Business news 18 May 2022
James Salmon, Operations Director.
Inflation. Vacancies surpass unemployed. Rise in insolvency work forecast. Chancellor dismisses calls for immediate tax cuts. One in four skip meals due to cost of living squeeze. Planned redundancies up 60%. And more business news.
Breaking news – Inflation
Inflation figures came in hot as expected this morning, hitting a 40 year high with CPI at 9% (and RPI at 11.1%) anually – a 2.5% month on month rise as the country grapples with a cost of living crisis.
Economists have predicted inflationary headwinds to hit double figures by the end of the year, as food, energy and other household services and goods spiral in cost. The Bank of England has predicted that inflation will pass the 10% milestone this year, far exceeding the Bank’s 2% target.
Vacancies surpass unemployed
While the average annual salary rose by 7% in March, most workers saw a fifth consecutive month of declining living standards. Office for National Statistics data shows that without bonuses, workers saw an average 4.2% wage increase in the first three months of the year.
However, this fell well short of the 7% inflation rate recorded in March. The report also revealed that the unemployment rate fell to 3.7%, the lowest since 1974. With job openings rising to a new high of 1.3m, it means there are more vacancies than unemployed people in the UK for the first time since records began.
The number of UK workers on payrolls rose by 121,000 between March and April, hitting 29.5m. About 83,000 workers re-joined the jobs market in March, up from 10,000 in February.
Darren Morgan, director of economic statistics at the ONS, noted: “Total employment, while up on the quarter, remains below its pre-pandemic level.”
Commenting on the ONS figures, Chancellor Rishi Sunak said: “It’s reassuring that fewer people are out of work than was previously feared, and we are helping them to keep more of their hard-earned money through tax cuts, changes to universal credit and support with household bills worth £22bn this financial year.”
Martin Beck, chief economic adviser to the EY Item Club, said there are few signs that higher wages are contributing to soaring inflation, noting that there is “still little evidence to suggest a wage-price spiral is developing.”
FRP Advisory forecasts rise in insolvency work
FRP Advisory expects to see a revival in insolvency fees as businesses struggle to deal with rising prices and the end of pandemic-related support. The restructuring and advisory firm said it expected more insolvency business “stemming from the increasing challenges emerging in the economy.” FRP saw trade hit by emergency support that helped to prop up companies that would have otherwise collapsed amid the coronavirus crisis and in the immediate aftermath. The firm noted an increase in the level of inquiries for restructuring services in recent months “following the removal of UK government support measures and ongoing headwinds facing UK corporates”.
One in four skip meals due to cost of living squeeze
A new poll has found that two in three people in the UK have turned off their heating due to the cost of living crisis, while half have changed supermarkets and just over a quarter have skipped meals. Among people on lower incomes, one in three people have missed meals because of the surge in inflation. Gideon Skinner, Ipsos’s head of political research, comments: “Given the economic forecasts there may well be more anxiety on the horizon.” “This is going to maintain pressure on the Government to take more steps to help people through the cost of living crisis,” he added.
Chancellor dismisses calls for immediate tax cuts
Rishi Sunak has dismissed calls for immediate tax cuts as Conservative MPs urged the Chancellor to act to ease pressure on households hit by the cost of living squeeze. Mr Sunak insisted that cutting taxes was his “priority” but added a reduction in income taxes would only come “as soon as the public finances allow.” The Chancellor told MPs the Government was ready to do more as the cost-of-living crisis continues, insisting that ministers would “act to cut costs for people without making the situation worse.” He went on to warn: “No honest Chancellor could stand here and promise prices will not rise further or that the Government can cover every extra pound on people’s bills.”
Chief Secretary to the Treasury Simon Clarke said the Chancellor will bring forward a programme of measures at a time when they will “make the right difference in a targeted way.” The Guardian looks at options that may be open to the Chancellor, saying a cut in VAT and bringing forward the income tax cut Mr Sunak has planned for 2024 “would offer help across the board.” Meanwhile, Mr Sunak is also being urged to roll out a one-off windfall tax on energy companies. Shadow Climate Change Secretary Ed Miliband said ministers have “run out of excuses” for opting against a windfall tax, predicting that “a massive U-turn is lumbering slowly over the hill.” While Labour has led calls for the levy, Tory MPs including Mel Stride, chairman of the Treasury Committee, have also backed the idea. Mr Sunak says he would not rule a windfall tax out but argued that such levies are “not the simple easy answer” to every problem.
Planned redundancies up 60%
Planned redundancies have jumped 60%, rising from almost 38,000 to more than 60,000 in the last quarter according to GQLitter, a specialist law firm dealing with employment. The firm’s Raoul Parekh said: “UK businesses, many of which took on additional debt to help them through the pandemic, are now suffering the consequences of increased borrowing costs.” He said that “companies are looking at where they can reduce costs, including within their wage bills,” adding that firms which “put off difficult decisions on controlling staff costs may have decided they can no longer afford to delay.”
Experian
Experian reported a strong full year this morning with revenue up 17 per cent at $6.3bn. Operating profit was also up 19 per cent at $1.6bn, with growth in Latin America, North America and UK and Ireland. Its consumer services business has grown at 22 per cent and now has 134m members, with the UK boasting 1.5m new users.
HSBC
Momentum is moving towards a break up of Europe’s biggest bank and its largest investor, Chinese insurance company Ping An calls for the bank to separate its European and Asian arms and other investors support the call.
Northern Ireland
Foreign Secretary, Liz Truss, has said that the government would introduce a bill to override parts of the Northern Ireland protocol. The legislation would propose “green” and “red” lanes for goods traveling between the mainland and the province. Ms Truss insisted that the bill would comply with international law. But Maros Sefcovic, the EU’s Brexit negotiator, said that the action raises “significant concerns”.
Markets
The pound has continued it’s recovery against the dollar to 1.242 on strong employment numbers as US markets also bounced overnight as the S&P 500 rose 2.02% and the NASDAQ rose 2.76% as Treasuries slumped despite Fed chair Jerome Powell sounding hawkish saying the FED won’t hesitate to go above the neutral rate of 2.5% and saying there could be some pain involved.
Green Energy
The Russian invasion of Ukraine has sped up moves by Europe to transition to renewable energy and get away from Russian fossil fuels. EU ministers are set to announce new targets to take renewables to 45% by 2030.
Burberry
Burberry reported a 23 per cent rise in revenue to £2.83bn, but said the ongoing outlook for the luxury brand depended on Chinese recovery. Despite group adjusted operating profit up to £523m, the comparable store sales in Asia Pacific were down seven per cent in the final quarter in the final quarter as lockdown batters China. Sales surged 51 per cent in EMEIA and 12 per cent in the Americas.
Marstons
Marston’s today announced it has returned to profit after sales at its 1,482 pubs bounced back to 97 per cent of pre-pandemic levels. The pub and hotel operator posted profits of £39.9m for the 26 weeks running up to 2 April 2022, compared to a £57.2m loss over the same period in 2021.
Leading firms overestimate their performance on diversity, equity and inclusion
Analysis by Agility in Mind shows that while 99% of FTSE 100 firms have an inclusive mission statement, only 48% have positive diversity, equity and inclusion initiatives. One in three business leaders believe a lack of knowledge regarding diversity initiatives’ importance holds them back from having the desired impact. Michelle Meakin, business services director at Agility in Mind, said: “Building a truly diverse and inclusive culture is laden with challenges, but our audit reveals that many well-intentioned leaders have pledges and goals to reach it.” The Financial Conduct Authority last week announced requirements for listed companies to report against targets for female and ethnic minority representation on boards and in executive management.
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