Business news 21 March 2023
James Salmon, Operations Director.
Lending contraction to hit UK economy. BoE expected to abandon rate rise. National debt. NCSC provides advice to small firms on improving cyber security. And more business news.
Lending contraction to hit UK economy
Goldman Sachs has warned that nervousness in the banking sector caused by the collapse of Silicon Valley Bank and Credit Suisse will shave 0.4% to 0.6% off UK GDP growth as banks rein in lending and financial conditions rapidly tighten. “We find that the recent drop in bank stocks, rise in financials spreads, and increase in uncertainty might tighten bank lending standards by around 10 percentage points both in the Euro area and the UK,” Goldman said. The bank now expects a 0.2% GDP hit to the UK economy compared to previous projections, meaning growth flatlines this year. Elsewhere, Susannah Streeter at Hargreaves Lansdown said: “As risk aversion grips the sector, the worry is that overall banks will become more cautious in their lending, which could be another blow for already fragile housing markets in particular. Worries are rattling investors about what repercussions a potential lending squeeze will have on the global economy.”
BoE expected to abandon rate rise
Analysts are predicting an about turn by the Bank of England this week with bankers now betting the Bank will hold rates at 4% instead of hiking them a further 0.25%. Silvia Ardagna, chief European economist at Barclays, said: “In light of elevated tensions in the US and European banking systems, we change our call and expect the Bank of England to pause next week and reassess the need for further hikes at the May meeting.” Thomas Pugh of RSM also said he had downgraded his expectations to 4% as a result of turbulence in financial markets. Elsewhere, Deutsche Bank has maintained its forecast for a 0.25 percentage point increase but the bank’s chief UK economist Sanjay Raja said the situation is live.
National debt
The Government borrowed a record amount in February to support spending on energy support schemes, according to the Office for National Statistics. UK public sector borrowing – excluding public sector banks – totalled £16.7 billion last month. This compared to £7.0 billion in February of last year. The ONS said this was the highest February borrowing since monthly records began in 1993, largely due to substantial spending on energy support schemes.
NCSC provides advice to small firms on improving cyber security
The National Cyber Security Centre (NCSC) – part of GCHQ – is offering new online security programmes tailored to help millions of UK small businesses stay secure online. Lindy Cameron, NCSC chief executive said: “Small businesses are the backbone of the UK, but we know that cyber criminals continue to view them as targets. I strongly encourage all small businesses to use these tools to keep the cyber criminals out and their operations on track.” Martin McTague, of the Federation of Small Businesses (FSB), welcomed the move, saying: “A fifth of small businesses see cyber-crime as the most impactful crime in terms of both cost and disruption to their operations. Equipping small firms with the right tools and tailor-made guidance could enable them to be more cyber resilient and in turn reduce costs in real life.”
Senior Tory MP questions impact of planned revamp of capital rules on UK SMEs
Harriett Baldwin, the chair of the House of Commons Treasury select committee, has questioned why the Bank of England would introduce Basel regulations that risk cutting lending to SMEs by 25%.
UK housing market proves resilient
The average asking price of homes put up for sale climbed 0.8% to £365,357 in March compared with the previous month, according to data from property portal Rightmove. Typical first-time buyer properties with two bedrooms or fewer were leading the recovery, Rightmove said, with average asking prices are now just £500 below last year’s record. Asking prices for larger homes rose by about 1.2% but sales of top-of-the-ladder properties are 10% behind the same period in 2019. Second-stepper homes are 13% behind. Tim Bannister, Rightmove’s director of property science, comments: “While higher mortgage rates and economic headwinds raise challenges, many potential home movers who were effectively side-lined in the frenetic bidding wars of the last two years will find that a slower-paced market gives them time to plan and secure their next move.”
EU regulator set to open new tax probes
European Commission Vice-President Margrethe Vestager has warned that fresh probes could be conducted into tax deals between EU countries and multinationals after reviewing their arrangements. “My services have conducted an in-depth inquiry into tax ruling practices in all member states for the period 2014-2018, and I expect this will lead to new investigations in certain countries,” she told a conference in Copenhagen.
FCA issues warning to ESG ratings agencies
Following a review of ethical investing ratings agencies, the Financial Conduct Authority has warned benchmark compilers that the poor quality of their reviews could lead to greenwashing. The City watchdog said it will dish out fines if agencies continue to provide vague sustainability targets. “High quality ESG benchmarks are important to support trust in the market for ESG products and the transition to a net zero economy,” the FCA said in a letter to agencies. “Where firms fail to consider our feedback, we will deploy our formal supervisory tools and, where appropriate, consider enforcement action.”
Using pensions to avoid IHT a “no brainer” for savers
The Telegraph reports on the expected rise in the number of families subject to inheritance tax over the coming years. The Office for Budget Responsibility now estimates the freeze on IHT thresholds will bring in £45bn for the Treasury by 2028 – £3bn more than previously expected. However, Jeremy Hunt’s move to lift the pensions lifetime allowance (LTA) means pensions are far more attractive as a means of passing on wealth. The Chancellor also lifted the amount people can save into a pension tax-free each year from £40,000 to £60,000 and any unused allowances from the previous three years can be carried forward. Ian Dyall of wealth manager Evelyn Partners said: “With carry forward, you could save £180,000 into your pension and then a maximum of £60,000 for each subsequent year. So technically it’s not unlimited but you could build up a very large pot, IHT-free.” Tom Selby of investment platform AJ Bell said using pensions to avoid IHT will become a “no brainer” for savers. “Money left in pensions can be passed on to your nominated beneficiaries IHT-free, and completely tax-free if you die before age 75.”
Amazon
CEO Andy Jassy said in a memo to staff on yesterday that the retail giant are going to lay off a further 9,000 more employees in the coming weeks, adding to the 18,000 already announced in January as the company cuts back from the over expansion it carried out during the pandemic.
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.