Business news 19 January 2023
James Salmon, Operations Director.
Confidence among UK SMEs drops sharply. Investors eschew clueless UK . Strikes. Levelling up. UK inflation dips but remains close to 40-year high . And more business news.
Confidence among UK SMEs drops sharply as government cuts back support
A survey by the Association of Chartered Certified Accountants and the Corporate Finance Network reveals confidence among SMEs has fallen from 38% in summer last year to 17% now
CBI: Investors eschew clueless UK
The director-general of the Confederation of British Industry (CBI) has warned that a lack of leadership on the economy is leaving investors wondering what Britain’s policy intentions are. Speaking on the margins of the World Economic Forum in Davos, Tony Danker said: “Money is leaving the UK. Investors are freezing up and the heart of the problem is that we don’t have a strategy.” He adds: “We need a reform of the Government so that we are not constantly pouring money into leaky buckets, and it makes it doubly important that we make Britain a more attractive place to invest with a competitive tax system.”
Strikes
Almost 500 thousand UK workers are set to strike on a single day. Unions representing civil servants, teachers, university staff and train drivers have all said their members will walk out on 1st February as they fight for large pay rises due to record inflation.
Levelling up
The Government announced over £2billion worth of funding to regional infrastructure and regeneration projects from Scotland to Cornwall, following months of delay due to political turmoil in Westminster. Programs across the country will will benefit from this second tranche of money awarded from the Conservative government’s flagship Levelling Up Fund. Some £672 million will go toward transport links and £821 million to community regeneration according to the Department for Levelling Up, Housing & Communities.
Michael Gove, the Levelling Up Secretary, said: “We are firing the starting gun on more than a hundred transformational projects in every corner of the UK that will revitalise communities that have historically been overlooked but are bursting with potential. This new funding will create jobs, drive economic growth, and help to restore local pride.”
UK inflation dips but remains close to 40-year high
Price rises slowed for a second month in a row in December but the cost of living remains close to a 40-year high. Inflation, which measures the rate of price rises, fell to 10.5% in the year to December, compared to 10.7% in November, figures from the ONS show. The drop was due to fuel prices falling along with clothing and footwear prices; however, this was offset by rising costs in restaurants and hotels. The cost of food also continued to rise and there was a big jump in air fares. Grant Fitzner, chief economist at the ONS, said: “It is important to point out although we’ve seen a second consecutive easing, it is fairly modest fall and inflation is still at a very high level with overall prices rising strongly.” Martin Beck, chief economic adviser to the EY Item Club, said inflation has passed its peak, however, “the descent in CPI inflation will be slowed by the continued pass through of last year’s sterling depreciation and higher energy costs for businesses”.
UK’s financial services exports increased in 2021
Figures from the TheCityUK show that the UK’s trade surplus in financial and related professional services increased in 2021 as the US cemented its position as the top customer. The UK financial services and related legal and accounting trade surplus rose to £81bn in 2021, up from £79.6bn in 2020, according to the data. For the second year running, the US was the top customer, accounting for 34.1% of the total, followed by the EU at 29%. When Britain still had full access to the EU market in 2019, it accounted for 40.5% of the sector’s total exports of $82.7bn, with the United States coming in second with a 26.6% share.
HMRC trials answer by text system to cut call queues
Routine calls to HM Revenue and Customs will be answered by text, rather than by a human, in a trial aimed at improving its customer service record. From Thursday, the tax authority will send a direct website link by text to some people who want to find their reference number or reset a password. The trial will continue until the start of April, and is designed to free up call handlers for more complex issues. Routine requests that will be answered with a text and a website link include: locating a Unique Tracking Taxpayer Reference (UTR) number; registering for HMRC online services; and resetting a lost or forgotten online service password or user ID. Richard West, director of personal tax operations at HMRC, said: “Redirecting these sorts of queries to online services should help customers find the answer more quickly. It also means calls from customers during the current self-assessment peak, whose questions cannot easily be answered online and require help from an adviser, get the appropriate support they need.”
Global tax deal to raise $220bn a year, OECD estimates
The Organisation for Economic Cooperation and Development (OECD) forecasts that a planned 15% global business tax floor on large multinationals – the second pillar of the two-track tax reforms – will raise $220bn a year when implemented, a 46% increase from previous estimates. Meanwhile, the re-allocation of taxing rights under the first pillar of the reform is now expected to cover $200bn in multinationals’ profits, up from $125bn previously. The increase is mainly due to higher multinational profits now than a couple of years ago, with 50% coming from large digital groups, the OECD said.
Dyson: Tories extinguishing enterprise culture
Sir James Dyson, the billionaire entrepreneur and founder of the technology company Dyson, has criticised the Conservative Government’s economic approach, describing it as “short-sighted” and “stupid”. Writing in the Telegraph, Sir James warns that “growth has become a dirty word” during Rishi Sunak’s tenure, arguing that high taxes and regulatory burdens are holding the economy back. He also suggests that the Government’s failure to get workers back to the office after the pandemic has “badly damaged the country’s self-belief and work ethic”. Sir James concludes: “Our country has an illustrious history of enterprise and innovation, born of a culture which we are in the process of extinguishing. We have got through the worst of Covid, but risk wasting the recovery.”
UK ‘cleantech’ firms set for funding boost
KPMG analysts are predicting that cleantech and alternative energy firms could be set to attract fresh funding this year as investors look to capitalise on Europe’s rush to shore up energy supplies. “The growing pressure on the need to move to low carbon energy sources has really accelerated interest by investors in the alternative energy sector, which is growing in the UK,” Gavin Quantock, Head of energy M&A at KPMG, said. Meanwhile, separate figures from Pitchbook show funding into green technology across Europe fell 18% to $12.5bn last year, down from $15.3bn in 2021.
UK house prices show first monthly decline since October 2021
Office for National Statistics data showed on Wednesday that UK house prices fell 0.3% between October and November, their first monthly fall in more than one year. This brought the annual growth rate to 10.3% in November, down from 12.4% in the previous month. The average UK house price was £295,000, slightly down on October’s record high of £296,000. Barret Kupelian, senior economist at PwC, expects an 8% fall in house prices this year, in line with the trend in other advanced economies that are “also trying to cope with low economic growth, high inflation and tightening financial conditions”. Meanwhile, the latest survey from the Royal Institution of Chartered Surveyors, covering December, reveals a net 42% of respondents reported a decline in house prices. Simon Rubinsohn, chief economist at the institution, said the survey results “highlight the emerging challenges in the housing market as new buyers grapple with more costly finance terms and uncertainty over the economy”.
Sage
Sage said it has made a strong start to its new financial year as it reported a double-digit percentage rise in revenue. For the three months that ended December 31, Sage reported £540 million in revenue, up 10% from £493 million the previous year.
Premier League model working well
Deloitte’s Football Money League reveals that for the first time more than half (11) of the top 20 clubs generating the most revenue in the 2021-22 season were based in England. Tim Bridge, the head of Deloitte’s Sports Business Group, told the PA news agency he could envisage a position in years to come where all 20 Premier League clubs occupied places in the top 30, and said the report was “a stark message” for the rest of Europe. “The Premier League model is just so appealing to external markets. There is a danger that (the gap) isn’t bridgeable now for the other leagues,” he said. Manchester City have retained their status as the world’s richest football club, for a second year in a row, ahead of Real Madrid, Liverpool, Manchester United and Paris Saint-Germain. Chelsea, Tottenham Hotspur and Arsenal were among six Premier League teams in Deloitte’s top 10.
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