Business news 21 March 2022
James Salmon, Operations Director.
Energy Security. Spring Statement set to ease cost-of-living crisis. Hospitality sector in VAT hike warning. Early retirees risk ‘sleepwalking’ into a financial disaster. Inflation is the UK’s biggest financial concern. And more business news.
Energy Security
Prime Minister Boris Johnson is turning to nuclear and wind energy in an attempt to boost the nations energy security and is meeting with industry leaders to explore ways of speeding up new projects. The Prime Minister is also looking to boost domestic oil and gas extraction and will hold a forum with North Sea producers to examine options.
Spring Statement set to ease cost-of-living crisis
With public finances in better shape than had been forecast, the Chancellor is understood to have room for spending on measures to help ease the cost-of-living crisis. Action to help ease the squeeze on living standards in the Spring Statement seems increasingly necessary, especially with the Office for National Statistics likely to say that inflation has risen from 5.5% to 5.9%. KPMG’s head of tax policy, Tim Sarson, says: “The Spring Statement wasn’t intended to be used to launch significant new tax-related measures, but an intensifying cost-of-living crisis, coupled with what many expect to be a fairly rosy fiscal forecast, may mean Sunak can’t resist a few tax announcements.” Chris Sanger, head of tax at EY, comments: “Normally a Chancellor might want to maintain a war chest for closer to an election. However, COVID-19 has changed the timeline for raising and spending money for the public. If Sunak has any cash, he’ll probably spend it on the cost-of-living crisis.” However, Ian Stewart of Deloitte warns: “While stronger than expected tax receipts give the Chancellor scope to slightly soften some of the impact of higher energy bills, it cannot remotely prevent a severe household squeeze over coming months.” Meanwhile, Jon Richardson, head of tax policy at PwC, comments on how the Chancellor could offer reassurance over business investment, saying that with the super deduction ending next April, “businesses would benefit from a signal now” on what the investment landscape will look like afterwards
Hospitality sector in VAT hike warning
Leaders in the hospitality sector say Government plans to increase VAT from 12.5% to 20% in April will see some businesses “become unviable overnight.” Kate Nicholls, head of industry body Hospitality UK, said the tax hike will worsen the cost-of-living crisis, with London’s hospitality businesses set to be particularly hard hit. She said that for a sector trying to recover from the pandemic amid a “tsunami of inflationary pressures”, the VAT increase comes at the “worst possible time.” Voicing concern that consumer confidence will “crumble” and an upturn in footfall will reverse, Ms Nicholls said this would be “bad news for London and for the national economic recovery as a whole.” Elsewhere, Greater Manchester’s night time economy adviser, Sacha Lord, said the VAT increase is a “critically short sighted” move that “will only exacerbate the perilous financial position many businesses find themselves in.”
Early retirees risk ‘sleepwalking’ into a financial disaster
Experts say half a million older people have been squeezed out of the workforce during the pandemic and could face a retirement disaster as the cost of living crisis bites. Figures from the Office for National Statistics show more than 493,000 people aged 50 to 70 have stopped working since the pandemic began, with an additional 160,000 leaving their careers during 2021. Redundancies were higher in older workers versus all other age groups throughout the pandemic and once unemployed this cohort also found it the most difficult to return to work. Tom Selby of AJ Bell comments: “The implications of mass early retirement could be seismic and there is a real danger tens of thousands of people risk sleepwalking into hard times in later life.”
Inflation is the UK’s biggest financial concern
Research from M&G Wealth shows that inflation is the main financial concern for Britons, in both the long and short term. The poll of 2,000 people saw 25% cite soaring inflation as their biggest financial concern over the coming year, while 22% said rising inflation is their main financial worry over the next five years. Almost a fifth (18%) said they were worried about their investments losing money this year, while 17% are worried about not saving any money at all, with 18% saying their bills are already too high for them to save. It was found that 18% save less than £50 a month, while 8% have no savings at all.
