Business news 17 April 2023

James Salmon, Operations Director.

Expectations up! UK expected to avoid a recession this year and inflation expected to have fallen slightly in March.  Plus wary of a trade war, concerns over AI. Government and enterprise, covid fraud, the CBI and more business news.

Expectations up! UK expected to avoid a recession this year
In the first story of rising expectations, the EY Item Club is predicting a 0.2% rise in GDP this year – a major upgrade from the 0.7% decline expected in its January forecast. The group believes the economy will avoid a recession this year as inflation subsides on the back of energy price falls.

Hywel Ball, the EY’s UK chairman, said the economy seemed to be “turning a corner, albeit very slowly”. He added: “While easing, the economy’s challenges haven’t gone away overnight. Inflation is still in double digits.”

EY Item Club expects the Bank of England (BOE) to raise interest rates next month to 4.5% from 4.25%, before cutting rates by the year end. Inflation will fall to close to 3% by the end of the year.

Expectations in a survey in the FT however were that that the BOE may pause its rate hikes.

UK inflation expected to have fallen slightly in March
In the second  story of rising expectations, experts are predicting that data from the Office for National Statistics due on Wednesday are expected to show inflation fell slightly to 9.8% in March, down from 10.4%. A steep fall in fuel prices and a fall in the cost of clothing are expected to bring down the consumer price index, according to Sanjay Raja, senior economist at Deutsche Bank. Meanwhile, core services inflation could fall slightly to 6% but this is not seen as a material drop.

Hunt ‘wary’ of new subsidies, warns of trade war
The enormous subsidies being offered by the US under its Inflation Reduction Act are luring British-based tech firms to shift production to the US. But Chancellor Jeremy Hunt says increasing subsidies in the UK could be a mistake and only lead to a protectionist trade war. Britain’s only surviving home-grown battery producer, AMTE Power, is considering a move to the US due to the support offered, with CEO Alan Hollis arguing: “We don’t have a competitive environment in the UK at this moment in time.” Mr Hunt intends to reveal more details of his response to the US Inflation Reduction Act at the Autumn Statement later on this year, but told Sky News: “If we were to turn our backs on free trade that will be a disaster for the world economy. We will enter into a dark ages period.”

Concerns raised over use of workplace AI
Labour MPs and unions are calling for stricter oversight of the use of artificial intelligence in the workplace as concerns grow over its use to surveil staff and manage performance. Labour’s deputy leader, Angela Rayner, who has the future of work in her portfolio, said: “The powerful potential of data analysis and artificial intelligence is already transforming our economy. Rights at work must keep pace with these changes so that risks can be managed and harm prevented, while benefits are felt by workers. Labour will update employment rights and protections so they are fit for the modern economy.”

Downing Street accused of turning its back on private enterprise
Rishi Sunak’s administration is restricting business access to Downing Street, executives have told the Sunday Telegraph, after the Prime Minister scrapped Boris Johnson’s flagship business council. Instead, Mr Sunak has hired a former investment banker to host a new Business Connect conference next week. But company bosses fear Mr Sunak and the Chancellor are overly focused on the tech sector leaving other slower growth parts of the “real economy” out in the wilderness. Industry figures are understood to be frustrated with the PM’s return to the more hierarchical pre-pandemic system where companies were forced to engage with government departments rather than directly with No 10. A spokesman for No 10 said: “One of the Prime Minister’s five priorities is to grow the economy and the Business Connect conference later this month is just one of a number of ways the Government is engaging with key businesses and entrepreneurs across the UK to deliver on that ambition.”

Former SFO chief: Ministers ignored red flags over Covid fraud
A former director of the Serious Fraud Office (SFO) has claimed “red flags were ignored” as the Government rushed to distribute billions in taxpayer-funded loans to businesses during the pandemic. Sir David Green said, “just because you need to get money out the door doesn’t mean you throw ordinary prudence out the window.” Fraud and error were likely to have cost the UK Government as much as £16bn across the various Covid loan schemes. But Sir David says fraud is a broader problem and called for experts to be embedded across government with expertise and training in identifying and preventing fraud, rather than them being confined to the SFO and pockets of HMRC and the police.


