Business news 17 June 2022
James Salmon, Operations Director.
Interest rates up to 1.25% in fifth consecutive hike. Firms hit by post-pandemic recruitment pressure. Employers urged to allow staff to work from home during rail strikes. Northern MPs tell PM to cut taxes or risk Red Wall losses. And more business news.
Interest rates up to 1.25% in fifth consecutive hike
The Bank of England has raised interest rates by 0.25 percentage points from 1% to 1.25%, with this the fifth consecutive rise as officials attempt to ease soaring inflation. The increase to 1.25% means rates are now at their highest point in 13 years. Data shows inflation climbed to a 40-year high of 9% in the 12 months to April, a rise of 2% from March. The Bank expects to see a peak of 11% in October when the energy price cap rises again, with this far exceeding its 2% target. Six of the nine members of the Bank’s Monetary Policy Committee voted to raise rates to 1.25%, but three backed a bigger increase to 1.5%. It was also revealed that the Bank expects the UK economy to shrink by 0.3% in Q2. David Bharier, head of research at the British Chambers of Commerce, said that while the decision to raise the interest rate was expected, it “will add further concern to businesses amid a weakened economic outlook, soaring cost pressures and labour shortages.” Alpesh Paleja, lead economist at the Confederation of British Industry, commented: “With inflation high and price pressures remaining acute, the Bank of England has rightly raised interest rates again to anchor inflation,” but warned that “with the outlook looking weaker, monetary policy is walking an increasingly fine line between taming inflation and supporting economic activity.”
Firms hit by post-pandemic recruitment pressure
The Times’ Oliver Pickup looks at how job vacancies data from the Office for National Statistics “exposed the post-pandemic recruitment challenges facing most businesses,” with the unemployment rate dropping to 3.8% in the three months from February to April, the lowest since 1974. Jack Kennedy, an economist at jobs platform Indeed, notes that for the first time since records began there are fewer unemployed people than job vacancies, pointing to a “dramatic turnaround” from last summer when there were four unemployed people per vacancy. This, he says, “highlights the extreme tightness of the labour market, which has been fuelling hiring difficulties across many sectors.” Ian Nicholas, the global managing director at the employment agency Reed, warns: “There must be a danger that some companies could relocate if they feel that they cannot attract and retain talent within the UK at remuneration levels that maintain their commercial competitiveness.” On the ways firms are looking to keep existing staff happy and appeal to new recruits, Mr Pickup says many companies are becoming “remote-first,” noting that PwC last year allowed all 55,000 US employees to work from anywhere.
Employers urged to allow staff to work from home during rail strikes
Downing Street has urged employers to allow staff to work from home during rail strikes that will see half of Britain’s rail lines closed next Tuesday, Thursday and Saturday. A spokesperson said: “As during the pandemic, it obviously remains sensible for public- and private-sector organisations to offer flexible working arrangements for some jobs.” Members of the RMT and Unite unions are set to walk out over pay, jobs and conditions. Transport Secretary Grant Shapps says the Government plans to introduce legislation to enable the use of agency workers during industrial action “if the strike drags on.” He said the strikes are “an incredible act of self-harm by the union leadership,” warning that walkouts are “going to endanger the jobs of thousands of rail workers.”
Northern MPs tell PM to cut taxes or risk Red Wall losses
Conservative MPs will today warn Boris Johnson he must cut taxes or risk losing the party’s Red Wall seats. The Prime Minister is set attend a conference of the Northern Research Group (NRG) of backbench Conservatives and chairman Jake Berry will insist: “It’s time to stop talking about being the party of low tax, it’s time to be the Government of low tax.” He will call for devolved mayoral authorities in the North to be given the power to cut local taxes and set stamp duty rates, saying: “There are almost as many people living in Greater Manchester as in Wales – yet Wales has power over tax, while Greater Manchester does not.” He will insist that giving areas the right to vary tax rates “will help deliver a more competitive economy.” Mr Berry will also argue that a “defining mission” of the Government should be to level up the country in a bid to tackle regional and local inequalities. The NRG, a group of 50 MPs who campaign for greater investment in the North, yesterday met with Chancellor Rishi Sunak and insisted there was a need to cut taxes.
No tax cuts for two years, ministers suggest
Tax cuts are not likely to be introduced for another two years, ministers have indicated, with Chancellor Rishi Sunak and Levelling Up Secretary Michael Gove suggesting that bringing forward a cut to income tax planned for 2024 could further stoke inflation and add to the Government deficit. Mr Sunak appeared to rule out short-term tax cuts, telling ITV: “I have a responsibility to make sure that we don’t burden our children with a legacy of debt that I didn’t deal with. And that’s why I’ve had to take some decisions which I know are not always popular.” Meanwhile, Mr Gove said those calling for tax cuts would have to wait because “you’ve got to make sure that you balance the books at a government level.” Asked whether this would mean ruling out further cuts for two years, he said: “The Chancellor has the right policy.”
The I
North Sea producers warn windfall tax has forced rethink of UK projects
North Sea oil and gas producers have warned Chancellor Rishi Sunak they are rethinking projects in Britain due to an “anti-investment” and “anti-business” 25% windfall tax on their profits.
Microsoft CDO: Improving diversity can help tackle skills shortage
Jacky Wright, the chief digital officer at Microsoft, has urged UK businesses to work harder to improve staff diversity, saying that as a black woman in a senior position, she is an anomaly in the business world. Speaking at the Times’ CEO Summit she said: “Let’s look around the room, CEOs in the room, C-suite in the room, I don’t see anyone who looks like me. Have we made progress? We still have a lot of work to do, not just in the UK but in the US.” Ms Wright said that some of the skills shortage businesses are experiencing can partly be attributed to a lack of diversity, warning: “Talent is a concern for everyone and we’re not harnessing the power where it exists.”
Small firms priced out of cyber insurance
Small businesses are increasingly being priced out of cyber insurance policies, due to sky-high premiums and the cost-of-living crunch. Analysis by GlobalData shows that 29% of companies with fewer than 250 staff cancelled their cyber insurance policies last year as they looked to cut costs. It was also found that 17.3% of UK SMEs had no cyber insurance policies in the first place, with smaller businesses most likely to be uncovered. GlobalData insurance analyst Ben Carey-Evans said: “With SME budgets being squeezed, and insurers not being able to lower the costs of premiums, the rising costs will be a big issue for cyber insurers going forward.”
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