Business news 16 May 2023
James Salmon, Operations Director.
One in five workers will be higher-rate taxpayers by 2027. Long term sick at record high. Fraud warning as more directors are probed for corporate misconduct. Unemployment unexpectedly rises. Card payments, greedflation, net zero, and more business news that we thought would interest our members.
One in five workers will be higher-rate taxpayers by 2027
Analysis by the Institute for Fiscal Studies (IFS) suggests that almost 8m people – one in five of all taxpayers – will be higher-rate taxpayers by 2027 as a result of the Government’s freeze on income tax allowances and thresholds.
The think-tank said an additional 2.5m people will no longer be basic rate taxpayers by the time the six-year freeze on allowances and thresholds comes to an end in 2027/28. The study shows that in 1991/92, 3.5% of UK adults (1.6m) paid the 40% higher rate of income tax. By 2022/23 that had risen to 11% (6.1m) and it is set to reach 14% (7.8m) by 2027/28. The IFS predicts that more than one in eight nurses, one in six machinists and fitters, one in five electricians and one in four teachers are set to be higher-rate taxpayers by 2027.
Isaac Delestre, a research economist at the IFS, said: “For income tax, the story of the last 30 years has been one of higher-rate tax going from being something reserved for only the very richest, to something that a much larger proportion of adults can expect to encounter.” He added that freezing thresholds leaves the income tax system “hostage to the vagaries of inflation.”
Mark Littlewood, director general of the Institute of Economic Affairs, commented: “The higher rate of tax was initially envisioned to capture an enhanced revenue stream from super-high earners. Managing, at some point, to get your salary to above £50,000 surely can’t be said to be in that category.”
Long term sick at record high
The Office for National Statistics (ONS) said more than two and a half million, a new record high, were not working because of health problems With 2.55m of sick and 33m currently in work, 1 person in 13 working is currently off long term sick. . Mental health issues among younger workers and back and neck pain have all increased, with possible causes being the increase in working from home.
Darren Morgan, director of economic statistics at the ONS, said that since the Covid pandemic started there are “well over 400,000 more people outside of the labour market due to ill health and that means we are now at a new record level of comfortably over two and a half million.”
He also said we’ve seen an increase in the category that includes post-viral fatigue so long Covid is also having an impact.
Fraud warning as more directors are probed for corporate misconduct
The Insolvency Service saw investigations into the alleged misconduct of directors of insolvent companies increase by 36% year-on-year last year, according to law firm RPC. The number of investigations increased from an average of 142 per month between April 2021 and March 2022 to 193 between April 2022 and the end of December. The number of cases referred to the Insolvency Service compliance and targeting department jumped from an average of 528 per month to 1,077 in the same period.
Reputational damage caused by pandemic support fraud `a blip´
Cabinet Office Permanent Secretary Alex Chisholm has told MPs that the reputational damage done to the UK by the high level of fraud involving Covid-19 support schemes was a “blip.” He told the Public Accounts Committee that he expects the UK’s reputation to improve due to Government efforts to improve how departments and national bodies handle fraud. The Public Sector Fraud Authority estimates that there was between £33.2bn and £58.8bn of fraud and error across Government spending in 2020/21. Data from annual reports of Government departments and arms-length bodies show an estimated £21bn was specifically lost to fraud in 2020/21 and 2021/22, compared with £5.5bn in the two years before the pandemic. A report by the National Audit Office said the latest Transparency International survey of perceptions of corruption showed the UK had fallen from eighth out of 180 countries in 2017 to 18th in 2022.
Unemployment unexpectedly rises
UK Unemployment ticked up in the three months to March, figures from the Office for National Statistics showed. The UK jobless rate unexpectedly edged up to 3.9% for the three months to March. Market consensus, as cited by FXStreet, had expected it to remain unchanged from 3.8% in the three months to February. “The increase in unemployment was largely driven by people unemployed for over 12 months,” ONS said. In the three months to March, annual growth in average total pay, including bonuses, slowed to 5.8% from 5.9% in the previous three-month period.
The claimant count rate increased from 3.9% to 4.0% with the jobless count rising 46.7 thousand causing the pound to drop.
Strikes
The country lost another half a million working days to strikes in March, marking the most severe round of industrial action in nearly four decades. The UK has now lost more than 3.5 million days to walkouts since last June.
