Business news 16 December 2022
James Salmon, Operations Director.
Interest rates raised to 14-year high. Consumer confidence climbs but remains at record low. Black Friday doesn’t save UK Retail Sales. Small business digital support scheme scrapped. And more business news.
Interest rates raised to 14-year high
The Bank of England has raised interest rates to the highest level for 14 years as it looks to tackle inflation. Although inflation fell from 11.1% in October to 10.7% in November, it remains more than five times higher than the Bank’s 2% target. The Bank’s Monetary Policy Committee (MPC) voted to hike rates to 3.5% from 3%, with this the ninth consecutive increase. The 50 basis point rise was less severe than the hike seen in October, when the MPC opted to up the rate by 75 points – the steepest increase in 33 years. While six members of the nine-strong MPC backed the 0.5% increase, two said rates should remain unchanged and one called for another 0.75% increase.
Bank of England Governor Andrew Bailey said that while he is aware that high interest rates “have a real impact on people’s lives,” by increasing rates “we can bring inflation down sooner.” He added that the dip in inflation seen in November was the “first glimmer” that soaring price rises were starting to come down but added that there was still “a long way to go.”
Reflecting on the rate increase, Paul Dales, chief UK economist at Capital Economics, said he expects rates to peak at 4.5% next year. Meanwhile, the Bank has said it believes the economy will perform better than expected between October and December, shrinking by 0.1% in Q4 rather than the previously predicted 0.3%.
Consumer confidence climbs but remains at record low
GfK’s consumer confidence index increased by just 2 points to minus 42 in December compared with November. This represents a record eighth month in a row that the measure of financial optimism gave a reading of -40 or worse on an index where a minus score represents negative confidence. Britons’ confidence in their personal finances is at the lowest level on record. Respondents rated their personal financial situation at -28 points, 23 points lower than in December 2021, while the gauge of confidence in the UK’s overall economic situation sat at -66 points, 27 points lower than a year ago. Linda Ellett, KPMG’s head of consumer, retail and leisure, has warned that the “fundamentals” driving the lack of confidence would last into the new year.
Black Friday doesn’t save UK Retail Sales
UK retail sales unexpectedly fell in November as Black Friday failed to bring its expected boost, worsening the crisis engulfing the retail sector as inflation hits energy costs and wages. The volume of goods sold in shops and online fell 0.4%, the Office for National Statistics said this morning, when economists had been expecting a 0.3% rise.
Small business digital support scheme scrapped
Business Secretary Grant Shapps has scrapped an initiative offering SMEs funding, advice and guidance on approved software solutions following a “lower than expected” take up. He said the Government “cannot justify the continued cost” of the Help to Grow: Digital programme, a scheme offering a discount of 50% or £5,000 on software purchases for smaller firms that were looking to boost their digital capabilities. The programme was launched in March 2021. Federation for Small Businesses chair Tina McKenzie commented: “Although uptake is low, firms should be given the time to reap the benefits instead of having it snatched away during a time of economic crisis.”
Tesla & Musk
Elon Musk is reported to have sold 22m Tesla shares bringing his total share sales to c. $40bn. Musk has lost his position as the world’s wealthiest individual to Bernard Arnault, LVMH chairman and majority owner.
Heathrow
Heathrow baggage handlers have called off a strike after agreeing to an improved pay offer from Menzies Aviation. The Unite union said a three day walk out expected to start tomorrow at 4am has been cancelled
Heathrow Airport expects 2022 traffic to be 60m-62m and it expects 2023 traffic to rise to 67.2m passengers.
Estate agents see increase in below asking price sales
Almost three quarters of estate agents saw the majority of their property sales agreed below the asking price in November, according to research from industry body NAEA Propertymark. A poll saw 72% of branches say a majority of their sales were for less than the price the client was seeking, up from 69% in October and 24% in November 2021. The report also showed a decline in competition for homes, with an average of seven buyers for every new property compared to a high of eleven. The number of new buyers registering per member branch fell to 52 in November, down from a high of 86 in August. The average number of sales agreed per branch dropped to six in November, from 10 in September. It was also found that the average number of viewings per property fell to 2.6, while new instructions were down on average to eight per member branch. However, the average number of properties available to buy per branch rose slightly to 33. Propertymark chief executive Nathan Emerson said: “The sales market is firmly back in the hands of buyers who have been on the back foot for 18 months. More property is available but the competition between those looking has cooled substantially.”
Higher earners in Scotland to pay more income tax
People in Scotland who earn more than £43,662 will have to pay more income tax next year, with Deputy First Minister John Swinney announcing that the higher rate of tax will increase from 41p to 42p in the pound, while the top rate will increase from 46p to 47p. The tax threshold for the top rate will also be lowered from £150,000 to £125,140, a change that had already been confirmed for other parts of the UK by Chancellor Jeremy Hunt. The threshold for the 41p higher rate will remain frozen at £43,663 in Scotland, with this lower than the £50,271 seen elsewhere in the UK. Economists at the Fraser of Allander Institute calculate that Scotland has around 2.5m tax payers, with around 362,000 of these in the higher rate bracket and a further 14,700 paying the top rate of income tax. Simon Cockburn, chair of the Chartered Institute of Taxation, said the change “further entrenches the divergence between the income tax regimes in Scotland and the rest of the UK.” Justine Riccomini, head of devolved taxes at the Institute of Chartered Accountants of Scotland, warned that the Scottish tax rate “may make it more difficult to attract skilled workers to be employed in Scotland.”
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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.