Business news 16 November 2021
James Salmon, Operations Director.
Real Living Wage increases. Restructuring expert in insolvency warning. 1 in 10 SME exporters have lost EU trade since Brexit. Bailey ‘very uneasy’ about inflation. UK expands post-Brexit loan programme. And more business news.
Real Living Wage increases
More than 300,000 workers are set to receive a pay rise after higher rates were announced for the Real Living Wage. The new hourly rate is £11.05 in London and £9.90 outside the capital, increases of 20p and 40p respectively. The Living Wage Foundation said almost 9,000 UK employers now pay the wage, which is higher than the statutory National Living Wage of £8.91 an hour for adults – with this set to rise to £9.50 in April. One in 13 people now work for an accredited Living Wage employer, said the foundation, with it found that 3,000 firms signed up to the policy during the pandemic. Latest research by the Living Wage Foundation shows that there are still 4.8m jobs – 17.1% of all employees – still paying less than the Real Living Wage in the UK. TUC General Secretary Frances O’Grady said the report showed that low pay was “endemic”. She has called on ministers to increase the minimum wage to £10, ban zero hours contracts and give trade unions greater access to workplaces to negotiate improved pay and conditions. The GMB union welcomed the living wage increase, but said that the pandemic had exposed the failures of many employers, with general secretary Gary Smith saying: “Workers are facing a cost-of-living crisis, and employers face a recruitment crisis, after years of politically driven cuts and a race-to-the-bottom by many employers. ”
Employment
British Employers added more workers to their payrolls in October after the government’s job-protecting furlough scheme ended, potentially easing the lingering concerns at the Bank of England about the risks of raising interest rates. Sterling rose as data showed the number of employees on company payrolls rose by 160,000 to 29.3 million employees last month and the unemployment rate in the third quarter fell by more than expected.
Restructuring expert in insolvency warning
Restructuring expert Blair Milne has warned that rising debt levels as inflation and interest rates begin to climb will trigger a dramatic jump in personal bankruptcies and repossessions. Noting signs that the cost of living and debt levels are on the up, Mr Milne, of Azets, said interest rates have been low for so long that there is a “generation of consumers inexperienced in managing a sudden rise in their overheads and costs”. He warned: “Our concern is that a vast number of households are running very tight budgets and have accumulated considerable debt, leaving them with little room for manoeuvre”.
1 in 10 SME exporters have lost EU trade since Brexit
An Institute of Directors survey for Channel 4’s Dispatches shows that more than one in ten SME exporters have lost trade with the EU since Brexit. The poll saw 13% of exporters say trade with the EU has fallen by up to 100% since the end of the Brexit transition period. While 26% of SMEs that trade with the EU are considering moving some of their European operations outside Britain, 16% have decided to move some or all of their operations into the single market due to Brexit. The poll also saw 62% of the 635 firms quizzed say costs have risen, while 70% have had to absorb this increase themselves.
Bailey ‘very uneasy’ about inflation
Bank of England governor Andrew Bailey has admitted he is “very uneasy” about spiking inflation levels, telling the Treasury Select Committee: “It is not the course where we want it to be to have inflation above target.” He also said that the Monetary Policy Committee’s (MPC) recent decision to keep interest rates frozen at a record low of 0.1% was a “very close call”. Saying it makes sense to assess the impact on the economy of the furlough scheme coming to an end before opting to increase interest rates, he noted: “You can make the argument for doing it now, it is a very closely balanced argument.” Mr Bailey also suggested a rate increase is on the horizon, saying the MPC believes “it will be necessary over coming months to increase Bank Rate in order to return Consumer Prices Index (CPI) inflation sustainably to the 2% target.” While data shows that CPI inflation was 3.1% in the 12 months to September, the Office for Budget Responsibility expects the inflation rate to hit 5% in 2022 – far above the Bank’s target of 2%.
