Business news 18 May 2023

James Salmon, Operations Director.

Resilient economy makes outlook brighter. Cost of living is the public’s top concern. AI can ‘turbocharge’ productivity, says Sage boss. Insurers could owe thousands. Chancellor: Office working should be default .  And more business news that we thought would interest our members.

Bailey: Resilient economy makes outlook brighter
The governor of the Bank of England has described the UK’s outlook as “looking a bit brighter” due to falling energy prices and “greater resilience in the economy than expected.” Speaking at the British Chambers of Commerce’s annual conference, Andrew Bailey also said there are signs that labour market tightness is loosening, although he warned that it “remains very tight.” Pointing to a recovery in labour market participation, especially amongst younger workers, he noted that the number of vacancies has come down from “very high levels.” He added: “The ratio of the number of vacancies to the number of unemployed, a key measure of labour market tightness, has fallen as a result.” Mr Bailey said the Bank would not hesitate to increase rates again if necessary but said there were “good reasons” to expect inflation to fall sharply in the coming months. He added that the Bank’s commitment to its 2% inflation target is “unwavering.”

Cost of living is the public’s top concern
A poll by More in Common shows that the cost-of-living crisis remains the top concern for the British public, with 75% of respondents citing it as the number one priority that ministers should address. More in Common UK director Luke Tryll said that ahead of the general election, the Government “needs the public to start believing things are getting better,” adding: “But as things stand only one in four Brits think the cost-of-living crisis will end this year or next.”

AI can ‘turbocharge’ productivity, says Sage boss
Steve Hare, chief executive of accounting software group Sage, says AI could “turbocharge” productivity, suggesting the technology “allows humans to concentrate on things that they’re good at and be released from more repetitive and more administrative tasks.” He suggested that AI could be used as “an assistant or co-pilot” for accountants and business advisers. Mr Hare said that for many years, the UK has struggled with its productivity, “and I see this as a really big opportunity to turbocharge output.” “We should use AI to free up people and let them focus on the areas where they can add the most value,” he added.

Insurers could owe thousands following pandemic payment ruling
Small businesses that claimed on their insurance during the pandemic but had their payouts delayed could be owed thousands of pounds after a ruling by the UK’s financial ombudsman. In what campaigners say is a key test case, the ombudsman ruled that an 8% annual rate of interest should be paid on the sum pro rata over the period between the claim being declined and it being paid. This means many businesses could potentially make similar claims. About 370,000 small firms made insurance claims worth a combined total of around £1.2bn after lockdowns left them unable to trade. Many policyholders initially had their claims declined on the grounds that business interruption policies were not designed to cover a government-imposed lockdown. In 2020, the High Court found in favour of policyholders following a test case brought by the Financial Conduct Authority, although claims were not paid out until after a Supreme Court ruling in 2021.

Chancellor: Office working should be default
The Chancellor has suggested that the “default” location for workers should be in the office, unless there is a good reason to work remotely or in a hybrid pattern. Jeremy Hunt said the while working remotely – which has become increasingly common since the pandemic – has produced “exciting opportunities,” he is worried about a “loss of creativity” when it is permanent.

Official figures show that 63.9% of people never work from home, while 21.4% work a hybrid model and just 7.8% of workers are based at home permanently. A recent Deloitte survey found more than three-quarters of Gen Z (77%) and millennials (71%) would consider looking for a new job if their employer asked them to go into their workplace full-time.

Kate Sweeney, partner and human capital lead at Deloitte, said younger workers “expect to be able to flex their work to accommodate their personal life.” She added: “Employers who recognise this desire for choice and support this are more likely to attract, retain and motivate the best talent from these two generations.” Ben Willmott, head of public policy at the Chartered Institute of Personnel and Development, said: “Office environments provide valuable opportunities for collaboration, learning and social interaction, but the pandemic has also demonstrated the value of remote working in fostering employee well-being, and work-life balance, without compromising on productivity.”

