones, subsidised travel to work, an online job interview and no requirement for previous experience. Half of respondents want an early finish on Fridays, while 45% expect occasional ‘duvet days’ – unplanned time off. Considering the poll’s findings, Maria Ovdii, co-founder of Ivory Research, said: “It’s a candidate-driven market currently, and potential employees know they have power.”
Prices climb amid staff shortages and rising costs
A British Chambers of Commerce (BCC) survey has found that many businesses are putting up their prices amid staff shortages and the rising costs of fuel and energy, with four in five of the 1,000 firms polled having increased the price of their goods or services in the past year. The study saw nine in 10 manufacturers and three quarters of firms with more than 50 employees say they had a shortage of skilled workers in their business or in their supply chain. Shevaun Haviland, director general of the BCC, said the findings “present a deeply worrying picture of the difficulties that businesses are currently facing across multiple fronts as supply chain disruption persists.” She added: “Unless action is taken soon, firms could be forced to cut back on their capacity or limit the range of products they offer.” Shadow Treasury minister Bridget Phillipson said the figures painted a “stark picture of the growing cost of living crisis”. She add that Labour would cut business rates to help companies, replacing the tax with a “modern form of business taxation”.
Economists expect inflation to climb toward 4%
Official figures published on Wednesday are expected to show inflation jumped from 3.1% in September towards 4% in October. While City economists expect inflation to have hit 3.8% last month, Nomura’s George Buckley warns it could hit 4.1%. This would mean inflation is more than double the Bank of England’s 2% target. He warned that a “perfect storm is brewing for UK inflation”, pointing to a rise in energy bills and widespread price increases. A poll by Reuters shows that the Bank of England is expected to be the first major central bank to raise rates in the wake of the pandemic. The Bank had been expected to increase its base rate to 0.25% last week but surprised markets by holding it at the all-time low of 0.1%.
Business sentiment hits 12-month low
British business sentiment dropped to its lowest level in a year in October, according to Accenture and IHS Markit’s latest business outlook survey. Inflation expectations among business leaders surged to a record high last month, with 66% expecting non-staff costs to increase over the coming year. This is double the global average of 33%. Expectations that business expenses will climb were driven by global supply chain issues, with concerns over energy prices also a factor. Amid shortages of skilled staff and an increased expectation that wages will climb, firms’ confidence in hiring in the next 12 months fell to 32% from a record high of 41% in June. On a more optimistic note, 56% of private sector firms are confident in an uptick in business activity in the next twelve months, while only 11% expect a decline. Simon Eaves, UK market unit lead at Accenture, comments: “The high levels of business confidence we saw earlier this year have been tempered by some strong economic and unanticipated headwinds.” “Despite this, business optimism in the UK remains higher than in most other European nations and we must capitalise on this sentiment to inspire further growth across the economy,” he added.
Christmas spending spree unlikely, says IFS
A study by the Institute for Fiscal Studies (IFS) suggests there is unlikely to be a Christmas spending spree despite consumers having around £150bn of savings, with much of the money people have saved during the pandemic likely to remain in bank accounts until there is an upturn in the economic outlook. A survey carried out for the report asked people what they would do with an extra £500 and, on average, respondents said that only £55 would be spent over the next three months. The IFS found that richer households were more likely than poorer households to use the extra funds to add to their savings, while poorer households were more likely to use the money to reduce their debts.
Small firms to cut jobs ahead of NI hike
The Federation of Small Businesses (FSB) has warned that one in seven small firms plans to cut staff ahead of the 1.25% increase in National Insurance that comes into force next year, with this potentially meaning 50,000 jobs could be lost. The FSB also revealed that than eight in ten SMEs do not plan to take on extra staff this quarter. FSB national chairman Mike Cherry said: “Tax rises will hit at the same time as a rise in the living wage, and against a backdrop of surging inflation and supply disruption.”
Covid concerns see firms pull party plans
Concern over Covid-19 has seen a number of City firms cancel traditional Christmas parties for a second consecutive year, with accountants, law firms and insurers opting for smaller dinners and receptions for individual teams despite there being no restrictions on large events. EY is giving its 17,000 UK staff the day off on Christmas Eve rather than holding a lavish get-together, while PwC is reinstating its additional day of Christmas leave having dropped it last year. Grant Thornton and BDO have said they will not be holding any large festive gatherings.
