Business news 20 February 2023
James Salmon, Operations Director.
UK retail sales rebound unexpectedly in January. UK slides further down ranking for entrepreneurship. FSB calls for pro-enterprise Budget. UK rejects ECJ ruling on tax privacy. EU bankruptcy filings jump to 8-year high as pandemic aid ends. And more business news.
UK retail sales rebound unexpectedly in January
UK shop sales volumes unexpectedly rose in January, despite higher living costs putting pressure on households. Figures from the Office for National Statistics (ONS) show the volume of retail sales increased 0.5% between December and January, following a revised 1.2% drop in the previous month. However, overall sales volumes were down 5.1% compared with January last year and remain lower than pre-pandemic levels. Lisa Hooker from PwC said the outlook for the sector was tough. “For retailers, surviving the next six months will be critical to their success in the year ahead.” Elsewhere, Thomas Pugh, economist at RSM UK, said with incomes expected to be further hit by inflation in the coming months, retail sales are likely to continue their downward trend in the first half of the year. Separately, data from the British Retail Consortium and KPMG suggested consumer spending remained broadly below inflation in January, although spending on holidays and entertainment rose.
Meanwhile nearly 15,000 British retail jobs have already been cut since January in a “brutal start to the year” for the high street. A total of 14,874 retail job losses have been announced by companies so far, according to analysis from the Centre for Retail Research (CRR).
UK slides further down ranking for entrepreneurship
The UK has slipped down the ranking of the world’s best countries for entrepreneurship, according to the annual Global Entrepreneurship Monitor, led by Aston Business School in Birmingham. The UK is now ranked at 25 out of 51 countries, down from 18 last year. This marks the second year of decline after the UK’s highest ranking at 14 in 2020.
The United Arab Emirates was ranked highest, followed by Saudi Arabia, Taiwan, India and the Netherlands. Economies comparable to the UK also scored higher: the United States (15), Germany (17) and France (18).
Professor Mark Hart, lead of the GEM UK team and professor of small business and entrepreneurship at Aston Business School, said he believed the decline was due to the “chaotic trading conditions and supply chain blockages, as the implications of Brexit continued to be multiplied by the aftermath of the pandemic and compounded by rising energy prices”.
FSB calls for pro-enterprise Budget
The Federation of Small Businesses is calling on Chancellor Jeremy Hunt to reverse planned changes to investment tax incentives in his Spring Budget. The Government is set to reduce the generosity of R&D tax reliefs for small businesses from April. In a letter to Mr Hunt, the FSB called for a “pro-enterprise, pro-education, and pro-employment agenda” which must include measures such as increasing a threshold at which small businesses start paying business rates, paid for by charging large businesses occupying the most valuable properties more. “Small businesses have played a crucial role in leading economic recovery after turmoil,” the FSB said, but confidence is at the lowest level on record outside of Covid lockdowns.
UK rejects ECJ ruling on tax privacy
Good news for those interested in transparency and credit reporting!
The UK Government has refused to adopt a ruling from the European Court of Justice (ECJ) which last year put the right to privacy above the public’s right to know who owns a business. After the ECJ judgment, EU members including Ireland and the Netherlands rushed to deny the public access to company ownership registers. The Mail notes that British tax havens in the Channel Islands and Caribbean are using the ECJ ruling to drag their feet on opening their registers to public scrutiny, which they promised to do by the end of the year.
Dan Neidle, founder of non-profit Tax Policy Associates and whose investigations into Nadhim Zahawi’s financial affairs forced him to quit as Conservative Party chairman last month, said there is a “powerful argument” for transparency. He said publicly available registers of company ownership “send a strong signal that dirty money isn’t welcome”, adding: “They also greatly increase the risk for tax evaders, sanctions busters and criminals. Even if the authorities don’t spot you, a nerd with a laptop might.”
The ingredients needed for London’s success are all there
Jill Treanor and Jamie Nimmo explored the prospects for the City of London in the Sunday Times following the record highs recently seen on the FTSE 100. The blue-chip index reached 8,012.53 at the close on Thursday, the first time in its 30-year history that the index has finished above 8,000. They review undervalued UK shares, the effect of Brexit on the attractiveness of London as a listing venue and the changes that have been made to listing rules so far. There are several reviews into financial services ongoing including consultations by the Treasury and the Financial Conduct Authority. Hussein Kanji, a partner at venture capital firm Hoxton Ventures, says reforms are always welcome, “but the wider question for me is whether the market here has enough investors who are looking for growth-oriented businesses.” However, Charlie Walker, head of equity and fixed income markets at London Stock Exchange Group, is more confident, stating: “We have all the ingredients that are needed. The reform agenda needs to ensure that those gears click together so that we’re able to finance the next generation of world-leading growth companies out of the UK. If we’re able to do that, then I think the future is very bright.”
