Business news 21 February 2023
James Salmon, Operations Director.
Disagreement over who is responsible for growth in economic inactivity. Surprise Government Surplus. One in three over-65’s relying on inheritance to fund retirement. Quarter of UK households regularly run out of money for essentials. Gas price fall hands Jeremy Hunt £11bn Budget boost. And more business news.
Disagreement over who is responsible for growth in economic inactivity.
Two conflicting bits of research look at why their has been an exodus from the UK workforce.
Experts from the consultancy LCP say Government efforts to get early retirees back to work to boost the economy are misguided and ministers should be focused instead on tackling long-term sickness to reduce economic inactivity. “There is a real risk of the government barking up the wrong tree when it comes to the growth in economic inactivity,” their report from the says.
The Chancellor, Jeremy Hunt, previously urged the over-50s to get off the golf course while the Work and Pensions Secretary, Mel Stride, is preparing an urgent review of options to boost workforce participation.
Sir Steve Webb, the former pensions minister who co-authored the LCP report, said rising long-term sickness and NHS waiting lists were much more significant than early retirement. “We were gobsmacked by what we found,” Webb said. “It turns out there are fewer earlier retired today than at the start of the pandemic.” However, the number of “long-term sick” has risen by more than 350,000 since the start of the pandemic, accounting for more than half of the growth in inactivity over that period.
Meanwhile the Resolution Foundation says An exodus of rich professionals from jobs is driving Britain’s crisis of low participation in the labour market, according to their new research that lays bare the challenge of plugging widespread worker shortages. The Resolution Foundation found that a jump in people taking early retirement disproportionately comes from highly- paid workers over age 50, making it more difficult to persuade the group to return to work.
Surprise Government Surplus
The UK Government recorded a surprise surplus in its finances in January despite “substantial spending” to help households with energy bills and one-off payments to the EU. The government spent less than it received in tax during the month, resulting in a surplus of £5.4bn.
One in three over-65’s relying on inheritance to fund retirement
Research by property website Zoopla reveals nearly a third of those aged 65 and above are relying on inheritance from their parents to help fund their retirements or pay off their mortgages. This figure rises to 37% amongst those aged 55-64. The firm’s Daniel Copley commented: “As average life expectancy increases and the retirement age creeps upwards, it’s logical to assume that inheritance is taking longer than ever to reach beneficiaries, who may in fact be approaching retirement themselves.”
Quarter of UK households regularly run out of money for essentials
A group of charities has said that one in four households regularly run out of money for essentials and voters do not believe the government is doing enough to help. A survey for the charities found that 40% of people end the month with no money left, while 24% run out of money for essentials either most months or most days. The assessment adds to the growing welter of indicators that persistent double-digit inflation and soaring energy bills are having a widespread impact on UK households and may do so at the ballot box. Separately, Macmillan Cancer Support warned that cancer patients were resorting to selling possessions and using loan sharks to make ends meet. In findings it described as “heart-breaking”, the charity said a third of patients had been buying or eating less food, and 22% had been spending more time in bed to stay warm.
Gas price fall hands Jeremy Hunt £11bn Budget boost
As the European energy crisis eases and the price of natural gas continues to come down, the Chancellor will be gifted with an £11bn windfall ahead of his Spring Statement in March. The cost of the Energy Price Guarantee, which subsidises bills from October 2022 to March 2024, was expected to cost £37.6bn in mid-November. But experts now predict the cost will now be around £26bn. The savings are roughly equivalent to the cost of cutting the basic rate of income tax by 2 pence in the pound for a year, analysis RSM accountants shows. But Peter Levell, associate director at the IFS, said as the savings boost was only temporary, there was “no justification” for enacting permanent tax cuts or spending increases off the back of it.
Michael Izza: Government delays holding audit reforms back
The chief executive of the Institute of Chartered Accountants in England & Wales (ICAEW), has warned that the Government’s failure to overhaul the country’s audit sector risks Britain losing its position as a world-leading investment hub. Reforms first put forward in 2018 are set to see Britain’s Financial Reporting Council (FRC) replaced with a new, more powerful regulator –the Audit, Reporting and Governance Authority (ARGA). The overhaul would also boost competition in the sector. Michael Izza says the reforms “are pretty much ready to go” but are being held back by a lack of political will. “We’ve got to recognize we’re in a competitive situation,” Izza said. “We want people to be confident they can invest here”.
Brexit
Rishi Sunak held one-on-one meetings with party members of Parliament on Monday afternoon in which he explained the outline of a prospective agreement with the EU and win support.
