Business news 15 November 2022
James Salmon, Operations Director.
UK to be first G7 nation in recession and last one out. Unemployment rises. Business confidence slides. Fraud taskforce will not recover £3bn. Business tax breaks hit record £105bn. And more business news.
UK to be first G7 nation in recession and last one out
Economists have warned that Britain risks being the first G7 nation to slip into recession and the last one out of it, predicting that it would be outpaced by the US, Germany, France, Canada, Japan and Italy. Experts from Pantheon Macroeconomics said the UK is “the laggard among G7 economies by a growing margin,” noting that while GDP fell by 0.2% quarter-on-quarter in the UK in Q3, it rose by 0.2% in France, 0.3% in Germany, 0.4% in Canada, 0.5% in Italy and 0.6% in the US. Pantheon said the economic prospects for “most other European countries are brighter,” noting that fiscal policy is not being tightened by most EU member states and that UK households also are more indebted than those across the EU. “Accordingly, we expect the UK to be first to enter a recession, and the last one to pull out,” the economists added.
Unemployment rises
UK Unemployment rose to 3.6 per cent in the three months to September, up from 3.5 per cent in the previous three months, the Office for National Statistics said todayage rises continued to be far outstripped by rocketing inflation, with average earnings with bonuses stripped out down 3.8 per cent when compared with Consumer Prices Index, the figures showed.
Business confidence slides
Business confidence has fallen to its lowest level since the pandemic, according to a survey of about 1,000 accountants by the ICAEW. Firms have been hit by rising inflation, energy prices, higher pay for staff and repeated changes to tax policies, with the retail and construction sectors hardest hit by recent economic and political turmoil. The accountancy trade body has called for the Chancellor to offer clarity for businesses on the level of support they will receive with future energy bills.
Fraud taskforce will not recover £3bn
The Taxpayer Protection Taskforce, which was set up to recover billions of pounds that were lost or stolen from pandemic support schemes, will not recover at least £3.3bn paid to criminals or ineligible claimants when it winds down next year, according to a study by TaxWatch.
It is estimated that by the time the taskforce closes, it will have collected less than a quarter of the money lost to fraud and error across the programmes. The TaxWatch report questions whether the specialist taskforce has harmed HMRC’s recovery efforts by diverting staff from “other more lucrative recovery work, reducing overall compliance yield.” TaxWatch said the taskforce had a lower return on investment than other parts of HMRC, “suggesting that diverting staff for this work may not have been the best” use of resources.
Dame Margaret Hodge, a former chair of the Commons’ Public Accounts Committee, said: “We must bring through legislation to provide HMRC with the long-term resourcing and powers it needs to deter would-be fraudsters and tax cheats, who will look at this and think that they can get away with murder.”
Just 1 in 200 fraud cases lead to charges
The National Audit Office (NAO) has warned of a lack of progress in tackling criminal fraud, with analysis showing that fewer than one in two hundred cases of fraud reported to the police resulted in a criminal charge last year.
The report shows that although the number of cases of reported fraud had risen from 631,000 in 2017 to 987,000 this year, the number of criminal charges fell from 6,400 to 4,816. The NAO, which warned the Government five years ago that fraud was being overlooked and demanded an urgent response, has accused the Home Office of failing to take the issue seriously enough. It said that in the period since, the threat had “increased and evolved” but the response from ministers had not. The NAO said that there were “significant gaps in the Home Office’s understanding of the threat” from fraud.
Dame Meg Hillier, chairwoman of the Public Accounts Committee, said: “I am concerned that the Home Office still hasn’t set out a clear funded plan for how it will tackle it.” The NAO found that fraud made up 41% of crime in England and Wales in the year to June 2022. It also calculated that fraud costs victims £4.7bn a year
Business tax breaks hit record £105bn
The value of business tax reliefs in the UK hit £105.3bn in the past year, up from £100.3bn in 2020/21, according to data from Thomson Reuters. While the total represents the combined cost estimated by HMRC for the 58 significant tax reliefs available to businesses, there are hundreds of tax breaks that are available to UK firms – with the value of many of these deemed to be negligible.
With the rate of corporation tax set to increase from 19% to 25% for businesses with annual profits greater than £50,000 from April 2023, Jas Sandhu Dade of Thomson Reuters said that businesses will be looking to make the most of tax reliefs that are available to them. He added: “As corporates contend with rising inflation and interest rates, making full use of the various available reliefs will become even more important.”
R&D tax credit overhaul on the cards
Chancellor Jeremy Hunt is expected to make the research and development (R&D) tax credits programme for SMEs less generous after a surge in claims and potential abuse. The programme was designed to offer a financial incentive for companies to innovate but an investigation by the Times uncovered a number of allegedly dubious claims submitted under the scheme. While HMRC says losses to fraud and erroneous claims hit at least £469m last year, experts believe this is likely to be an underestimate. In the year to March 2020, £7.4bn of support was claimed via 85,900 claims through the programme, an increase of 16% from the previous year. In 2014-15, around £3bn was claimed.
Asking prices dip 1.1%
The average asking price for a UK home fell by more than £4,000 month-on-month in November, according to Rightmove. The average price of a newly marketed home in November is £366,999, with this £4,159 lower than the average recorded in October. The decline follows a 0.9% increase between September and October. Year-on-year, property prices were up 7.2% in November, slowing from a rise of 7.8% the month before. The report also shows that 8% of unsold properties on Rightmove were reduced in October, double the 4% recorded in the same month of 2021
OBR: Borrowing to be £70bn higher than predicted by 2026
The Office for Budget Responsibility (OBR) has warned that Government borrowing could be £70bn higher than expected without action. The OBR has suggested that borrowing could hit £100bn in 2026/27, far exceeding the £31.6bn it forecast at the time of the Budget in March. Half of the extra cost will come from a rise in the cost of servicing Government debt, with the remainder due to a lower amount collected from taxes due to weaker economic growth, as well as the cost of welfare benefits and state pensions being driven up by inflation. The warning comes ahead of this week’s Autumn Statement, where Chancellor Jeremy Hunt is expected to set out around £35bn of savings and £25bn of tax increases in a bid to fill a black hole in Government finances.
Amazon
Amazon founder Jeff Bezos has announced he will donate most of his $110bn fortune to causes ‘close to his heart’ such as fighting climate change.
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