Business news 16 February 2023
James Salmon, Operations Director.
Small firms may struggle if energy bills spike. Will the chancellor extend the price guarantee? Inflation falls for a third month. Retailers set for business rates drop. Tech investors warn of issues hurting innovation. And more business news.
Small firms may struggle if energy bills spike
Analysis from credit score company Experian suggests a third of small businesses might not be able to cover their costs when energy bill support is slashed by the Government in April. The study warns that around 30% of the 1.2m small businesses it analysed will be at “heightened risk” when the support is phased down. This marks an increase on the current climate, where around 13% of small companies are at heightened risk. Small Business Commissioner Liz Barclay described the figures as “very worrying.” She went on to say that many firms are struggling to get paid quickly by their bigger customers, calling this an “added threat to the viability of small businesses.” Warning that climbing energy bills could break a small firm, she added: “We need bigger customers to pay smaller suppliers as a priority to give them a fighting chance of survival.”
Chancellor likely to extend price guarantee, says think-tank
The Chancellor will “almost certainly” extend the £2,500 energy price guarantee into the summer, the Resolution Foundation has predicted. With subsidies set to be cut from April 1, prices will rise to £3,000 per year for the average home. However, the think-tank believes Mr Hunt will extend the support scheme until June, saying such a move would “smooth out the rollercoaster” of household energy prices until wholesale prices fall further.
Inflation falls for a third consecutive month
Office for National Statistics (ONS) data shows that inflation fell for the third month in a row to 10.1% in January, dipping from the 10.5% recorded in December. Despite the decline, inflation remains well above the Bank of England’s target of 2% and has been at 10% or higher for five straight months. Grocery prices are currently one of the main drivers of inflation, climbing 16.7% in the year to January, with food inflation at a 45-year high. However, a continued drop in petrol and diesel prices helped bring overall inflation down.
Grant Fitzner, chief economist for the ONS, said there were signs costs facing businesses were “rising more slowly”, but warned that “business prices remain high overall.” Chancellor Jeremy Hunt warned that the “fight is far from over” in regard to rising prices, adding that it is why the Government “must stick to the plan to halve inflation this year, reduce debt and grow the economy.” Commenting on the inflation data, Yael Selfin, chief economist at KPMG, said: “With the end of the inflationary menace on the horizon, the Bank of England is under increasing pressure to change its course by ending the current tightening cycle.” The EY Item Club expects that inflation could fall as low as 3% by the end of the year, aided by the continued fall in wholesale gas prices.
Despite the slightly lower overall inflation, food inflation is still rocketing with Kantar reporting food price inflation hit 16.7%, adding £788 to annual food bills. Waitrose have already reacted, cutting prices on over 300 necessities by 20%. While discount stores Lidl and Aldi have seen sales rise over 20%
Retailers set for business rates drop
Retailers in England are set to see a 20% reduction in business rates bills from April after the Government’s £13.6bn support package announced in the Autumn Statement. In a statement, the Treasury said 80% of retail, hospitality and leisure businesses will see their bills either decrease or stay the same in the next year. Additionally, large distribution warehouses will see a 27% increase, reflecting the growth in the online sales sector.
Tech investors warn of issues hurting innovation
A group of tech investors and entrepreneurs have urged the Government to address “urgent issues” they say are hampering growth in the UK’s innovation sectors. In a letter to Science, Innovation and Technology Secretary Michelle Donelan, 26 leading figures from the tech sphere said they welcomed the creation of the Department for Science, Innovation and Technology but warned that the potential of the sector was currently being restricted. They have called for increased support for university spin-outs; for locked up pension cash to flow into start-ups via venture capital firms; and a robust intellectual property strategy. They also stressed a need for innovation hubs outside of the “golden triangle” of London, Oxford and Cambridge, as well as urging ministers to ensure tech workers can access UK visas. The signatories said that if the department ignored these issues, it would “represent a failure of the innovators it is supposed to support.”
Flybe rescue talks fail
Flybe is to be wound down and sold off in parts after administrators at Interpath Advisory were unable to strike a rescue deal. Talks with potential bidders stalled over regulations around landing slots and any buyer’s ability to operate the airline. Flybe collapsed last month for the second time in three years, having fallen into administration in March 2020 as the pandemic hit the travel market. Flybe relaunched less than a year ago after being bought out of administration by Cyrus Capital.
London offices
A quarter of London businesses are reducing their office footprints and giving up traditional long leases as the shift to flexible working becomes permanent. A further 18% are opting for co-working and flexible office spaces, instead of traditional offices.
ASML
Dutch chipmaking equipment manufacturer ASML has said data was stolen from its technical repository by a Chinese employee.
Centrica
The British Gas owner has reported a tripling of profits to £3.3 billion as energy prices rocket. The figures come after British Gas was criticised over its use of debt agents to force-fit prepayment meters in the homes of vulnerable customers.
Markets
The FTSE100 index reached a key milestone briefly of 8,000 – helped by a soft sterling which fell briefly under US$1.20 – before the index closed at 7997. The index is now 15% above its 1999 record, a level that stood for 15 years. Sterling had fallen after UK CPI data that showed inflation remained in the double digits.
Overall, the FTSE 100 saw a gain of 0.55% on Wednesday. Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said renewed optimism that inflation has peaked helped drive positive sentiment, suggesting that “recent momentum has been astounding in its speed, and highlights that the outlook for UK plc has turned a corner.” However, she cautioned: “The likely outlook for now shows a relatively clear path back to more normal fiscal environments, but as the last few years have shown, destabilising obstacles can appear with very little notice.”
Overnight in the US the Dow rose 0.11%, the S&P 500 rose 0.28% and the NASDAQ rose 0.92%.
Choice of mortgage products recovers
The number of mortgage products available has surpassed 4,000 for the first time since last August, according to Moneyfacts. It said 4,341 deals were available on February 1, compared with 3,643 products at the start of January. There were 2,258 deals left by October 1, down from 3,890 at the start of September 2022 following the mini-Budget. The choice of deals for borrowers with smaller deposits has also increased, with 149 products available in February for people with a 5% deposit, up from 132 in January. Product choice for people with a 40% deposit is at its widest in three years, with 606 deals available. The average shelf life of a mortgage product has increased to 28 days, up from 15 days in January.
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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.