Business news 19 April 2023
James Salmon, Operations Director.
UK insolvencies rise 16% in March. Inflation falls less than expected. Labour market pressures are easing but wage growth remains strong. And more business news.
UK insolvencies rise 16% in March
Data from the Government’s Insolvency Service showed that the number of companies failing in March hit at least a four-year high at 2,457 – a 16% increase on the same period last year.
Rising interest rates and heavy energy bills took their toll. Higher costs, weakening consumer spending and demands from staff for pay rises drove the numbers up.
David Kelly, Head of Insolvency at PwC, commented: “Businesses are struggling to secure financing and pay off their loans due to high interest rates and the wider impact inflation and consumer sentiment is having on sales and cash flows, so company insolvencies will likely continue to rise in the short term, making for a challenging spring.”
The food production sector had been especially hard hit, with the number of firms going under nearly tripling in the year to February.
Christina Fitzgerald, the president of the insolvency and restructuring trade body R3 and a partner at the law firm Edwin Coe said: “Business owners have spent three years trading through a pandemic and economic uncertainty, and an increasing number are choosing to shut their businesses before that choice is taken away from them and as the turbulent trading climate proves too much.”
Inflation falls less than expected
CPI came in at 10.1%, below last months 10.4% but below the anticipated drop to below 10% of 9.8%
Inflation was driven by the fastest rising food prices in 45 years.
UK inflation remains stubbornly higher than in other western nations, with shortages of workers gas and imported food prices significant factors.
Markets quickly started to factor in further interest rate rises, as the Bank of England’s anticipated pause is now under threat. Driving up Sterling.
UK Producer Price Inflation cooled to 7.6% in March from an upwardly revised figure of 12.8% in February. Market consensus had been expecting a reading of 9.8%.
“The largest upward contribution to the annual input inflation rate in March 2023 came from inputs of other parts and equipment…The second-largest contributor to the annual rate came from inputs of home-produced food materials,” ONS said.
Labour market pressures are easing but wage growth remains strong
New figures from the Office for National Statistics (ONS) suggest labour shortages in the UK labour market are starting to ease, with the unemployment rate rising slightly from 3.7% to 3.8% in the three months to February while job vacancies fell for the ninth time in a row.
The employment rate rose by 0.2% from the previous three-month period to 75.8%, driven chiefly by an increase in self-employed and part-time workers.
However, the hoped-for slowdown in wage growth was more gradual than expected with public sector pay increasing by 5.3% – the largest amount since 2005, while private sector pay rose by 6.9%, down from growth of 7.3% in the final quarter of 2022.
The ongoing wage growth will add to fears of greater persistence in inflation, and could put pressure on the Bank of England to raise rates again. Ashley Webb, UK economist at Capital Economics, said March’s CPI inflation data will be crucial to the Bank’s decision.
Sunak aims to woo Britain’s business leaders in corporate reset
The Prime Minister is launching a new business engagement initiative to counter Labour’s growing success in wooing corporate Britain. Rishi Sunak has brought in former Morgan Stanley executive Franck Petitgas as his new business and investment adviser and will attend several corporate events next week with cabinet members. Petitgas had run Morgan Stanley’s international operations since 2018 before he stepped down last year.
UK warns of attacks from Russian cyber hackers
The Cabinet Office secretary, Oliver Dowden, will warn in a speech today that Russian hacker groups are seeking to attack and damage critical British infrastructure. “These adversaries are ideologically motivated, rather than financially motivated,” Dowden will add, making the situation “particularly concerning”. Dowden will tell the Cyber UK conference in Belfast that the Government is disclosing the threat to alert companies to the risk they face so they can “take action to defend themselves and the country.”
Failure to tackle obesity leads to higher taxes
A new study from the Institute for Government warns that rising UK obesity rates are harming people’s health, burdening the NHS and seriously damaging the economy. The think tank says every government since 1992 has missed targets to cut obesity, with its report adding that obesity costs the NHS around £6.5bn a year and that failure to get to grips with the problem will result in higher taxes and lower productivity.
Markets
The FTSE 100 held above 7900 yesterday, buoyed by commodity stocks after Chinses growth surprised to the upside.
Sterling was firmer against the US dollar, following yesterday’s jobs data as the unemployment rate in the UK unexpectedly rose in the three months to February.
Fox settles Dominion Lawsuit
Fox News has agreed to pay voting machine maker Dominion $787.5 million in settlement of its defamation lawsuit after Fox continued to air claims it knew were bogus that Dominion machines were rigged to steal the US election from Trump.
Tax simplification plans to be announced next Thursday
The Sun reports that Jeremy Hunt, the Chancellor, will unveil measures to simplify the tax system next week. The changes will include simplifying customs on importing and exporting, as well as tax rules on buying and selling crypto. A Whitehall source told the paper: “We’re making things simpler so businesses spend less time doing tax admin and more time doing what matters most to them, being productive and growing.”
Corporation tax rise branded a ‘historic mistake’
Former Conservative ministers including Jacob Rees-Mogg, Kit Malthouse and Simon Clarke have slammed the Government’s decision to increase corporation tax with Rees-Mogg describing the move as “a major blunder” that fails politically and economically. He added: “Increasing corporation tax from 19% to 25% at a period when there is inflation in the system already is actually going to make things more inflationary. What we are doing at the moment is risking shrinking the economy, encouraging businesses to leave and go and set up elsewhere, and not having the money that we need for public services.” But Treasury minister Victoria Atkins defended the corporation tax rise, telling MPs: “The rate increase which took effect from this year and which this Bill maintains for financial year 2024 is forecast to raise over £85bn in the next five years. That will of course make a vital contribution to ensuring that our debt continues to fall as part of the Prime Minister’s five pledges, whilst also allowing us to continue to invest in our much cherished public services.”
How a business could help cut IHT bills
The Telegraph’s Elizabeth Anderson explores how a business owner can reduce their inheritance tax bill. Family businesses are often exempt from inheritance tax, she says, as would a £100,000 investment in a qualifying firm after two years. Nigel May, a tax partner at accountancy firm Gravita, said: “It is important to remember that relief is targeted towards ‘trading’ businesses as opposed to ‘investment’ businesses, so it is essential that consideration is given to the company’s activities as a whole.” In some cases an operating business that has accumulated a decent sum of cash may be passed on tax-free. Another way to reduce IHT is to invest in a child’s business, either as an individual or through your own business.
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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.