Business news 21 October 2021
James Salmon, Operations Director.
Rishi Sunak to extend Covid recovery loan scheme. Businesses face tough choices on jobs. Young business owners think Britain will rejoin EU. Only 3% of small businesses measure carbon footprint. And more business news.
Rishi Sunak to extend Covid recovery loan scheme
As the UK economy loses impetus the Chancellor is reportedly considering a six-month extension of the Government’s recovery loan scheme that had been due to end on December 31st.
The scheme provides credit worth up to £10m and comes with an 80% government guarantee for lenders.
However, terms are less generous than previous pandemic loan schemes with lenders able to ask for personal guarantees from directors and fees are payable from the start. The recovery loan scheme was launched in April as a bridge between the more generous coronavirus loan schemes and more normal credit conditions.
Businesses face tough choices on jobs
With the furlough scheme now ended, businesses across the country face the prospect of “tough decisions” around redundancies in the coming weeks, experts say.
Chris Newell, managing director at business advisory firm Quantuma, said businesses will have to make a decision “sooner rather than later” as additional costs begin to bite. “I would say quite a few job losses are expected to be made across a number of sectors,” Newell added.
Young business owners think Britain will rejoin EU
As many as a third of SME business owners are convinced that the UK will apply to rejoin the EU in the future.
But the proportion rises to 47% among 18-34-year-old SME owners, according to data from cloud accounting provider FreeAgent, which is twice that of business owners aged 55 and over (23%).
“Although it’s been nearly two years since the UK left the European Union, and 8 months after the transition period ended, Brexit remains a hugely divisive issue for the SME sector,” Roan Lavery, CEO and co-founder of FreeAgent said. He continued: “With a third of small business owners predicting that the UK will eventually reapply to join the European Union, and a further 1 in 6 believing it will apply to join the Single Market or Customs Union, it seems that many are pessimistic about how Brexit is progressing and expect to see a dramatic U-turn at some point in the future.”
Cost of living rise slowed in September
Inflation fell slightly last month with the Consumer Prices Index reading 3.1% – down from 3.2% in August.
The dip was partly due to lower prices in the hospitality sector, the Office for National Statistics said, while higher prices for transport were the biggest contributor to overall price rises. However, price pressure is expected to accelerate markedly over the coming months as rising energy bills push the headline rate above 4%.
Food prices will also rise in response to higher manufacturing costs. Markets are now pricing in a 15 basis point interest rate rise to 0.25% when the Bank of England’s Monetary Policy Committee next meets on November 4th.
Yael Selfin, chief economist at KPMG UK, said: “While some of the current increase in prices is likely to prove transitory, there is growing concern that it could become ingrained into wage and price expectations.”
Only 3% of small businesses measure carbon footprint
Just 3% of the UK’s small businesses have measured their carbon footprint in the last five years and set an emissions reduction target, according to a survey by the British Business Bank.
Its chief impact officer, Shanika Amarasekara, warned that companies who sell to big businesses might start losing contracts if they do not slash emissions. “What’s going to happen in the future is that they will be part of supply chains of larger businesses that are going to be making those demands of them,” she said. “It’s becoming a licence to operate. It is going to become the competitive differentiator for smaller businesses.”
Small businesses are responsible for nearly a third of the country’s greenhouse gases, but the Bank’s CEO Catherine Lewis La Torre says more than half say they’re not ready to prioritise de-carbonisation. However, she points out that 11% of companies have taken loans to fund moves to net zero, while 22% said they are open to doing so. Funding businesses’ transition to net zero is an opportunity for external finance providers, she adds.
ONS tops list of best companies for work-life balance
The Office of National Statistics has topped Glassdoor’s list of the top 20 best workplaces in the UK for work-life balance.
The jobs website analysed thousands of anonymous reviews from employees to determine the list, which sees Softcat coming in second followed by Arm, Sky Betting & Gaming in fourth and Mastercard completing the top five.
