Business News 17th July 2017
This is the hopefully enjoyable and informative, bite size business news compiled by the Credit Protection Association on Monday 17th July 2017 for its members and visitors.
Markets Round up
The FTSE 100 fell 35 points (0.5%) to 7378 on Friday with the FTSE 250 fairly level at 19,408 (down just 0.1%) German and French markets were also broadly level down 0.2% and 0.1% respectively. The fall in the FTSE 100 was driven by sterling weakness as it rose to $1.3087 and €1.1458. Globally stocks were hit by negative sentiment regarding big US financials JP Morgan and Citigroup. Mining stocks were up though as Iron ore hit a 10 week high. The University of Michigan also released its monthly report showing a fall in US consumer sentiment in the month of July from 95.1 to 93.1 when it had been predicted to come in at 95.0. US inflation also fell with the US CPI falling from 1.7% to 1.6% according to the department of Labor. The falling inflation rate will hit expectations of another December rate rise. Despite this US shares rose with the S&P 500 up 0.5% to 2459 and the Nasdaq up 0.6% to 6312 as big tech and healthcare pulled US stocks higher. Asian stocks followed suite boosted by strong economic growth in China which came in at 6.9% for April to June above the 6.5% target for 2017. Oil and Gold rose as the dollar continued to fall supprted by a slowdown in the growth of US rigs and weak US data respectively.
Brexit
Brexit Secretary David Davis will attempt to reassure EU negotiators over Britain’s plan to guarantee the future rights of European nationals living in the UK amid deep scepticism in Brussels. Davis returns to the negotiating table in the Belgian capital for the second round of talks with the European Commission’s chief negotiator Michel Barnier. The meeting takes place against a backdrop of increasingly bitter and public feuding among UK ministers over the Government’s Brexit strategy. Over the weekend, Chancellor Philip Hammond angrily accused Cabinet rivals of trying to undermine his agenda for a “softer” business-friendly Brexit prioritising jobs and the economy. One unnamed Cabinet minister was reported have hit back, claiming Hammond was part of an attempt by “the Establishment” to prevent Britain ever leaving the EU. The rowing will be seen as further evidence of Theresa May’s weakness after seeing her Commons majority wiped out in last month’s general election. After what Davis said was a “good start” in the opening session of the Brexit negotiations last month, the mood between London and Brussels has soured following a series of public spats.
HMRC raises record taxes
HMRC raised a record £574.9bn in taxes during 2015-16, including £29bn from its tax avoidance and evasion programme. However, more than £9bn in tax is being repaid due to legal cases in which people successfully demanded their bills be reassessed. The National Audit Office’s report shows HMRC expects to repay £9.6bn due to such legal cases for the period 2016-17, a significant increase from the £5.9bn paid in 2015-16. The report also reveals that an estimated £1.57bn of tax credits were overpaid due to error and fraud in 2015/16. Meanwhile, the NAO found the hiring of 800 extra staff has “significantly improved” HMRC’s call centre service, with calls in the year to March 2017 answered in around 3 minutes 54 seconds. The Government had pledged to improve waiting times after a decision to cut 5,600 jobs in 2015 led to some callers waiting up to an hour for an answer.
Bad debt rising
Research by Bibby Financial Services has found average levels of bad debt at small firms has increased by 70% in just one year. The survey of 1,000 SMEs throughout May and June found that the average level of debt written off as unrecoverable has risen to £20,043. When asked what could ease the pressures on their finances, 29% of those surveyed called on the Government to lower business rates. The survey follows news that a £300m discretionary business rates relief fund has yet to be put into action. Mike Cherry, national chairman of the FSB, said the rates relief hold-up has added to concerns about the overall climate for SME operations. He warned that small business confidence is down for the first time since the referendum, and political uncertainty has created a cooling effect on investment. The FSB also believes a culture of late payments is partly to blame for poor financial security at SMEs.
