Business news 20 June 2023
James Salmon, Operations Director.
Sterling, Recession, Competitiveness, food price inflation, London’s ranking, online store failures, fraud, manufacturing and more business news that we thought would interest our members.
Sterling
Sterling remained yesterday firm not drifting far off US$1.28 as speculation mounted that the Bank of England might raise by 0.5% at its meeting this week. Gilt yields for 1,2 and 3 year maturities rose above 5% for the first time since 2008 today. Yields on longer dated bonds were also higher with the 20 year gilt now offering almost 4.6%.
Recession prediction
Stubborn wage and cost inflation, stubborn consumer demand and a strong employment market are raising expectations that UK interest rates will have to rise to 6%, which would spark a 2% fall in GDP and take the country into recession.
Competitiveness
The annual World Competitiveness ranking from the International Institute for Management Development shows the UK plunge from 23rd to 29th out of 64 countries.
The UK has fallen six places down the global economic competitiveness rankings reportedly because business leaders have lost confidence in the country, due in part to “government incompetence.”
Underinvestment puts growth in a ‘doom loop’
Analysis by the Institute for Public Policy Research (IPPR) suggests that underinvestment by the Government and business has left Britain’s economy trapped in a growth “doom loop.”
The think-tank said business investment is lower in the UK than in any other country in the G7, and 27th out of 30 OECD countries. It also found that Britain has ranked below the G7 average for spending on infrastructure, research and development, skills and training since 2005.
The report says that had the UK maintained its position at the G7 average since that date, the private sector would have invested an extra £354bn in real terms. Had public sector investment also held that position, the Government would have invested an additional £208bn between 2006 and 2021.
George Dibb, an associate director for economy at IPPR, said: “If the economy is the engine of a country, investment is its fuel. But the UK’s tank is running on empty and it’s harming economic growth, driving inequality and slowing progress towards net zero and energy security.”
Food price inflation
UK food price inflation may have passed its peak as a Kantar survey showed grocery price increases eased to 16.5% in the four weeks through June 11, down from 17.2% last month. Elsewhere Lloyds Bank said production costs for food and drink makers fell last month for the first time since 2016.
London’s ranking falls
London slipped to fourth place from second in Julius Baer’s Lifestyle Index, ranking the worlds most expensive cities. Brexit and its “ensuing turmoil” continue to dent the UK’s reputation and the city now faces strong competition from burgeoning financial centers such as Dubai and Singapore, according to Julius Baer. Julius Baer’s Lifestyle Index ranks the world’s 25 most expensive cities by analyzing residential property, cars, business class flights, business school, degustation dinners and other luxuries. Singapore come on top, followed by Shanghai, Hong Kong, and then London. New York, Monaco, Dubai, Taipei, Sa Paolo, Miami, Bangkok, Jakarta, Paris, Zurich and Tokyo complete the top 15.
Online store failures surge
Analysis by Mazars shows that the number of online shops going into insolvency jumped by 53% in the year to the end of April, with 532 online retailers going insolvent. Mazars said many of the failed firms were small businesses, noting that they were often side hustles that had not expanded into anything more. Rebecca Dacre, a partner at Mazars, said the increase was a “clear sign that the pandemic ‘golden age’ of small online retail start-ups is now behind us.” She added: “Whilst the boom in online sales did create some long-term winners, many smaller players simply didn’t prove profitable enough to last.”
Pub closures up 68%
Pubs are closing at the quickest pace in a decade, according to analysis by Price Bailey which shows 620 shut in the year to the end of March. This marks a 68% increase from the 369 failures in the same period last year. In the first three months of 2023, 200 pub companies went under. Pubs have been hit by soaring energy prices, increasing wages and a slowdown in consumer spending. Matt Howard, head of Price Bailey’s insolvency and recovery team, said: “Many pub businesses have accumulated unmanageable levels of debt.”
McColl’s still owes £45m
Unsecured creditors to McColl’s are still owed around £45m after the convenience store chain’s collapse. The business was last year rescued from insolvency by Morrisons in a deal worth £182.1m – with a further sum of up to £8m to pay unsecured creditors. The administrators’ proposal report shows that unsecured creditors, including trade suppliers and landlords, are in line to receive dividends from money set aside to pay unsecured debts worth £600,000. According to documents filed at Companies House, secured creditors to McColl’s have been paid the full £164.3m owed to them. PwC has sought approval from creditors to extend the administration to May 2024 as the standard 12-month administration period is not a “sufficient” amount of time to complete the restructuring.