1 in 3 energy suppliers at risk
Price Bailey analysis suggests that around a third of the UK’s domestic energy suppliers are at imminent risk of collapse as wholesale energy prices continue to climb. With 14 electricity and gas suppliers deemed to be “maximum risk” under their credit score, Matt Howard of Price Bailey warns: “The energy supply sector is facing complete carnage as we head into the winter months.” “Over a third of suppliers have already gone bust and another third are at imminent risk of going under in the coming months,” he added
HMRC chaos leaves taxpayers facing long delays
David Byers in the Sunday Times says “customer service chaos” at HMRC is leaving taxpayers waiting up to seven months for their money, while others are being chased for debts they do not owe and being wrongly threatened with fines and debt collectors. Analysis of the tax office’s annual report shows that one in five phone calls to HMRC goes unanswered, while callers are having to wait more than 12 minutes on average for a phone call to be picked up – nearly twice as long as last year. More than a third of letters are not replied to within 15 days and 30% of online forms are not processed for at least seven days. Those using an online tool are reporting delays of seven months for responses to basic questions about self-assessment refunds, while those submitting questions about tax rebates last week were told to expect a reply by early June next year. Angela MacDonald, HMRC’s deputy chief executive, has said she is “really sorry” for the delays but warned the issues may continue for months due to the impact the pandemic has had on the department’s staff.
Tax hikes and rate rises set to hit homeowners
Homeowners could see higher rates and find home loans tougher to come by as banks roll out changes to mortgages ahead of tax increases and probable interest rate rises. With Chancellor Rishi Sunak freezing many tax-free allowances and introducing around £85bn in tax increases – including 1.25% increases in national insurance and dividend tax from 2022 – homeowners are likely to have less money to cover repayments. Paul Haywood-Schiefer from Blick Rothenberg says that while Mr Sunak implemented a stamp duty holiday during the pandemic “which pushed property transactions through the roof”, the tax increases will leave many of those who snapped up homes with less spare cash. “Coupled with rising inflation and the shadow of interest rate rises, there are a difficult five years ahead,” he added. Ali Hussain in the Sunday Times notes that between April and June, a record 57% of new mortgages were classed as large, up from 50% a year ago. He also highlights that mortgage lending hit a record £40bn in June compared with £15bn in June 2020, just before the stamp duty holiday was introduced.
Will the world economy return to normal in 2022?
Kaisha Langton in the Sunday Express considered whether the world economy will return to normal in 2022, having been shaken by the pandemic. European Central Bank chief economist Philip Lane believes the current period of inflation is “very unusual, temporary, and not a sign of a chronic situation”, saying he expects “bottlenecks will ease and energy prices will decline or stabilise” next year. George Lagarias, chief economist at Mazars Wealth Management, comments: “We think that the probability of a full return to some sort of normality before the end of 2022 at the earliest garners low probability.” Jeremy Thomson-Cook, chief economist at international business payments firm Equals Money, says that while growth is beginning to return to normal, it is not doing so fast enough, warning that “inflation is rising a lot faster than prices and so wage packets are not going as far as they used to.”
Cop26
Boris Johnson said the Glasgow climate deal is a “game-changing agreement” which sounds “the death knell for coal power” however after last minute intervention from India and China, the wording on the deal was watered down to “phase down” from “phase out” of coal. Alok Sharma, the COP26 president, called on China and India to explain their decision to weaken the promise merely to “phase down” Coal. All 197 parties to the conference had pledged themselves to a “Glasgow Climate Pact” which still requires them to start strengthening their emissions-reduction targets for 2030 by next year. But delegates for the EU and many poorer countries expressed disappointment at the loss of the stronger commitment. And scientists said that even if all the pledges are fulfilled it will only reduce warming to 1.8%, not 1.5%.
Astrazeneca
AstraZeneca has announced it will now adjust its charges for its covid-19 vaccine, abandoning the non-profit model it adopted at the start of the pandemic. Poor countries will be exempt. Pascal Soriot, the pharma company’s chief executive, justified the change by noting that covid-19 would soon enter its “endemic phase”. Those arguing for waiving of vaccine patents were unimpressed, noting that the firm’s jab was 97% publicly funded.
Shell
Royal Dutch Shell set out plans to simplify its share structure and change its name to Shell. Instead of the current ‘A’ and ‘B’ share structure, the oil major plans for a conventional single share structure. This would allow for an acceleration in distributions by way of share buybacks, reduce risk for shareholders, and let Shell manage its portfolio with greater flexibility, it said. The company will align its tax residence to the UK. It has been incorporated in the UK with Dutch tax residence and a dual share structure since 2005.
Cineworld
Cineworld said revenue has grown steadily since reopening and the group touched 90 per cent of pre-pandemic levels in October in its recent trading update. In the UK and Ireland, box office and concession revenue was up 127 per cent compared to 2019 figures. This improvement in revenue has meant the group generated positive cash flow, which it regards as “an important milestone in the Company’s recovery”.
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