Lauren Thomas, Economist at Glassdoor, commented: “Employee reviews on Glassdoor indicate that the companies that top the work-life balance rankings offer a range of options to help workers harmonize their home and professional lives.” However, Thomas warned that “mentions of burnout have increased 128% since April 2021, suggesting that employers are not fully meeting the needs of their workforce.”
Technology was the best industry for work-life balance, followed by Aerospace & Defence, Media, Education and Telecommunications. The worst were Hospitality, followed by Retail, Travel & Tourism, Transport & Logistics and finally Arts & Entertainment.
Average UK house price jumps by £25,000 in a year
Property values in the UK increased by 10.6% over the year to August 2021, up from 8.5% in July, according to the Office for National Statistics.
The average house price was £264,000 in August 2021, £25,000 higher than the same time last year.
The average house price in Scotland increased by 16.9% to a record high of £181,000. In England, average house prices increased 9.8% over the year to £281,000, in Wales to £195,000 (a 12.5% rise) and in Northern Ireland to £153,000 (9.0%). Although the stamp duty savings, which artificially inflated the market, may have disappeared, there is still a shortage of supply and looming interest rate rises are likely to continue to spur buyers.
Jamie Durham, economist at PwC, said: “Looking ahead, we expect that house price growth will remain relatively buoyant, but likely at a slightly lower rate than we have seen over the last few months.”
Green strategy could leave thousands unable to sell
The Government’s Net Zero Strategy plans would force mortgage lenders to keep data on the energy efficiency of the homes they lent money against, report this to the Government and set themselves targets to improve how well-insulated the homes on their books were.
The move could leave some homeowners facing costly energy efficiency improvements if they want to sell their properties, experts say.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, said it is “likely to get much harder to track down a cheap mortgage for an inefficient property, which will make them more difficult to sell, which in turn is likely to bring down their value.”
A spokesman for Boris Johnson said: “We have consulted on setting requirements for mortgage lenders to support homeowners to improve the energy performance of their homes. The aim of that is to catalyse the development of a green finance market and make available affordable finance.”
Covid
The Government is resisting calls for now to turn to plan B and bring back some restrictions to control the spread of covid, despite a surge in infections and a rise in hospitalizations and deaths, Health Secretary Sajid Javid said.
Public Sector Borrowing
UK Public Sector Net Borrowing was £21.8 billion in September 2021, the second highest September borrowing since monthly records began in 1993 and only £7 billion short compared with September last year.
Kwarteng insists tax rises not needed for Net Zero move
Kwasi Kwarteng, the Business Secretary, has argued that Britain’s drive to Net Zero need not necessarily require tax rises. His comments come after Treasury analysis suggested the Chancellor could have to recoup losses from a fall in vehicle excise duty by phasing out petrol and diesel vehicles by raising taxes elsewhere.
But Mr Kwarteng said the shift from coal to renewables over the last decade had not resulted in increased costs.
Separately, Paul Johnson, director of the Institute for Fiscal Studies, said the final bill for Net Zero would be “well over £1trn” spread over the next 30 years.
Meanwhile, Tory backbencher John Redwood has expressed frustration with the prospect of fresh tax hikes. In a Twitter post on Wednesday, Sir John said the Treasury “keeps threatening more and new taxes. We need to promote a better recovery which means encouraging jobs, investment and business, not taxing them more.”
Paypal and Pinterest
PayPal is investigating a possible $45 billion acquisition of social media company Pinterest, in what would be the biggest technology deal of the year and move the payments company closer to its ambitions of becoming a “super app.” Under CEO Dan Schulman, PayPal has set its sights on becoming a one-stop shop for all things shopping and finance
UK and New Zealand agree free trade deal
The UK has agreed a free trade deal with New Zealand in a deal Boris Johnson says will cut costs for exporters and open up New Zealand’s job market to UK professionals. Their cross-border trade stood at £2.3bn last year.