Trade deal with 65 nations will cut import costs
A post-Brexit trading scheme launched by the UK will see developing nations benefit from reduced tariffs and simplified trading rules. The Developing Countries Trading Scheme (DCTS), which will cut import costs for 65 countries, will save UK firms and consumers £770m a year on import costs on £9bn worth of goods. International Trade Minister Nigel Huddleston said the “brilliant” initiative “will create opportunities for businesses around the world, supporting livelihoods, creating jobs and diversifying local and international supply chains.” Minister for Africa, Andrew Mitchell, said the DCTS “shows how we can use trade to deliver development.”
Banks call for tech firm action on fraud
A group of banks has warned Prime Minister Rishi Sunak that big tech firms should help reimburse fraud victims, saying fraud “should not be seen just as an issue for the UK’s banking sector.” Nationwide, Santander, TSB, Starling and Handelsbanken say that the responsibility to tackle fraud goes beyond the banks involved, arguing that “a fraud strategy that fails to mandate action on all actors involved in the fraud journey and collective responsibility for the harm done to consumers, will never be effective.” The letter warns that fraud is having a “material impact on how attractive the wider UK financial sector is perceived by inward investors.” “Online fraud poses a strategic threat to the prosperity of the UK and impacts the credibility of, and confidence in, the economy and financial sector,” the banks argue. Data from UK Finance shows that £1.2bn was lost to fraud last year, making the UK the “fraud capital of the world.”
A quarter of workers are looking to change jobs
A PwC survey of 53,000 workers from 46 countries has found that 23% expect to move jobs within the next 12 months, with many citing a higher salary as their key motivation for looking to move on. Of the British workers surveyed, 47% said they had little to no money left at the end of the month after paying their bills, while a further 15% were struggling to keep up with some or all of their monthly bills. One-in-ten workers in the UK has more than one job, with most doing so to earn extra money. It was also shown that more than a third are planning to ask for a pay rise this year. Sarah Moore, head of people and organisation at PwC, said: “It’s clear that workplace dissatisfaction looms large, with pay, workload and overall fulfilment at the top of employees’ minds.” She added: “Organisations who continue to prioritise their people and invest in programmes focused on wellbeing, flexible working, career progression and more personalised benefits will reap the rewards of employee loyalty.”
Manufacturers lift 2023 outlook
Manufacturing trade body Make UK has revised up its outlook for the year, saying it expects factory output to fall 0.3% this year compared with a 3.3% contraction predicted three months ago. This comes amid strong demand for aircraft and electronics. Make UK has kept its forecast for growth in 2024 unchanged at 0.8%. James Brougham, senior economist at Make UK, said: “Manufacturers are seeing a gradually improving picture, but the word ‘gradually’ is doing a lot of heavy lifting.” Richard Austin, head of manufacturing at BDO, which sponsored the survey of Make UK members, said supply-chain pressures remain an issue for medium-sized firms who are facing “continued disruption and increased costs at home and abroad.” He added that many are choosing to onshore operations “but facing major barriers in doing so.” It is noted that Make UK expects the overall UK economy to grow 0.4% this year and 1.3% in 2024.
Tax Freedom Day lands later than ever
Analysis by the Adam Smith Institute shows that UK workers have finally seen Tax Freedom Day, the first day of the year that earnings are no longer earmarked for HMRC. The report says that if a taxpayer allocated all their pay to cover their tax bill on January 1, it would have been June 18 before they would finally be clear of the debt. This is the latest arriving Tax Freedom Day since reliable records began in 1995. In 2022, it arrived on June 8 and the think-tank says that by 2025, taxpayers will not be working tax free until June 23. John O’Connell, chief executive of the TaxPayers’ Alliance, said those struggling amid the cost-of-living crisis will be angry to learn that they spend almost half the year working for the taxman. He added: “What’s more, the screws will be turned further in the coming years as the Government shifts ordinary workers into tax bands designed for the super-rich.” Noting that Tax Freedom Day is 10 days later than just a year ago, former Brexit Minister Lord Frost said this shows how much the Government has raised taxes “in a short period.”
Ukraine
The EU is reportedly set to propose a financial aid package of around €50 billionto support to help finance the Ukrainian government’s current expenditures and pay for urgent reconstruction. The package is seto be will be announced today ahead of a donor summit this week in London, on how to rebuild the country.
Doctors still plan to retire early despite pension tax changes
One in five doctors still plan to retire early despite the £4bn pensions tax giveaway by Jeremy Hunt. The Chancellor scrapped the lifetime allowance on pension savings and increased two other allowances which limited the amount workers could save into their pensions tax-free. However, new data obtained by the Telegraph reveals many doctors are still planning to retire. Wealth management firm Quilter asked 200 doctors whether Mr Hunt’s pension changes had made them reconsider their retirement plans and 20% said they still plan to retire early. Meanwhile, Dr Sarah Tennant, chair of the hospital doctors’ union pensions committee, warned more doctors will leave if Labour follows through with its promise to bring back the lifetime allowance if it wins the next election
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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.