Pro-business Brexit predicted to boost economy
The EY Item Club has predicted that June’s general election result will lead to a more business-friendly Brexit and a better than expected economic picture in two years’ time. Although its GDP growth forecast has been reduced to 1.5%, from 1.8% for this year, EY Item increased its view of GDP growth in 2018 and 2019 on the assumption that a transition arrangement for leaving the EU is now likely. It pushed up GDP growth for 2018 to 1.3% from its earlier forecast of 1.2%, and to 1.8% for 2019 from 1.5%.
Hammond warns of investment uncertainty
Philip Hammond has told the BBC’s Andrew Marr Show that businesses are holding off from investing in the UK because of uncertainty about Brexit. “It is absolutely clear businesses where they have discretion over investment, where they can hold off, are doing so… They are waiting for more clarity about what the future relationship with Europe will look like,” he said. The chancellor has also suggested that a Brexit transition deal that gives business a cushion of a “couple of years” will be required after the UK leaves the bloc. Philip Hammond has called for a Brexit transition deal that would give business a cushion of a “couple of years” after the UK leaves the EU as he accused hardliner cabinet members of trying to undermine him. The chancellor’s accusation that there was a move to resist a business-friendly exit from the EU will cast a shadow over Monday’s resumption of Brexit talks in Brussels. David Davis, Brexit secretary, will call for both sides in the exit talks to “get down to business” but in Brussels there was concern that Theresa May’s cabinet was still arguing over what form an exit should take. There was also doubt in Brussels over whether a weakened prime minister could stay in office long enough to deliver Brexit, as speculation about an autumn leadership challenge and malicious briefings reached a new intensity in Westminster.
The ECB
The European Central Bank is on track to unwind its stimulus next year but it’s likely to drag out the process, economists say. The ECB will probably hold fire this week and wait until September before slowing the pace of its bond-buying program, a Bloomberg survey shows. The rollback is seen starting in January and taking nine months, up from the previously predicted seven months, with future reductions announced one step at a time. Respondents are split on whether officials might set the tone on Thursday by dropping a pledge to boost quantitative easing if needed. The survey suggests that the Governing Council session in Frankfurt on July 19-20 will largely be a time for discussing how much room there is to pare back stimulus after more than four years of economic expansion. While inflation is still short of the ECB’s goal, President Mario Draghi and some of his colleagues have said in recent weeks that it may be possible to adapt the existing measures without undermining the recovery.”
Young buyers face stamp duty trap
The Telegraph reported on Saturday that thousands of young people who bought buy-to-lets as a way of getting on to the property ladder are having to pay tens of thousands of pounds in additional stamp duty when they come to buy a home for themselves. It follows the introduction last year of a 3% stamp duty surcharge for additional property.
Richest recover from financial crisis
Research from the Resolution Foundation shows the wealthiest 1% of UK households have now recouped all the ground they lost during the financial crisis. The think-tank said households with incomes of £275,000 or more have seen their share of national income return to the level seen before the summer of 2007. The Foundation added that the other 99% of households have struggled to make ends meet, with weaker wage growth, higher inflation and frozen welfare benefits offsetting any gains from rising employment over the past year.
Lack of hiring blamed on Brexit uncertainty
Hays says companies are putting off making long-term decisions about their plans to expand while Brexit negotiations are ongoing. Paul Venables, the company’s finance director, said employment in the UK was relatively stable but companies were reluctant to commit to any hiring sprees amid political and economic uncertainty.
Public would pay more tax to end pay cap
Research for the Independent has revealed most people would pay more tax if it meant a pay rise for paramedics, firefighters, nurses and the police. The poll shows no fewer than 56% of people are willing to pay more in tax to fund pay increases in “blue light” occupations. The Independent’s leader argues that a “judicious increase in tax, combined with a modest relaxation in borrowing, is what the nation needs.” Meanwhile, the chancellor is said to have told his cabinet colleagues during a meeting that public-sector workers are “overpaid”, as he refused to lift the 1% cap on wages
Cash-in-hand is not the issue
Karren Brady says the Taylor Review’s claim that cash-in-hand work costs the Treasury more than £6bn is not as big a problem as the tax-planning practices of firms such as Google. Meanwhile, the founder of marketplace PeoplePerHour has predicted half of the UK’s workforce by 2020 will be freelancing. Xenios Thrasyvoulou said the Taylor Review “shows the workforce is shifting and the model of fulltime employment is becoming obsolete.”
