Business news 19 October 2022
James Salmon, Operations Director.
CPI hits 10.1%. Small firms see costs climb and revenues fall. Energy bills may exceed £4,000. Unions will fight to protect workers’ rights, says TUC. IMF welcomes the UK’s mini-Budget U-turn but we are saddled UK with uncompetitive tax system. And more business news.
CPI hits 10.1%
UK Consumer price inflation (CPI) has risen to 10.1%, according to official figures, up from 9.9% in August.
On a monthly basis, inflation rose by 0.5 per cent in September 2022, compared with a rise of 0.3% in September 2021, the Office for National Statistics announced this morning. Rising food prices were the culprit behind the 40-year high, as fuel costs continued to fall.
Small firms see costs climb and revenues fall
A Federation of Small Businesses survey has shown the steepest drop in confidence since the pandemic, with small firms facing rising costs and falling revenues. Almost half of small companies polled said revenues fell in the past three months, while almost nine in every 10 said costs are rising.
Analyst: Energy bills may exceed £4,000
Typical household energy bills could rise to above £4,000 a year from April, analyst Cornwall Insight has warned. This comes after Chancellor Jeremy Hunt announced that Government support due to be in place for the next two years will now be reviewed and reduced in April. Under the Energy Price Guarantee, the typical household faces an annual bill of £2,500. Predictions from Cornwall Insight suggest that, for households that do not receive any support, a typical annual energy bill could be £4,347 in the spring, dropping to £3,722 next winter. Although the Government said the most vulnerable will continue to be protected from soaring energy prices, Mary Starks, former executive director for consumers and markets at energy regulator Ofgem, criticised ministers for being “very unclear” by failing to identify who will be affected and how it will work.
Unions will fight to protect workers’ rights, says TUC
Unions are ready to fight any Government attempts to strip away workers’ rights, the head of the Trades Union Congress has said. With ministers planning to change the rules on strike action, Frances O’Grady said this is “a cynical move to distract from the chaos they have caused.” She told the TUC conference that the umbrella group for UK unions has taken legal counsel over whether plans to change rules governing industrial action breached the law, warning ministers: “Read my lips: We will see you in court.” She added: “If ministers cross the road to pick a fight with us then we will meet them halfway.” Ms O’Grady also warned that Business Secretary Jacob Rees Mogg wants employee rights derived from EU laws to be “stripped from the statute book,” including holiday pay, parental leave and limits on safe working hours. In an interview with the BBC’s Today programme, Ms O’Grady also voiced concern over pay, saying there is a “moral and economic argument for making sure people’s pay packets at least keep up with inflation.”
Tech sector confidence falls
Technology industry body TechUK has warned that business confidence in the sector is at its lowest ever level. Almost a third of tech companies surveyed told TechUK they expected the outlook would deteriorate over the next 12 months. This comes as KPMG analysis shows that Britain’s consumer tech sector has seen a slump in mergers and acquisitions as venture capitalists switch their focus to business software firms. Jonathan Boyers, a KPMG corporate finance partner, said: “The M&A market is cooling. There’s no IPOs happening in the UK, or really across Europe.”
IMF welcomes the UK’s mini-Budget U-turn
The International Monetary Fund (IMF) has welcomed the Government U-turn on tax cuts, saying the changes will help tackle soaring inflation and help “better align fiscal and monetary policy in the fight against inflation.” The IMF last month criticised the Government’s mini-Budget, saying the tax cutting plan was likely to increase inequality and add to pressures that are driving up prices.
U-turns saddle UK with uncompetitive tax system
Economists have warned that the U-turn on the Government’s growth plans will leave Britain with one of the least competitive tax systems in the world. The UK is set to fall from 26 to 33 in the rankings, its worst performance since the Tax Foundation think-tank began compiling an index in 2014.
Meanwhile, the Centre for Policy Studies (CPS) says the decision to reinstate a corporation tax increase from 19% to 25% removes one of the UK’s biggest incentives as a place to do business. Tom Clougherty of the CPS said that although conditions in financial markets left the Government little choice but to raise taxes, the move would harm the economy’s prospects. He said ministers “have been thrown into crisis mode by the reaction of the markets – they had to do whatever it took to stop gilt yields from climbing and climbing. That is what they have done, it is understandable and appropriate.” He went on to suggest that officials should look for future opportunities to cut taxes, simplify the system and reform the over-regulated economy.
Tax Foundation analysis shows that Estonia has the most competitive tax system in the Organisation for Economic Co-operation and Development. Latvia is in second place, followed by New Zealand. Among larger economies, Australia is the 11th most competitive, Germany the 15th and the US 22nd. France, Italy and Portugal were the worst performers.
Two-year mortgage rates hit 14-year high
Research from Moneyfacts shows that average mortgage interest rates are the highest they have been since during the financial crisis. The average rate for two-year fixed rate loan has risen to 6.53%, with this the highest rate for such a deal since August 2008. The average rate for a five-year fix has risen to 6.36%, the highest since November 2008. While mortgage rates have been climbing steadily over recent months as central banks increase interest rates in a bid to ease soaring inflation, the cost of loans has risen sharply amid the market fallout from the Government’s mini-Budget. While the U-turn on the Government’s plans is expected to calm markets and ease pressure on mortgage rates, Eleanor Williams of Moneyfacts said the mortgage sector “remains volatile” at the moment.
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.