EU bankruptcy filings jump to 8-year high as pandemic aid ends.
The number of EU businesses filing for bankruptcy rose to the highest level for at least eight years in the fourth quarter as state aid programmes set up during the pandemic came to an end.
House prices
UK House Prices were largely unchanged in February, figures from Rightmove showed, in a sign of buyer confidence despite robust mortgage rates. The property portal said the average price of properties coming on the market was £362,452, up ever-so-slightly from £362,438 in January. It is the smallest February increase on record, Rightmove said, but the reading “could be seen as a positive indicator for the year ahead”.
Brexit Deal edges closer
Rishi Sunak is preparing to unveil a deal with the European Union that risks a stand-off with Northern Ireland unionists and members of his own party. The government is looking to reset relations with our biggest trading partner in a solution to the impasse in Northern Ireland, more than three years after Britain formally left the bloc.
Tesco bank
Tesco is reviewing options for the future of Tesco Bank, including a possible sale of the business with investment bank Goldman Sachs Group Inc advising on the options for its retail banking arm, which first launched back in 1997.
Driving up pension age threatens retirement plans
Government plans to increase the state pension age to 68 will automatically mean workers can only access private pension savings from the age of 58, under a policy introduced by the Conservatives in 2014. Following a review of the state retirement age, ministers are expected to confirm that the state pension age increase to 68 will be brought forward from the late-2030s to the mid-2030s. But Sir Steve Webb, a former pensions minister and now a partner at pensions consultancy LCP, says: “Making people wait an extra three years for their pension will just add complexity to the system for no obvious benefit. The Government should leave the normal minimum pension age at 55.” Meanwhile, Steven Cameron, of pensions provider Aegon, said the Government’s push to get over 50s back in the workforce could be driving the push to increase the minimum pension age. He said: “The Treasury wants over 50s to get off the golf course and back into work. That would be a key driver behind pushing up the minimum pension age, as it would help improve our economic activity.”
Brits living overseas face poverty after pension increases frozen
Nearly 500,000 elderly Britons living overseas have launched a campaign to get their frozen pensions uprated. Those who emigrated abroad have not had annual increases in their pensions for 70 years, except where Britain has a reciprocal agreement with the country they now live in. And successive governments have been reluctant to strike such deals because of the extra £640m cost to the annual pensions bill. There are 106 countries in which retired Britons are paid their pensions at the amount they would have received on the date they left the UK. Former pensions minister Ros Altmann comments: “This has been tested in the courts and the UK Government was found to have the right to withhold uprating if there is no reciprocal arrangement. But it does seem rather harsh to me.”
More UK households depending on food banks
More people are depending on food banks than ever before in Britain, according to new figures. Research by the Independent Food Aid Network (Ifan) found that almost 90% of food banks surveyed reported increased demand in December 2022 and January 2023 compared with a year earlier. Half of the 85 organisations running 154 food banks that responded said if demand rose further they would either have to cut support or turn people away.
Full-time work no longer pays in the UK
The Guardian looks at why families working full-time across the income spectrum in the UK have been finding themselves earning less money than if they worked part-time. Research from the Institute for Fiscal Studies (IFS) indicates tougher benefit rules may have boosted employment in the UK, but they have also trapped workers in unrewarding jobs and weakened incentives to move from part to full-time work. Those working just a few hours a week need to triple their output to be only £100 better off, for example, because their universal credit would be cut. Others earning around £40,000, commuting and paying nursery fees, find themselves better off not working at all. They may choose to work part-time from home and claim government-funded childcare. Other middle and higher earner couples say childcare costs and income tax mean going part-time and generating income through property ownership was more lucrative than full-time employment. A pilot earning over £100,000 is planning to go part-time and reduce pension contributions, giving him the same monthly income as full-time work. He says: “This Government has given us 12 years of fiscal drag and asset price bubbles, and people no longer see that work pays. It’s crackers.”
The AI revolution puts middle-class jobs at risk
The Guardian’s Economics Editor Larry Elliot says the advent of artificial intelligence will, unlike previous technological advances, hammer middle-class workers rather than replacing low-paid jobs. “Previously, machines replaced manual labour, leaving jobs that required cognitive skills to humans. Advances in AI – symbolised by ChatGPT – shows that machines can now have a decent stab at doing the creative stuff as well.” This means white-collar, middle-class jobs are most at risk this time, while many of the jobs created might be of the low-paid, variety, Elliot says. Separately, the creators of ChatGPT have admitted its AI is “politically biased, offensive, or otherwise objectionable” and propose opening up data about its training and the demographics of the people who undertook it to help address its limitations. OpenAI also promised a future upgrade where users will be able to customise ChatGPT’s behaviour.
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.