Business news 17 November 2021
James Salmon, Operations Director.
Inflation
UK Inflation surged in October to a 10-year high, driven by fuel and energy prices. The figure is now more than double the target set by the Bank of England. The UK Consumer Prices Index rose by 4.2% in the 12 months to October 2021, up from 3.1% in September. Economists polled by Reuters had a expected a figure of 3.9% for October.
Covid
Germany is heading toward stiffer restrictions on people who have refused a Covid-19 vaccine, as authorities across Europe seek to rein in a renewed surge in the disease. Europe’s largest economy is grappling with its worst outbreak in the pandemic, posting a fresh record in its infection rate on Tuesday.
Tax debts hit £42bn, with HMRC owed by 2.4m more people
Data from the National Audit Office (NAO) shows that the UK’s tax debt burden jumped from £16bn to £42bn between January 2020 and September 2021, with up to 2.4m more taxpayers having fallen into debt to HMRC. The analysis shows that as of September 30, 6.2m taxpayers owed money to HMRC compared to 3.8m on January 31, 2020, with the average amount taxpayers owe now at £6,800, a 60% increase. The tax office paused most debt collection activity as Britain went into lockdown in March 2020, while payments of VAT and self-assessment income tax were also deferred. The ONS has warned that HMRC faces a “significant challenge” clearing the backlog, warning that staff numbers are unlikely to be enough to manage the increased workload. The tax authority has forecast that it will have twice the usual level of debt to manage at the end of March 2022, predicting that total tax debt will be around £33bn. The NAO suggested that HMRC should develop a revised strategy for recovering the money. Gareth Davies, the head of the NAO, said HMRC is set to see “several years of managing a far greater level of tax debt than it has seen in recent times” as a result of the pandemic. Dame Meg Hillier, chair of the Public Accounts Committee, said the tax authority faces a “careful balancing act”, adding: “It must quickly recover the unpaid taxes from those that can afford it, yet support those who are struggling to pay.”
Vacancies at a record high in October
Job vacancies hit a record high in October, with Office for National Statistics (ONS) showing there were 1.17m job openings last month. The report also shows that 2.2m people started a new job between July and September. While there had been concern that the redundancy rate would spike when the Coronavirus Job Retention Scheme was withdrawn at the end of September – with 1.1m people still on furlough that month – there were 160,000 more workers on payrolls in October than September – a 0.6% increase. Redundancies rose slightly in the three months to September but the unemployment rate fell to 4.3%, close to its pre-pandemic level. A net increase of 304,000 people moved from unemployment into work in the three months to the end of September. Sam Beckett, head of economic statistics at the ONS, said: “It might take a few months to see the full impact of furlough coming to an end, as people who lost their jobs at the end of September could still be receiving redundancy pay … However, October’s early estimate shows the number of people on the payroll rose strongly on the month and stands well above its pre-pandemic level.” She added: “There is also no sign of an upturn in redundancies and businesses tell us that only a very small proportion of their previously furloughed staff have been laid off.”
Derby hit by new nine-point deduction
Derby County have accepted a total deduction of 21 points for financial breaches, with administrators Quantuma having agreed a new nine-point deduction, plus an additional suspended three points. The club have also agreed a business plan including restrictions on spending, transfers and losses. The club was given a 12-point penalty after entering administration in September, with a second penalty after breaching the English Football League’s profitability and sustainability rules.
Film and TV sector surges amid streaming demand
Research from BDO show that the UK’s 50 leading film and TV companies have seen their turnover rise by 15.4% in the last year, hitting £8.1bn as demand for content from streaming platforms continues to drive growth. Peter Smithson at BDO believes “this demand is likely to be sustained for some time yet”, despite concerns around the pandemic.
SME bosses unaware of bank balances
A poll by accounting platform Dext shows that thousands of small business owners have no idea how much money they have in the bank, with one in six saying they are too busy to keep up with the cash going in and out. More than a third of those surveyed said they would like to employ the services of an accountant or bookkeeper. The study of 500 UK SME owners found 26% struggle with financial admin, with 38% identifying rising costs as their biggest challenge. The poll also shows that 58% operate from week-to-week rather than planning for long-term sustainability, with 61% saying they wish they had more time to strategise about their business goals. On the climate for their firm, 77% described their business as being ‘reasonably healthy’, with 27% of these saying it is ‘very healthy’. One in three SME owners currently employ an accountant. Of those, 39% say their accountant keeps them in line with local tax filings, 26% rely on their accountants to spot areas their business can save money and a quarter use them for fraud detection and prevention. A Dext spokesperson commented: “Our results clearly show the benefits of having a dedicated accountant or bookkeeper for a business.”
Reeves: Labour committed to post-Brexit equivalence for the City
Shadow Chancellor Rachel Reeves says a Labour Government would seek to secure a post-Brexit equivalence deal for the financial services sector, telling TheCityUK’s national conference that, if elected, Labour will “fix some of the holes in the patchwork Brexit deal with the EU”. Saying that the party wants to ensure the UK has “the widest possible agreement” on equivalence, Ms Reeves said the current government “hung financial services out to dry during Brexit negotiations.”
Jobs data could prompt rate rise
With the unemployment rate falling and a data showing a record high for job vacancies, BBC News suggests this increases the likelihood that the Bank of England will raise interest rates from record lows before the end of the year, with officials expected to take steps designed to ease inflation. Paul Dales, chief UK economist at Capital Economics, said: “If the next labour market release on December 14 tells a similar story, we think that will be enough to prompt the Bank to raise interest rates from 0.10% to 0.25% at the meeting on December 16.” Yael Selfin, chief economist at KPMG, says uncertainty is not over yet, adding: “We expect the Bank will wait with the first hike until February next year, but… an earlier move in December cannot be ruled out.”
HMRC intensifies efforts to claw back pandemic payouts
HMRC has ramped up efforts to recoup £1bn from fraudulent or incorrect furlough pay-outs, with more than 26,500 investigations into potentially fraudulent pandemic support claims launched over the past eight months. The probes also cover the income support scheme for the self-employed and the “eat out to help out” initiative. With HMRC having planned to target about 30,000 cases over a three-year period, the Guardian’s Richard Partington says the fact that officials have already opened nearly as many cases this year suggests the total is likely to be much higher than originally anticipated.
Gas
European gas prices surged after Germany suspended the approval process for the Nord Stream 2 gas pipeline from Russia to Europe. Germany’s energy regulator said it would only certify the pipeline’s operating company if it were compliant under German law.
Experian
Experian reported a jump in first-half profit, led by ‘standout’ growth in its consumer services business. For the six months ended 30 September 2021, pre-tax profit was up 43% to $654 million year-on-year as revenue increased 23% to $3.06 billion.
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