SMEs urged to consider R&D tax credits
A lack of awareness and daunting jargon means many SMEs are missing out on potentially thousands of pounds in R&D tax credits. Introduced in 2000, the credits enable businesses to reclaim up to 33p for every £1 spent on “advances in science and technology”. In the 2014-15 tax year, £2.5bn of R&D tax relief was claimed, with SMEs accounting for £1bn – up from £325m the previous year. However, a recent survey reveals only 5% of small businesses have used R&D tax credits, compared with 50% of large companies. “The government needs to explore how it might better promote the scheme, as well as simplifying the application process so it is less onerous,” says the FSB’s Mike Cherry.
Business rates linked to consumer prices from 2020
The Treasury has said business rates will be indexed against consumer prices rather than faster-rising retail prices from 2020. The move follows demands from pressure groups for a fairer tax system to ease pressure on businesses, town centres and local shops. The Treasury said the change would save companies £1bn in the first three years, representing a £250m saving for the retail sector. Meanwhile, co-founder of the Wahaca restaurant chain Mark Selby tells the Mail on Sunday that business rates rises are “killing” small businesses across the country.
The business rates advisory firm CVS has welcomed the government’s commitment to switching business rates indexation from RPI to CPI from 2020. But it also warned that in the two years ahead of the switch, businesses still face £2.1bn of inflationary increases in rates.
Be wary of freedoms
The Sunday Times’ Nina Montagu-Smith says savers should be wary of using new pension freedoms to cash in their savings, highlighting the fact that pensions are tax efficient. Figures last week revealed that 52% of those who have cashed in their pension pot invest the money in another savings or investment vehicle. Lee Hollingworth, head of defined benefit consulting at Hymans Robertson, warns that by doing so, savers are missing out on a more tax-efficient savings option. Ms Montagu-Smith also says that for people who still work, taking income — by moving to a drawdown scheme or buying an annuity — could push them into a higher tax band.
Bosses call for wage freeze
Bosses are calling for a freeze in the minimum wage amid signs that Brexit uncertainly is making businesses reluctant to invest. Increases in the national living wage could prevent firms from growing or lead to job losses, according to the British Chambers of Commerce. It is calling for a freeze in real terms, which it says would equate to a 2.7% rise in the next year. “Recent uncertainty over Brexit suggests that the pace of planned increases needs to be reviewed,” said the BCC in a submission to the Low Pay Commission. Meanwhile, a survey by the CBI has found more than 40% of companies have cut back on planned investments because of the Brexit vote.
Tax changes deter overseas landlords
The proportion of British homes owned by foreign landlords has fallen to 5%, compared with 12% in 2010, according to Countrywide. Tax changes appear to have discouraged some overseas landlords, while others have bought property in cheaper areas instead. The news was welcomed by tenants groups, who said foreign owners had clearly benefited from tax loopholes in the past. “This implies that there has been a gradual net sell-off, which demonstrates that government taxation of foreign property is having some impact in deterring speculation,” said Dan Wilson Craw, director of Generation Rent.
Trump proposals ‘will widen Americas wealth gap’
Tax reforms proposed by Donald Trump will increase the gap between rich and poor, researchers warn. The say the US could fall a further six places from its ranking of 23rd on the ‘commitment to reducing inequality index’, compiled by Oxfam, if the tax plan is passed.
Previous News pages
Business News 14th July 2017
Business News 13th July 2017
Business News 12th July 2017
Business News 11th July 2017
Business News 10th July 2017
Business News 7th July 2017
Business News 6th July 2017
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Business News 4th July 2017
Business News 3rd July 2017