Business news 20 October 2021
James Salmon, Operations Director.
SMEs rethinking EU trade. Inflation falls in September. Inflation concern as costs climb. Tough winter ahead. London the cleantech capital of Europe. And more business news.
SMEs rethinking EU trade
Figures from the Office for National Statistics shows a second consecutive monthly fall in trade between the UK and EU.
The total exports of goods, excluding precious metals, fell by £1.3bn (4.6%) in August, with this partly due to a £0.6bn (4.3%) fall in exports to the EU. Trade also slipped on a quarterly basis, with total exports of goods, excluding precious metals, down £1.2bn in the three months to August, with this marking a 1.5% dip.
Reflecting on the data, Lucy Sutcliffe at Azets says a failure to support EU exporters has driven the fall in trade between the UK and EU. She said: “Small UK businesses have been completely overwhelmed by bureaucracy and the additional time and cost it takes to trade across Europe.” She added: “New duties, border delays and transport costs are pushing UK SMEs into rethinking trade with the EU.”
Inflation falls in September
The latest Consumer Prices Index figures how the rate of inflation dipped slightly in September as the economy continued to reopen.
The increase in the cost of living fell to 3.1% in the year to September, down from 3.2% in August.
Higher prices for transport were the biggest contributor to price rises. It comes after the Bank of England warned at the weekend that it “will have to act” over rising inflation, suggesting interest rates may rise soon.
The inflation rate fell back slightly last month because prices in restaurants rose less this August than last August when the Eat Out to Help Out Scheme was running, the Office for National Statistics said.
Mike Hardie, head of prices at the ONS, said: “However, this was partially offset by most other categories, including price rises for furniture and household goods and food prices falling more slowly than this time last year. The costs of goods produced by factories rose again, with metals and machinery showing a notable price rise. Road freight costs for UK businesses also continued to rise across the summer.”
Inflation concern as costs climb
Industry leaders have warned MPs about the soaring cost of eating out, supermarket bills and manufactured goods, saying pressure on the cost-of-living is set to undermine the Prime Minister’s levelling up agenda.
The Food and Drink Federation said that while café, restaurant and pub prices are rising at 14-18% a year, supermarket prices are set to follow. Federation CEO Ian Wright warned ministers on the Business Committee to “think seriously” about the inflation caused by supply-chain disruption, describing the level of inflation seen in the sector as “terrifying”.
Manufacturers’ organisation Make UK said the sector is being hit by a rise of 30% to 40% in material price, with this coming alongside rising energy and shipping costs. CEO Stephen Phipson warned that huge increases in shipping and air freight costs were “not sustainable”, yet industry leaders expect supply chains to be disrupted for another six to nine months. These concerns, alongside the fact petrol prices are nearing a record high, have prompted concerns over inflation.
Tough winter ahead
Prime Minister Boris Johnson predicted a difficult winter due to covid and other pressures on the National Health Service, as his government acknowledged worsening data in its pandemic response. The U.K. reported a further 223 deaths within 28 days of testing positive for Covid-19 as of Tuesday, the highest figure since March
Net Zero Plan
The government has shared its net zero investment plans, including £3.9bn to reduce emissions from heating buildings and £620m for electric vehicles and charging points.
It will provide £5,000 grants in England and Wales from April to help households switch gas boilers for low-carbon heat pumps, covering 90,000 pumps. However, experts say the scheme falls short of the government’s plan to install 600,000 heat pumps a year by 2028. The heating of buildings accounts for more than 20% of UK greenhouse gas emissions and the government hopes gas boiler sales will be phased out after 2035.
Treasury: Taxes may need to rise to support net zero drive
Prime Minister Boris Johnson has unveiled plans for Britain achieving net zero by 2050 but the Treasury has warned that taxes may have to rise to cover the estimated £1trn bill. The Treasury said the transition to a greener economy will have “material fiscal consequences” and warned: “There will be demands on public spending, but the biggest impact comes from the erosion of tax revenues from fossil fuel-related activity.” It added: “If there is to be additional public spending, the Government may need to consider changes to existing taxes and new sources of revenue throughout the transition to deliver net zero sustainably.”
According to the Treasury’s net zero review, higher taxes could discourage foreign companies from operating in the UK, lowering tax revenues further. The Treasury document also suggested: “Seeking to pass the costs onto future taxpayers through borrowing would deviate from the polluter pays principle,” adding that it would also “not be consistent with intergenerational fairness nor fiscal sustainability.” Despite flagging issues around the financial element of achieving net zero, the Treasury acknowledged that the costs of global inaction on the climate were greater than those of action.
Isaac Delestre, research economist at the Institute for Fiscal Studies, said that if the Government is successful in steering the UK towards net zero, fuel duty and vehicle excise duty revenues will “decline substantially, placing direct pressure on the public finances.” Julian Jessop, economics fellow at the Institute for Economic Affairs think-tank, said that lost tax revenues from fossil fuels “will be significant” but added that this “should not be a key consideration in setting climate change policy”.