Lobby group hits out at card payment costs
Lobby group Coadec has warned of a “startling” rise in the cost of accepting cards for small businesses. This comes with interchange fees, which are charged to merchants and paid to the card issuing bank and payment network, having soared in recent years. Coadec has called for alternative payment methods to be explored, pointing to alternatives like “open banking payments, or vital staples like cash.” Groups including Coadec, the Federation of Small Businesses and the British Retail Consortium last year launched the Axe the Card Tax campaign, calling for regulators to step in and reduce fees. The Payment Systems Regulator is currently conducting a market review of the fees paid to card payment networks. Mark Barnett, the European president of Mastercard, recently defended the current fee structure, saying: “We believe interchange is the right mechanism for everybody, sharing the costs and benefits of the payment system.”
Small firms prioritise revenue over net zero targets
Small businesses are focusing more on increasing revenue and gaining new customers than meeting net zero carbon targets set by the Government. A poll of 500 decision makers by BSI shows that 18% feel their organisation has a lot of work to do before they can reach the 2050 target, while 29% would be willing to face future penalties if it meant they could focus on their own priorities now. The survey shows that 67% are committed to becoming net zero, with 43% saying this would only require a few adjustments. However, 29% are not confident in their ability to identify their organisations’ current carbon footprint. A BSI poll of 1,003 SMEs shows that just 52% of businesses currently have a net zero policy in place.
Saunders: ‘Greedflation’ not to blame for price surge
Former Bank of England rate-setter Michael Saunders says ‘greedflation’ is not to blame for surging prices, insisting that businesses are pushing up prices in response to soaring costs. Mr Saunders, an ex-member of the Monetary Policy Committee who is now senior economic adviser at Oxford Economics, says isolated incidents of rising profits “do not reflect the overall picture” of the UK economy. In a note to clients, he said: “The bulk of UK food price inflation reflects cost increases from the international surge in prices for agricultural commodities and energy.” He noted that the cost of materials used by food manufacturers have risen by 29% over the last two years, with consumer prices also up 29% in the same period. Mr Saunders added: “Take out oil and gas, where profits have risen sharply, and the share of company profits in GDP has fallen markedly” to their lowest level since 2009.”
Food supply Chain
The government has announced a reviews of the causes of double digit groceries inflation to investigate the fairness of food supply chains to make sure farmers are getting fair prices.
Sunak is hosting the Farm to Fork Summit looking at how to strength the UK market as the CMA investigates the grocery market as food takes over from energy as the chief driver of inflation.
City grandees set out vision for UK markets
The Capital Markets Industry Taskforce, headed by London Stock Exchange chief Julia Hoggett, are drawing up a “new market model” for the UK’s capital markets that will seek to “help deliver growth across the broader UK economy.” The new Capital Markets of Tomorrow report, from Freshfields lawyer Mark Austin, follows a number of government-commissioned reviews designed to deliver reform and keep London competitive. Mr Austin said issues raised in these reviews needed bringing together, calling for a “cohesive, simple to understand model and vision, which goes all the way across law and regulation, market practice and the cultural attitude and mindset.” Mr Austin will author the report alongside L&G chief Sir Nigel Wilson, Penny James, a senior independent director at Hargreaves Lansdown, and Alex Hickman, a former business special advisor to the Prime Minister.
Business and Trade Secretary Kemi Badenoch has reiterated the Government’s commitment to the City, telling businesses that they “want a government that gets the City, there’s no one better than the people who are in government right now to do that.” Speaking ahead of trade deal talks with her Swiss counterpart Guy Parmelin, Ms Badenoch said: “Pretty much my entire professional career was in financial services operations. We understand it. We get it. We’ve come from that world.” On the free trade deal with Switzerland, she said its “potential is limitless.” It is hoped the deal will lower tariffs on UK exports to Switzerland, with the Business Department saying this could save British businesses nearly £7.4m a year
Vodafone
Vodafone said its annual performance slowed in line with its expectations. In the financial year to March 31, the telecoms firm said revenue was virtually flat year-on-year, up just 0.3%
The telecoms giant has had a difficult few years, as it struggles with higher energy costs and falling sales in big markets such as Germany, Italy and Spain where it has struggled to keep pace with rivals.
Following a five-month strategic review, Vodafone announced an “action plan” to focus on “customers, simplicity and growth” with 11,000 jobs to be axed from its work force of 104,000 over the next 3 years. “Our performance has not been good enough. To consistently deliver, Vodafone must change,” said CEO Margherita Della Valle.
EU lifts economic growth forecast
The European Commission (EC) has raised its economic growth forecast, saying Europe has dodged a recession. The outlook for countries using the euro improved to growth of 1.1% this year from a prediction of 0.9% in February. Its economic growth forecast for 2024 was raised to 1.6% from 1.5%. EC vice president Valdis Dombrovskis said the European economy “is holding up remarkably well in the face of Russia’s aggression against Ukraine.” However, he also cautioned that ”core inflation remains persistently high, which could erode people’s purchasing power, slow investment growth and impede access to credit.”
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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.
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.