Pandemic prompts greater focus on worker wellbeing
Nick Freer, founding director of the Freer Consultancy, looks at the impact of Covid on employee wellbeing and firms’ policies around the issue, saying: “Pre-pandemic, workplace initiatives around mental health could be filed under ‘nice to have’, whereas now it’s a ‘must have’.” Nicki Denholm, founder of search and recruitment specialist Denholm Associates, says the nuances around mental health and wellbeing, and “other workplace factors that have moved up the agenda since the pandemic”, are constantly changing “and employers need to be on the ball if they want to attract and retain talent.” Paul Reid, CEO and co-founder of Trickle, a start-up developer of digital tools to increase employee engagement, comments: “The working world has changed beyond recognition in the last two years … Truly understanding what matters most to your employees day by day, is more important than ever before.”
Energy boss in cost of living warning
Bill Bullen, chief executive of energy supplier Utilita, has warned that people may be forced to cut spending on food and clothing to pay their energy bill, voicing concern that financial support from the Government is not adequately directed to those who need it most. Millions of households are facing a 54% rise in the cost of a typical annual gas and electricity bill when the new, higher price cap takes effect on April 1. While ministers have pointed to “decisive action” in helping people with their bills, including a £150 council tax rebate for 80% of households and a £200 discount on bills in October which will need to be repaid, Mr Bullen has questioned whether the measures are inadequately focused. The Joseph Rowntree Foundation has argued that benefits should increase in line with inflation. Citizens Advice estimates that 5m people will be unable to afford the April energy price rise, with the prospect of more price rises in October meaning one in four may be unable to pay their bills.
Pub boss says Bank is stoking inflation
Tim Martin, founder and chairman of Wetherspoons, has accused the Bank of England of stoking inflation, arguing that the Bank’s money printing programme has driven up the cost of living. While the Bank has pumped £450bn of new money into the economy through quantitative easing during the pandemic, inflation is at a 30-year high of 5.5% and set to climb further. This, Mr Martin says, is a result of Bank of England action which has led to “significant inflation and higher taxes.” Mr Martin also hit out at the disparity between pubs and supermarkets when it comes to VAT, adding that pubs pay around 20 pence a pint in business rates, whereas supermarkets pay only 2 pence, “creating further inequality.”
FCA urged to delist Russian companies from LSE
City regulators have been criticised for refusing to delist Russian companies from the London Stock Exchange (LSE). While several firms with direct links with sanctioned oligarchs have seen their shares suspended, they remain listed. The Financial Conduct Authority (FCA) decides which companies are on the LSE but has deferred the matter to the Foreign Office, a move financier-turned-campaigner Bill Browder has deemed to be “buck-passing” and “bureaucratic doublespeak.” He argues that “someone needs to take responsibility for this and delist all Russian companies from the London Stock Exchange immediately.” He added that the FCA “should stop deferring to anything and should just get on, pull their finger out and get it done … they should just either get on with it or admit defeat and give the job to somebody else.” The Mail notes that the Foreign Office has not yet instructed the LSE and FCA to delist Russian firms.
BP profits and pay prompt windfall tax call
With BP seeing profits surge and boss Bernard Looney handed £4.5m in pay and bonuses in 2021, campaigners have renewed calls for a windfall tax on the profits of oil and gas companies. A spokesperson for Greenpeace said the CEO’s pay rise demonstrated BP’s ability to withstand such a tax and called on Chancellor Rishi Sunak to implement a levy that would deliver cash to help people struggling with the cost of living crisis. Labour’s Ed Miliband said the profits and executive pay at BP serve as “another sign that the oil and gas price crisis is a ‘cash machine’ for BP,” adding: “It’s only fair, right and just that we levy a one-off windfall tax on the profits of oil and gas producers.” Luke Hildyard, director at the High Pay Centre, said: “People will take a view that if you’re paying your chief executive millions and at least a quarter of staff at least £126,000, then the argument that you couldn’t afford to simultaneously invest and shoulder a windfall tax looks a lot weaker.”
Dumbphones in demand
BBC News looks at the revival of the ‘dumbphone’ – devices with limited functionality that offer users little more than the option to make calls and send text messages, foregoing all the bells and whistles of a smartphone. Google searches for such devices jumped by 89% between 2018 and 2021, according to a report by software firm SEMrush, while one report suggests that global purchases of dumbphones were set to hit 1bn units last year, up from 400m in 2019. A 2021 study by Deloitte found that one in 10 mobile phone users in the UK had a dumbphone.
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