Tariffs will be removed on UK goods including clothing, ships and bulldozers, and on New Zealand goods including wine, honey and kiwi fruits. Additionally, professionals will be able to work in New Zealand more easily, the Government said.
Although the pact is unlikely to increase UK economic growth, like the trade deal recently struck with Australia, the UK hopes this is a step towards joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) – a trade bloc that includes Australasia, Canada, Mexico and Japan among others.
Bitcoin
Bitcoin touched a high of almost $67,000 Wednesday, driven by the successful launch of the first U.S. Bitcoin futures exchange-traded fund (etf). It is up 120% so far this year and the bitcoin zealots have $100,000 in their sights.
HMRC to issue ‘nudge’ letters targeting crypto asset owners
HMRC has issued a warning to individuals who have bought crypto assets that they will soon be issuing “nudge” letters to encourage taxpayers to review their affairs. Zoe Wyatt, partner and crypto asset specialist at Andersen UK, commented: “These nudge letters are likely to have been automated and issued to anyone that has bought and sold crypto, regardless of whether they have got their reporting and tax payments right,” Wyatt said. “In our view, it would be fair to say that most underpayments will not have come from wilful evasion, but rather ignorance.” However, Ms Wyatt added: “Those choosing to ignore a nudge letter now move from careless to deliberate – the consequences of which are maximum penalties and potentially criminal prosecution.”
Unilever
Unilever reported a slowdown in underlying sales growth but retained its full-year guidance. Third quarter underlying sales growth was 2.5% on a year ago, slowing from the 5.0% achieved in the second quarter. The year-to-date figure was 4.4%, moderating after first-half growth of 5.4%. Nonetheless, Unilever backed its full-year underlying growth guidance range of 3% to 5%.
Rentokil
Rentokil reported a slight rise in revenue in the third quarter, as weakness in its disinfection services weighed on growth. Revenue was up 0.9% to £761.3 million year-on-year as its pest control and core hygiene businesses delivered growth of 18.3% and 6.4% respectively
Barclays
Barclays reported better-than-expected third-quarter profits on Thursday, following its Wall Street rivals in receiving a significant boost from its investment banking division. The British bank reported attributable profit of £1.45 billion for the third quarter. Analysts had expected a net income of £931.25 million, according to Refinitiv data, and the figure marks a significant increase from the £611 million reported in the same period last year.
Lloyds
Lloyds Banking Group announced yesterday that it plans to close a further 48 branches, blaming declining visits by customers. The Unite union said the closure of 41 Lloyds Bank and seven Halifax branches will deny thousands of customers access to vital services and cash, and could lead to 178 job losses.
Metro bank
Metro Bank said its deposit and loan values slipped slightly in the third quarter compared to the second. The value of its loan book edged down to £12.32 billion at the of September, down from £12.33 billion at the end of June.Deposit volumes fell 1% to £16.41 billion and total assets fell 1% to £22.77 billion.
Sunak to cut tax on banks to keep City competitive
Several papers pick up on reports that Rishi Sunak is planning to cut the surcharge on bank profits 8% to 3% in his Budget next week. Oscar Williams-Grut, the City editor at the Evening Standard, said it’s the right thing to do, arguing that finance “was totally overlooked in Brexit negotiations and has found itself worse off as a result.” The Chancellor will say in his Budget that the UK is the only global financial centre to place an extra surcharge on the banking sector and that it should be slashed. The cut will come into effect in April 2023 – the same month corporation tax is due to rise from 19% to 25%. Without the reduction to the surcharge the total tax rate on profits will hit 33%. The Guardian cites John McDonnell, the former shadow chancellor, who was left unimpressed by the news: “Sunak talked about morality in his conference speech, where’s the morality in cutting universal credit forcing more children into poverty whilst reducing the taxes on wealthy banks? Appalling judgement.”
Oil
Oil fell on Wednesday after the Chinese government stepped up efforts to tame record high coal prices and ensure coal mines operate at full capacity as Beijing moved to ease a power shortage.
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