Business news 21 November 2022
James Salmon, Operations Director.
Company insolvencies up by a third
Figures from the Insolvency Service show there were 38% more company insolvencies during October in England and Wales than in the same month last year – 1,948 compared with 1,410. Additionally, there were 7,610 cases of individuals making arrangements to clear their debt in the three months to October – an 8% increase on the same period last year. Nicky Fisher from R3, the trade body that represents licensed insolvency specialists, said: “The outlook is tough for many businesses as costs rise and consumer confidence remains low. Worries about the price of food and fuel as winter approaches means many people simply aren’t spending and a range of businesses, including household names, are struggling as a result.”
UK restaurants going bankrupt at rapid rate
Restaurant company insolvencies have increased by 59% over the past year, according to advisory firm Mazars. The total has risen from 984 in 2020/21 to 1,567 in 2021/22 and over the past three months, the number of restaurant companies becoming insolvent rose to 453 from 395 the previous quarter. Rebecca Dacre, partner at Mazars, said: “Insolvencies of restaurant businesses are now happening at a far faster rate than during Covid. It is a very toxic mix of rising input costs, sharply rising finance costs and weak demand. Most restauranteurs have not seen this combination of negative factors before.”
WFH blamed for pub woes
The number of office Christmas parties booked this year is a fifth lower than pre-pandemic levels, pubs have reported, with the rising number of staff working from home and cost pressures blamed for the fall in demand. In a normal year, British pubs take in around £2.3bn in December – about one tenth of their annual income and their most profitable month by far – according to the British Beer and Pubs Association. However, a survey of 5,000 watering holes last week found that festive bookings are down by 20% compared to what was normal before the pandemic. Meanwhile, December bookings for the wider hospitality sector were only slightly below 2019 levels, according to separate analysis by UKHospitality. The industry group’s chief executive Kate Nicholls commented: “We are cautiously optimistic. Bookings are coming in, but they tend to come in a little later these days than they did before the pandemic.”
Small businesses less than inspired by Hunt
Enterprise Nation founder Emma Jones writes in the Times on last week’s Autumn Statement. She says it’s understandable the Chancellor Jeremy Hunt opted for the appearance of fiscal stability, but it sadly “lacked the vision for a brighter future that small businesses needed to see.” Ms Jones laments the lack of attention paid to start-ups and the tax changes that will make it harder for small firms. “The role of government is to provide economic stability, sound infrastructure and business confidence. The best governments must engage with entrepreneurs and small business owners to achieve their aims. Here’s hoping they are not forgotten again when Hunt delivers his debut Budget.”
Cutting migration could mean higher taxes and more spending cuts
The Treasury believes the Government’s aim of cutting net immigration will result in higher taxes or bigger spending cuts to balance the books, reports the i. The paper cites a Treasury source who says that if the Government succeeds in its aim of reducing net immigration, economic forecasts will be revised downwards. This would mean more money would be needed to close the deficit, with ministers required to go further than the £55bn of tax rises and spending cuts outlined in the Chancellor’s Autumn Statement. The Office for Budget Responsibility (OBR) has suggested that higher than expected migration forecasts could save Britain from “even bigger tax rises and deeper spending cuts,” saying a “larger contribution from net migration” was “offsetting slower growth in productivity.”
Economists warn of “regressive recovery”
Jill Treanor in the Sunday Times asked whether the more well off can help keep the economy afloat with their continued willingness to splash out on luxuries. Consumer spending generates about two-thirds of Britain’s gross domestic product. “It [consumer spending] will be one of the key things that determines just how deep this recession is,” said Thomas Pugh, economist at the professional services firm RSM. But Britain is becoming increasingly divided with charities warning that the cost of living crisis had created a “tsunami of need” among the less well-off. Simon French, chief economist at the investment bank Panmure Gordon, warned that the divide between the rich and poor could widen: “This is going to be a regressive recovery,” he said.
Retail sales rebound in October
Office for National Statistics (ONS) data shows that retail sales volumes increased by 0.6% in October, outpacing the 1.5% decline seen in September and exceeding a 0.4% increase predicted by analysts. While food store sales dipped 1% in October, non-food store sales increased 1.1%. ONS director of economic statistics Darren Morgan said the overall increase in sales was “likely a rebound effect” after weak sales in September that came in part due to an extra Bank Holiday for the Queen’s funeral. He added: “Looking at the broader picture, retail sales continue their downward trend seen since summer 2021 and are below where they were pre-pandemic.”
6m workers face higher income tax bills
Analysis of the stealth tax rises announced in the Chancellor’s Autumn Budget show that more than 6m workers face paying more tax as they are dragged into higher income tax brackets. Around 15% of workers will be paying higher rate income tax by 2028, compared with just 6% in 2010
UK enters new era of higher taxes, says IFS
The Institute for Fiscal Studies (IFS) says the UK has entered a “new era” of higher taxes, with the think-tank’s director Paul Johnson warning that the tax burden is unlikely to return to its pre-pandemic average “for several decades.”
Brexit not to blame for UK’s economic woes
Dr Graham Gudgin, a research associate at the CBR at the University of Cambridge and Julian Jessop, a fellow at the Institute of Economic Affairs, dispute claims made by the Office of Budget Responsibility and others that Brexit is to blame for Britain’s economic woes. They look at the assumptions behind claims regarding foreign investment, labour shortages, inflation and trade, among other indicators, and conclude there is a lack of evidence of significant economic harms resulting from the decision to leave the EU. “The hard evidence is that leaving the EU has had remarkably little impact on the UK economy. Between the first quarter of 2016 and the third quarter of 2022, OECD data show that the economy grew by a total of 6.7%, a little behind France (7.4%), but ahead of Spain (6.6%), Germany (6.2%) and Italy (4.9%). UK exports to the EU have recovered to long-term trend levels, and the City of London has been little impacted.”
Theranos
After being convicted in January, disgraced founder of Theranos, Elizabeth Holmes, was sentenced to 11 years in prison for fraud. The founder of the fake blood-testing startup, had claimed to have invented a device that could diagnose hundreds of diseases from just a few drops of blood.
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