UK expands post-Brexit loan programme
The UK has expanded the Export Development Guarantee (EDG) scheme, a post-Brexit lending programme that sees the Government underwrite loans to British exporters. The initiative, which goes through the Government’s credit agency UK Export Finance, is to be expanded to include businesses that do not currently export, but have “huge export potential”, including businesses that are not yet based in the UK. UK Export Finance said the move could “encourage companies operating in sectors in which the UK doesn’t have a strong presence” to come to the country. Announcing the expansion of the EDG scheme, International Trade Secretary Anne-Marie Trevelyan also revealed that challenger banks will be able to lend through the programme. Around £10bn of loans have been issued through the scheme since it was launched in 2019.
$483bn lost to tax abuse
Research by tax campaigners suggests that countries have lost $483bn to tax abuse by multinationals and the super-rich, up from $427bn in 2020. Of this total, the UK accounted for almost 40%. The State of Tax Justice 2021 report published by the Tax Justice Network, the Global Alliance for Tax Justice and the global union federation Public Services International, found that $312bn of the loss was the result of cross-border corporate tax abuse by multinational corporations and $171bn stems from offshore tax evasion by wealthy individuals. The analysis shows that rich countries were responsible for facilitating 78% of global tax losses. The report suggests that responsibility for setting international tax rules should be moved from the Organisation for Economic Co-operation and Development to the United Nations. Alex Cobham, the chief executive of the Tax Justice Network, said: “We must reprogramme the global tax system to protect people’s wellbeing and livelihoods over the desires of the wealthiest”. He added that the report “tells us exactly which countries are responsible for the tax abuse we all suffer. It’s time they were held accountable.”
Lord Mayor: The City has work to do on diversity
The new Lord Mayor of London says more work needs to be done on diversity in the City, with Vincent Keaveny highlighting that fewer than one in 10 management roles in the financial services sector are held by black, Asian, or other ethnic minority people. Mr Keaveny, who was sworn in as Lord Mayor on Saturday, said he is “deeply proud” of the City’s work on leading the conversation on investment on the environmental element in ESG, but added: “As Lord Mayor, I want the City to lead the next conversation, to lead the work on the ‘S’ in ESG.” Noting City of London Corporation research showing that employees from less privileged backgrounds take an extra year to progress through each stage of their careers despite no evidence of poorer performance, he said: “I know that’s wrong, you know it’s wrong and I want to put an end to it.”
Shell plans UK HQ
Royal Dutch Shell is planning to move its headquarters to the UK as part of proposals to simplify the company’s structure. It will also ask shareholders to vote on shifting its tax residence from the Netherlands to the UK. hell’s chair, Sir Andrew Mackenzie, said: “The simplification will normalise our share structure under the tax and legal jurisdictions of a single country.” The oil giant has been incorporated in the UK with Dutch tax residence and a dual share structure since 2005.
HMRC invests in tech amid hybrid working shift
HMRC has invested in nearly 40,000 laptops, tablets and phones in the last 12 months, with staff being given more technology amid a move toward remote and hybrid working. The tax office has snapped up 45,704 devices since October 2019, with the number of new devices purchased jumping 366% from 8,080 in October 2019 to September 2020, to 37,624 in October 2020 to September 2021. Sridhar Iyengar, managing director for Zoho Europe commented: “Remote working, whether full time, hybrid part time, or ‘choose your own’ work from home model, is becoming the operational structure of choice for many organisations and HMRC is no exception.”
Vodafone
Vodafone posted a 34% fall in first-half profit, though its underlying earnings improved and it nudged up its annual guidance. Pre-tax profit for the six months through September decreased to €1.28 billion, down from €1.93 billion year-on-year.
Serco
Serco upped its annual profit and revenue guidance, though it added that some of the drivers of the upgrade were unlikely to be repeated.Underlying trading profit for the year through December was now expected to be at least £225 million, up from previous guidance of around £200 million and the prior year’s £163 million. Revenue was now expected to be around £4.4 billion, up from previous guidance of around £4.3 billion and the prior year’s £3.9 billion.
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