Business news 21 July 2022
James Salmon, Operations Director.
Rising fuel and food costs push UK inflation up to 9.4%. Loan scheme for small firms to be extended by two years. Small business owners forced to raise prices. And more business news.
Rising fuel and food costs push UK inflation up to 9.4%
A 42% year-on-year increase in petrol prices, and an increase of almost 10% in food prices pushed June’s inflation figure to an annual rate of 9.4%, the Office for National Statistics (ONS) said. This is up from May’s reading of 9.1% and marks a fresh 40-year high. The prices paid by factories for materials and energy were 24% higher last month than a year earlier – the biggest increase since records began in 1985 – while prices charged by factories jumped by 16.5%. The Bank of England is expecting a further acceleration – beyond 11% – in October when the energy price cap is adjusted again. Yael Selfin, chief economist at KPMG UK, agreed the peak in inflation is “still some way off”, adding: “This means more pain is on the way for household budgets.”
Loan scheme for small firms to be extended by two years
Kwasi Kwarteng has announced that a scheme offering government-backed loans to small businesses will be extended by a further two years. The Business Secretary said on Wednesday: “Small businesses are the lifeblood of the British economy, which is why we are determined to support our traders and entrepreneurs in dealing with worldwide inflationary pressures. The extension of the Recovery Loan Scheme will help ensure we continue to provide much-needed finance to thousands of small businesses across the country, while stimulating local communities, creating jobs and driving economic growth in the UK.”
Small business owners forced to raise prices
A report by small business insurer Simply Business shows seven in 10 small business owners believe soaring costs are their single biggest challenge in 2022. Almost half of the 1,000 firms surveyed say they will increase their prices over the next six months as part of attempts to stay afloat. Two in five are holding off on opening new premises with 48% unlikely to hire additional employees. “The temperature of the nation’s self-employed is absolutely clear in our latest research,’ said Alan Thomas, boss of Simply Business. “With almost six million SMEs in the UK – accounting for over 99% of all businesses, 33% of employment and 21% of all turnover – it’s vital for all of us that they can weather this summer of uncertainty and beyond.”
Public Sector borrowing
UK Public Sector Borrowing hit £22.9bn last month, the second highest-ever June since records began in 1993, according to official figures. The figure was some £4.1bn more than June 2021 and overshot the Office for Budget Responsibility forecast by £600m, as the government seeks to tame rising energy costs, spiraling inflation and inject cash into the C-19 effort, on top of its usual spending.
UK strikes new US deal with North Carolina
Britain has improved a £200bn trade deal with North Carolina by signing a Memorandum of Understanding (MoU) to boost collaboration in areas such as clean tech and energy infrastructure. It is the second trade and economic MoU with a US state, after a similar deal was achieved with Indiana in May. In a statement, Trade Minister Penny Mordaunt said the MoU will “grow our already £200bn trade relationship.” She added: “Our twin-track approach to trade with the US is helping cut bureaucracy, reduce costs and increase exports and investment, and I look forward to seeing UK businesses reap the benefits.”
Liz Truss and Rishi Sunak go head to head for Tory leadership
Tory MPs have voted Liz Truss into the final two of the leadership contest alongside Rishi Sunak, with Ms Truss viewed by bookmakers as the favourite after a string of recent polls found Conservative Party members. Writing in the Mail the Foreign Secretary says the former Chancellor had gone in the wrong direction on tax and vowed to “hit the ground running by immediately cutting taxes, growing our economy and unleashing the potential of everyone in the United Kingdom.” Meanwhile, writing in the Telegraph, Mr Sunak claims he will be “the heir to Margaret Thatcher” and “deliver the radical set of reforms need to unleash growth.”
Clarity lacking over audit and corporate governance reform
An ICAEW Insights piece outlines how the Financial Reporting Council’s recent position paper on audit and corporate governance reform provides a roadmap towards how the Government’s package can be made to work. “There’s a lot for the profession and for the FRC and others to be getting on with, regardless of the legislative agenda,” says Dr Nigel Sleigh-Johnson, ICAEW’s Director, Audit and Corporate Reporting. “There are still a lot of frustrations and concerns about the timing of everything, for which we have very little clarity.” However, there are some clear positives, the piece continues, adding that as the agenda moves forward, professional bodies and others within the profession will need to take a keen interest and apply pressure to ensure that what comes through is not asymmetrical, focusing unduly on auditors, for example, rather than other areas of the corporate reporting ecosystem.