Four day week trial a success
The world’s largest-ever trial of a four-day work week was called a success, with most of the participating companies involved deciding not to return to the five-day tradition. Around 2,900 workers and 61 companies in Britain, ranging from banks to fast-food restaurants, said employee turnover and stress mostly fell while productivity remained flat or even rose. Managers contributed to making workdays more efficient by cutting back on meetings.
Experian
The UK Information Commissioner’s Office has said it will consider whether to appeal, following a ruling on its action to require Experian to change how it handles personal data. The judgment supported aspects of the ICO’s decision (That Experian hadn’t notified 5 million indviduals that it was using their data for marketing purposes), while allowing Experian’s appeal in other areas (That experians privacy notice was indeed transparent and that it was fair to use credit reference data for marketing purposes). Experian said it is “very pleased” with the outcome and it remains deeply committed to transparency, safeguarding privacy and helping consumers to better understand and control the use of their data.
Rush to pay R&D tax credits encouraged fraud
The Times reports that a decision by the Treasury to accelerate R&D tax credit payouts during the pandemic may have been driven by a desire to aid small businesses but it likely also contributed to the high levels of R&D fraud seen over the past three years. Rufus Meakin, who runs the R&D Tax Credit Insider blog, said HMRC was now cracking down on claims, punishing genuinely innovative small businesses because many of the new HMRC inspectors don’t have the technical background needed to assess complex inquiries. Richard Edwards, who trains advisors in R&D tax relief, said: “While HMRC’s response to Covid may have contributed to an increased level of fraud and error in R&D tax relief in the past few years, this isn’t a new problem. HMRC’s lack of scrutiny over 20 years created the problem they’re now scrambling to fix.”
Darktrace hires EY for review following short-seller attack
Darktrace has hired EY to carry out an independent review of its finances after Quintessential Capital Management claimed that the cybersecurity company had used irregular accounting practices to inflate sales. The New York-based investment fund also alleged that Darktrace may have held links to offshore shell companies manned by “individuals with ties to organised crime, money-laundering and fraud.” Darktrace vehemently denied the allegations with CEO and co-founder Poppy Gustafsson saying that the company was run with “the greatest integrity”. Gordon Hurst, the chair of the Darktrace board, said on Monday: “The board believes fully in the robustness of Darktrace’s financial processes and controls. As a sign of that confidence, we have commissioned this independent third-party review by EY. We look forward to the outcome of this review.”
Investment in City commercial property hits eight-year high
New data show investment into commercial property in the City of London property reached £572.2m in January, 55% higher than the total for the whole of the final quarter of 2022. According to Savills, there were eight transactions during the month, with spending 80% higher than January 2022, and said there are a further 16 buildings currently under offer worth a combined £1.67bn. Felix Rabeneck, director in the City investment team at Savills, said: “This has been the strongest start to the year in the City for eight years, as improving investor sentiment combined with more market data points has helped narrow the gap between vendors’ and buyers’ pricing expectations.” The most significant deal of the month was Chinachem Group’s acquisition of 1 New Street Square, Deloitte’s headquarters, for £349.5m.
Crisis ahead for landlords as rising costs hit renters
Data from the Office for National Statistics (ONS) show those renting properties are 4.4 times as likely to be experiencing financial hardship compared to homeowners, signalling a crisis ahead for landlords. More than half of renters said they would be unable to afford an unexpected but necessary expense of £850, the ONS said, with just one in eight outright homeowners saying the same. With tax changes now leaving landlords worse off, many who would have helped struggling tenants will no longer be able to assist, warned Chris Norris, of the National Residential Landlords Association. Alicia Kennedy, of Generation Rent, a campaign group, warned: “The risk of homelessness relating to rent arrears is stark.”
£26bn left forgotten in lost pension pots, survey finds
The Pension Policy Institute found last year that the value of lost ¬pension pots had increased by £7bn in four years to reach £26.6bn. Experts now fear the country’s pension illiteracy could lead to the loss of serious amounts of cash. Sam Richardson, Which? Money Deputy Editor, said: “The cost-of-living crisis has made it harder for retirees and those about to retire to make ends meet.” Steve Webb, the former pensions minister, added: “With so many of us not saving enough for retirement as it is, ¬making sure we do not lose track of the pensions we do have is vital.”
HSBC
HSBC said net interest income rose to $32.61 billion from $26.49 billion a year before. Net fee income fell to $11.45 billion from $13.10 billion. Net insurance premium income rose to $12.83 billion from $10.87 billion. Net operating income – before credit losses and impairment charges – improved to $51.73 billion from $49.55 billion. This was slightly ahead of company-compiled consensus of $51.41 billion.
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.