Business news 18 February 2022
James Salmon, Operations Director.
Record number of small businesses opt for closure. Councils hold £1bn grants intended for small firms. UK Retail Sales. Office attendance increases but remains below pre-pandemic levels. Hospitality sector calls for extended VAT aid. And more business news.
Record number of small businesses opt for closure
Research by Price Bailey shows that a record 14,526 businesses in Britain voluntarily appointed liquidators last year, with this marking a 7% increase on the previous record set in 2020, when 13,590 companies voluntarily appointed liquidators. Analysis shows that fewer than 10,000 businesses opted to close in 2019, with support initiatives such as the furlough scheme and bounce back loans helping keep SMEs going amid the pandemic. Price Bailey has warned that the 1.25% increases in National Insurance and dividend tax rates set to come into force in April may prompt further voluntary liquidations. The firm’s Matt Howard said: “Successive governments have chipped away at the tax advantages of running a business to the point where business owners are deciding that the risks outweigh the potential rewards.” “We may well see a flood of voluntary liquidations ahead of April’s tax rises,” he went on to warn. Analysts also fear that soaring inflation and rising energy bills present another significant challenge to small businesses in the coming months.
Councils hold £1bn grants intended for small firms
It has been claimed that local authorities are holding onto almost £1bn in grants intended for struggling businesses. The Federation of Small Businesses (FSB) is demanding that councils “get their house in order” and pay out the money before firms collapse, highlighting the pressure businesses are facing as inflation spikes and energy and supply chain costs soar, with April’s increase in National Insurance also drawing concern. FSB national chair Mike Cherry said: “Against a backdrop of surging prices and labour shortages, we’re now hurtling towards the unwinding of remaining Covid support measures, a national living wage increase and a regressive hike to National Insurance in April.” He went on to warn: “Unless policy makers intervene before this April flashpoint to alleviate the mounting wider pressures that small firms face, we risk long-term scarring of the economy and local communities.”
UK Retail Sales
UK Retail Sales rebounded by 1.9% in January as the impact of Omicron and pandemic restrictions eased. Department stores, garden centres and other non-food outlets saw particularly strong growth with a 3.4% rise, the Office for National Statistics said. However, food sales fell below their pre-pandemic level for the first time
Office attendance increases but remains below pre-pandemic levels
Staff are returning to UK offices in the highest numbers since the start of the pandemic, research by the property analysts Remit Consulting shows. However, office use remains far below pre-pandemic levels. While office occupancy of 23.3% between February 7 and 11 continued a trend for a gradual increase since the start of the year, the rate remains well below pre-pandemic levels that were closer to 60%. On February 10, occupancy reached 27.5%, the highest since March 2020. Lorna Landells, a consultant at Remit, said: “Since the relaxation of restrictions, we have seen an incremental increase in the volume of staff working in the office, with occupancy rates increasing by a few percentage points each week.” The Times notes that some firms are trying to tempt staff back to the office with perks, with PwC giving staff £1,000 “to help with the adjustment of coming back to the office” in September. The firm’s chief people officer, Ian Elliott, said the company was seeing “a real hunger to get offline and off mute to collaborate in person”.
Hospitality sector calls for extended VAT aid
The hospitality sector has urged the Chancellor to extend VAT support beyond April, with industry body UKHospitality saying the pandemic had resulted in almost £115bn of lost sales for its businesses since March 2020. It warned that this means the sector is 43% down on what it would normally expect, adding that with inflation surging, the recovery is now at risk from “rising costs across the board.” UKHospitality has called on ministers to hold VAT at its current level of 12.5% in April when the tapering of the tax support is due to end. Chief executive Kate Nicholls said the pandemic has wreaked “utter devastation” on the sector, “with thousands of businesses closed, many on the brink of collapse, and countless jobs lost.” She added: “The last thing operators need – and which a lot of them simply wouldn’t survive – is a VAT increase.”
Half of workers have been job-hunting
Analysis shows that almost half of UK workers have been hunting for a new job in the past three months, with around a third having considered quitting their current position. While 27% of those polled by Ipsos have asked for a pay rise or role change in the last quarter, almost half were turned down. Among those who did receive a pay rise, two in five said it was less than the rate of inflation. While 33% received a raise of about the same as inflation, which is currently at 5.5%, just 20% were granted an inflation-beating pay increase. The survey also revealed a gender disparity, with 55% of men having received a pay rise compared with 39% of women.
IMF: Supply chain crunch hurting the global economy
The International Monetary Fund (IMF) has warned that supply chain breakdowns that are contributing to soaring inflation are inflicting serious “harm” on the global recovery from the pandemic. The economic watchdog warned: “A large and sustained rise in costs due to bottlenecks can harm the recovery, both by lifting consumer prices and cutting into households’ purchasing power, and indirectly by leading central banks to tighten monetary policy sooner to prevent inflation expectations from shifting above target.”
Energy
Rising energy prices are estimated to cost U.K. consumers an extra £26 billion this year. Savings accumulated during the pandemic will help ease the squeeze on living standards, with Britons estimated to have amassed £185 billion in savings during the pandemic , but won’t offset it completely. As most of those savings are with high income households. Low income households however, haven’t been able to boost their savings in the past two years, and are therefore the big losers from higher energy bills.
Natwest
Natwest has returned to profitability after suffering heavy losses in 2020, with results boosted by strong savings and lending growth. The banking group reported profits of £2.9bn for the latest financial year, up from losses of £753m a year prior, with investors treated to earnings of 25.4p per share. The bank revealed that lending grew by £7.8bn in 2021, primarily driven by growth in mortgages, while 471,000 people increased their savings at the bank by £100 or more.
Segro
Segro reported a jump in annual profit following rise in the value of its portfolio and record levels of rental growth. For the year ended 31 December, pre-tax profit swelled to £4.36 billion from £1.46 billion year-on-year, while net like-for-like rental income grew by 5.6% to £234 million.
Markets
American markets fell on fears of the prospect of war in Ukraine, with the big indices all dropping on Thursday. The Dow Jones dropped 1.8% in its worst session of 2022. The S&P 500 slumped by 2.1% and the NASDAQ fell by 2.9%. Western governments have said they see no evidence of the claimed withdrawal and have warned that Russia may be planning a “false flag” event to create a pretext to invade Ukraine.
Chinese firms black listed
The US Trade Representative’s office added chinese companies Alibaba and Tencent to its “notorious markets” list of firms suspected of being involved with significant levels of counterfeiting and piracy. Both of the Chinese online-shopping giants said they were working to address the US’s concerns.
Former archbishop joins calls for wealth tax
Former archbishop of Canterbury Rowan Williams has urged the Government to impose a wealth tax on the super-rich to help tackle “spiralling inequality”. He has joined the Church Action for Tax Justice campaign group in calling for a one-off tax on the richest 1% of the population to help close the “staggering” gap between the richest and poorest in society. Warning that inequality is a “major issue in our society” that is “deeply damaging to our collective morale and trust”, he says a wealth tax “recognises that vastly disproportionate rewards for a very small number of citizens will not make for a cohesive and just national community.” Dr Williams told those who would be liable for the levy that they should not view paying back to wider society as a tax burden but as “an opportunity to build a stable, sustainable economy that works for everyone”. The Guardian notes Greenwich University research showing that a wealth tax on the top 1% could generate at least £70bn a year. This is equivalent to 8% of the current total tax take but would affect only around 250,000 households. The Wealth Tax Commission, which was set up in 2020 to consider the costs and benefits of imposing a wealth tax, recommended a one-off 1% tax on households with more than £1m, calculating that such a levy would generate £260bn.
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