Insurers issue warning as post-Brexit reforms of City unveiled
The post-Brexit overhaul of the rules governing the insurance sector, put forward by the Bank of England’s Prudential Regulation Authority, would increase capital requirements for some providers and dash Government hopes for a boost to infrastructure investment, insurance companies have warned. Although welcoming the proposed overhaul of Solvency II rules, the Association of British Insurers said that, for life insurers, the changes to how their liabilities were calculated would more than offset the benefit of reducing their risk margin. The changes are included in the new Financial Services Bill, which Chancellor Nadhim Zahawi said would see hundreds of pieces of burdensome EU regulations repealed and the UK seize the benefits of Brexit “to ensure the financial sector works in the interests of British people and businesses.” The legislation also gives the Financial Conduct Authority and the PRA new secondary mandates to promote competitiveness and growth and new power to oversee stablecoins.
BoE boss ‘failed to protect’ British Steel pensioners
MPs have accused the Governor of the Bank of England, Andrew Bailey, of failing to protect British Steel pensioners while he was boss of the City watchdog. Whilst head of the Financial Conduct Authority (FCA), Mr Bailey did not do enough to prevent “unscrupulous financial advisers” from robbing steelworkers of their savings, the Public Accounts Committee (PAC) found. Around 7,800 British Steel employees were mis-sold pensions when the Government introduced “pensions freedoms” in 2015, which allowed them to transfer savings into riskier defined contribution schemes. They lost an average of £82,600 each – with some losing up to £489,000. The PAC said the FCA was “consistently behind the curve”, and “failed to take preventative action to protect consumers.” MPs said that the case pointed to wider problems within the FCA’s regulation of financial advice, such as the authorisation and oversight of small firms, access to data and intelligence to identify problems, and the use of enforcement powers.
CGT rules for divorcing couples to change next year
The Government has announced that Capital Gains Tax (CGT) rules for divorcing couples will change on 6th April 2023. Currently, if a couple transfers assets between them any time after the tax year in which they separated, there may be a tax to pay. The new rules will give couples three tax years from the split to share assets without triggering a tax bill. Couples will also be given unlimited time to settle if those assets are part of a formal divorce agreement. Sarah Coles, senior personal finance analyst, Hargreaves Lansdown said: “When you’re going through a divorce, there’s already enough stress and pressure to be getting on with. Couples don’t need the added trauma of being on the clock to split their finances before the end of the tax year.” Additionally, those who moved out of a marital home but kept a share in it will be able to claim Private Residence Relief (PRR) if the property is sold. Those who transferred their interest in the property to their ex will be able to apply the same tax treatment to the sale proceeds as applied when they transferred it.
Alan Sugar faces call to clarify UK tax status
British entrepreneur Alan Sugar is under pressure to clarify his tax status in the UK after he took a leave of absence from the House of Lords and paid himself a £390m dividend.
State pension faces inflation hit
Pensioners’ incomes have fallen by £589 over the past year in real terms with prices increasing three times faster than the state pension. British retirees will now be more than £14,000 worse by age 85 after the Government suspended the “triple lock”. The state pension increased by just 3.1% in April, equivalent to £5.55 a week, while prices have surged 9.4% in the 12 months to June. Separately, the Treasury has been accused of pocketing £5bn from state pension age increases that should have been used to help struggling older workers. A report from Phoenix Insights said the Government clung on to the £4.9bn saved by raising the state pension age, when the money should have been used to help those who can’t afford to wait another year for retirement.
Fear of interest rate rise spurs house price surge
The average UK house price rose to £283,000 in the year May, a jump of 12.8% compared to 12 months ago, according to the Office for National Statistics. This was up from 11.9% in April and marked the highest rate recorded since the stamp duty holiday rush last summer, when growth hit 13.2%. The surge in prices is said to be driven by buyers racing to purchase homes with cheap mortgage deals before interest rate rises shut them out of the market. However, Samuel Tombs, of Pantheon Macroeconomics, said official figures had not registered the slowdown in house price growth reported in recent months as it is based on completed transactions. Elsewhere, Jamie Durham, of PwC, said: “Over the coming quarters we expect the market to slow as cost of living pressures bite. Rising inflation, increasing interest rates and the risk of recession have dampened consumer confidence.”
Royal Mail
115,000 Workers look set to strike after overwhelming support in ballots for industrial action.
Netflix
Netflix lost almost a million customers in the last quarter despite airing the latest series of Stranger Things
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