Labour’s pledge to bring back House-building targets
Labour Party has pledged to reinstate local housing targets to spur construction – “We choose the builders, not the blockers; the future, not the past; renewal not decline,” said Starmer.

Stellantis threatens to close factories unless Brexit changes

Stellantis, One of the world’s largest car manufacturers with Vauxhall, Peugeot, Citroen and Fiat among its brands, has urged the Government to renegotiate its Brexit deal with the EU or said it may have to close factories in Britain. The Car giant said present arrangements with the EU pose a “threat to our export business and the sustainability of our UK manufacturing operations”. It warned that if 10% tariffs kick in under so called local content rules which require 45% of the vehicle should originate in either the UK or Europe then it says the cost of manufacturing will make the UK noncompetitive and unsustainable for manufacturing and operations will close.  Manufacturers say its impossible to meet the rules unless batteries (which can be 40% of the value of the vehicle) can be sourced within the UK or Europe but there just isn’t a supply chain at present. 800,000 jobs in the UK are associated with the car industry.

UK banks lead in implementing new standards
According to research from EY, UK banks are leading their global rivals in implementing the latest update to international banking standards. All UK banks surveyed have put measures in place to comply with the new rules, compared to only 61% of European banks and 57% of US banks. The Basel III reforms set new minimum standards for liquidity and capital requirements, and the latest update to those rules are set to come into effect in January 2025.

Climate

The World Meteorological Organisation has stated there is a 66% likelihood that global average temperatures will exceed their pre-industrial levels by 1.5°C in at least one of the next five years. Last year the UN agency put the odds of that happening between 2022 and 2026 at “just”48%. In 2015 the odds were near zero. Keeping long-term global warming beneath the key 1.5°C level was the more ambitious target of the Paris agreement signed in 2015.

UK-China investment

Prime Minister Rishi Sunak said he is considering stricter export controls and curbs on investment by British firms in China, confirming he is “very aligned” with the US and  President Biden on policy toward China. Sunak, in response to heavy lobbying from the US, who is chairing a G-7 leaders’ session on economic security at the summit in Hiroshima, said the UK is part of that discussion and is open to the idea of limiting investment in China and the sharing of sensitive technologies. European nations however have resisted such calls.

Japan

PM, Rishi Sunak announced new investment by Japanese businesses in the UK worth £18 billion, primarily in clean energy, as well as a bilateral “semiconductor partnership” aimed at boosting supply chain resilience as a back up to current supplies in Taiwan. The “Hiroshima Accord”  will deepen economic, security and tech cooperation between the two countries, he said as he arrived in Japan on Thursday ahead of the G7 summit.

PurpleBricks

Purplebricks is selling its trading business to Strike for £1 plus debt. Its cash balance up to a maximum of £5.5 million, will be retained with the intention of distributing cash proceeds  to shareholders and the company would no longer have a trading business

BT

BT Group reported revenues fell 1% to £20.7bn with pre-tax profit down 12% to £1.73bn. The board said net debt rose £850m to £18.9bn due to higher pension contribution outflows of £1bn. The company has announced it will be reducing its current headcount of 130,000 by 55,000 by 2030 with staff replaced by technologies including artificial intelligence. The move comes shortly after Vodafone said it would axe a tenth of its staff over the next three years, equating to 11,000 jobs.

US Debt ceiling

Market sentiment received a significant boost following upbeat news about US debt ceiling negotiations. US President Joe Biden, following a meeting with Republican House Speaker Kevin McCarthy, presented an air of optimism as discussions continue. “Now we have a structure to find a way to come to a conclusion,” said McCarthy, adding “I think at the end of the day we do not have a debt default. I think we finally got the president to agree to negotiate.” Biden shared this confidence, stating, “I’m confident that we’ll get the agreement on the budget, that America will not default.”

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The Credit Protection Association (CPA) has been assisting thousands of UK businesses to get paid, since 1914. We have seen many financial crises, this one will be particularly deadly for suppliers for some time to come.

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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections

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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.

Get compensated for previous late payments

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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.