54% of Royal college of nurses voted to reject the government’s latest pay offer, delivering a blow to Prime Minister Rishi Sunak’s administration and threatening to prolong industrial action for the National Health Service. Unison members voted by 74% to accept the offer.

G7 on climate

The G7  pledged to work toward boosting renewable wind & solar energy for power generation and reducing vehicle emissions by 50% by 2035, but failed to stop further investment and left the door open to new investment in fossil fuels.

Virgin Orbit collapse hurts Cornwall small businesses
The demise of Sir Richard Branson’s satellite company Virgin Orbit has left small businesses in Cornwall nursing huge losses. Virgin Orbit’s plan for the first orbital space launch from British soil came crashing down to earth in January with the failure of its mission from Newquay. Creditors include many local businesses, such as catering firms and hotels, court documents reveal.

Bank of England considers urgent reform of deposit guarantee scheme
Following recent bank failures, the Bank of England is reviewing the UK’s Financial Services Compensation Scheme with a view to increasing the amount covered for businesses and requiring banks to load more cash into the system. Both the BoE governor Andrew Bailey and Jeremy Hunt, the Chancellor, recently called for the system to be reformed in the wake of the collapse of Silicon Valley Bank and the rescue of its UK subsidiary by HSBC. Sources told the FT that regulators are concerned that current shortcomings in the deposit guarantee scheme undermine confidence in the FSCS and reduce its effectiveness in preventing bank runs.

CBI no longer relevant, says ex-Barclays director
Former Barclays’ director Baroness Wheatcroft believes the Confederation of British Industry (CBI) is no longer relevant, telling BBC Radio 4’s Today programme that the business lobby group’s “time has probably passed.” Baroness Wheatcroft said it was “increasingly difficult” for the CBI to represent “the broad spread of members that it claims to.” She added that the interests of a firm like Amazon and a small manufacturing business “are so different now that to put them under the same umbrella as the accountants and consultants and the banks really doesn’t make sense any longer.” The CBI has made headlines recently amid a number of misconduct claims. It this week fired Tony Danker after an investigation found that his conduct fell short of that expected of the director general. Former director general Richard Lambert has called on the CBI to deliver “a full account of what appears to have gone wrong” so as to rebuild trust.

Ofgem staff were ‘at home for crisis’
A Freedom of Information request has shown that just 8% of Ofgem staff were in the office when 30 energy suppliers went bust in 2021 and bill-payers were laden with the £3bn cost. The energy regulator “failed to act against unfit energy suppliers”, Citizens Advice said, while the TaxPayers’ Alliance’s Joe Ventre commented: “Taxpayers will be shocked by these low occupancy rates.” The news comes after it was revealed that Ofgem handed out £32m to consultants to help sort out the mess left by the collapse of gas and electricity suppliers. KPMG, it is noted, earned almost £2.5m for five contracts while Baringa recently landed a six-month deal worth £330,000 to help out with Supplier of Last Resort payments.

London rents soar nearly 20%
Rents in inner London rose 18.5% in the year to March, according to the estate agent Hamptons, taking the cost of the average property in the capital’s 12 most central boroughs to £3,046 a month. This is up from £2,571 in March last year. In outer London, rental growth comes in at 15.6%. This compares with a 10.8% increase in rent levels across the country as a whole. The high prices in central London are forcing young families to leave and schools to close. But the shortage of rental properties is likely to get worse, Hamptons says, as a growing number of buy-to-let landlords sell up and too few new landlords enter the sector. Aneisha Beveridge, head of research at Hamptons, said: “House price growth continues to slow [but] rents keep moving in the opposite direction. The number of rental homes on the market seems to have found a new normal at nearly two thirds below pre-pandemic levels.”

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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.