London the cleantech capital of Europe
London was the leading city in Europe for ‘cleantech’ projects last year, with analysis by EY showing that the UK secured a sixth of foreign direct investment centred on green issues and sustainability. London attracted 11 cleantech projects in 2020, contributing to the UK’s tally of 59.
When comparing investments on a country-by-country basis, only Germany scored more, with 67. The report shows that cleantech accounted for over 6% of all UK projects that received foreign investment last year.
EY’s Alison Kay said UK cleantech acceleration is “vital”, saying it is a priority area for investors and adding that the UK “may struggle to meet its climate commitments without coordinated cleantech investment.” She added that EY research also suggests cleantech investment can help level-up the UK economy
Foreign investment deals to create 30k UK jobs
The Government has said foreign investment deals in low-carbon sectors in the UK will create about 30,000 jobs, with Boris Johnson announcing 18 new deals worth £9.7bn.
The Prime Minister said investors had recognised “the massive potential in the UK for growth and innovation”, saying investments would power the economic recovery and help to achieve the levelling up agenda for UK regions.
The biggest pledge is from Spanish energy company Iberdrola, which plans to invest £6bn in offshore wind farms as part of a project that will create 7,000 jobs. Logistics firm Prologis is set to invest £1.5bn in the UK over the next three years to develop net zero carbon warehouses, supporting about 14,000 new jobs.
Mid-sized firms lack ESG awareness
Analysis by RSM shows that 44% of middle-market business leaders – those from firms where turnover is between £10m and £750m or where assets under management range between £200m and £7.5bn – are unfamiliar with ESG. It was also found that among those who were familiar with ESG, close to a quarter are not making any attempt to measure the potential impact of their ESG goals.
The report comes as ministers prepare to publish findings from a consultation proposing mandatory ESG reporting in line with the Task Force on Climate-related Financial Disclosure. The rules would make ESG reporting mandatory for private companies and limited liability partnerships with more than 500 employees and turnover greater than £500m, as well as all publicly quoted UK companies.
Alex Tait of RSM said ESG awareness is “now a clear business imperative”, warning that “reticence or inactivity in this space could have very real impacts on future growth, as customers, employees, investors and other key stakeholders increasingly demand strong ESG credentials.”
Segro
Segro said it had grown it’s rent roll and lowered its vacancy rate in the third quarter. Segro said it signed £25.8 million of new headline rent in the three months through September, up from £15.8 million year-on-year.
Deliveroo
Deliveroo upgraded is annual guidance for transaction values, but left is margin expectations unchanged. The company said gross transaction value had risen 58% year-on-year in the third quarter in constant currency.
Heathrow
Heathrow Airport will be allowed to raise passenger charges by up to 56% under plans announced by the UK aviation regulator. The Civil Aviation Authority is consulting on increasing the cap on the west London airport’s price per passenger from £22 last year to between £24.50 and £34.40.
Bellway
Housebuilder Bellway has announced a major growth strategy after a 40% rise in revenues saw its performance return close to pre-pandemic levels. Though it flagged how supply chain issues were holding back construction activity, the Newcastle firm posted preliminary results for the year ending July 31 that showed revenue of £3.1m and operating profit of £531.5m, up 65% on last year. That rise in revenue put Bellway only 2.8% below the record turnover it saw in 2019, and has led the firm to more than double its proposed dividend to shareholders.
London sellers overprice their properties by 40%
Analysis by property portal MoveStreets suggests that people selling homes in London are overpricing by as much as 40%.
The study found that the average asking price across Zoopla and Rightmove currently sits at £296,950, while homes are actually selling for £258,464. This presents a reality gap of £38,486 – or 13%. However, the gap between the average asking price and sold price of properties in London is 40%, with the average asking price £833,994 while the typical sale price is £494,673.
The next biggest gap is the South West (24%), followed by the South East (23%) and Wales (21%). The most realistic home sellers in Britain are those in Scotland, with the typical asking price of £184,149 just 4% higher than the average sale price, which is currently £177,166.
Oil
The price of Oil rose on Tuesday as a supply crunch in natural gas, electricity and coal continued across the globe while falling temperatures in China revived concerns over whether the world’s biggest energy consumer can meet domestic demand for heating.
Facebook
Facebook Inc., facing intense scrutiny over its business practices, is planning to rebrand the company with a new name that focuses on the metaverse, according to The Verge, leaving Facebook as just one of its divisions, much like Google who now operate under the Alphabet parent company
Moneysupermarket
Moneysupermarket.com said third-quarter revenue fell 10% as competition for insurance visitors intensified, though it stuck to earnings guidance citing resilient margins. The company also announced that it had acquired Maple Syrup Media, trading as Quidco, a consumer cashback business for up to £101m. Revenue for the three months through Sept fell to £76.4m, bringing the drop in revenue for the first nine months of the year to 11%.
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