business news 22 June 2021.
James Salmon, Operations Director.
Double edged sword for business as hybrid working sticks, Government borrowing, Vaccinated Travel, oil, crypto, pensions, trains, Morrisons, Goldman Sachs and more
Double edged sword for business as hybrid working sticks
A survey by the London Chambers of Commerce and Industry (LCCI) has found that over three-quarters of office-based businesses expect their staff to spend at least one day a week working from home after the pandemic, with almost one in five predicting no return to the office at all. A separate study from LinkedIn reveals almost half of employees want hybrid working, 38% want to work remotely for good and just 12% want a full-time return to the office. The upshot is businesses serving commuters face permanently lower footfall. Andrew Goodacre, chief executive of the British Independent Retailers Association, said “there will be casualties” among city centre businesses. “It is going to be horrible, it means a loss of what were perfectly good businesses prior to the pandemic,” he said. However, independent retailers in towns and suburbs could benefit as home workers visit local shops more frequently, he added.
Government borrowing
UK Government Borrowing reached £24.3bn in May despite the gradual winding down of lock-down restrictions, according to the latest official estimates. The Office for National Statistics also confirmed this morning that the UK’s debt hit £2.19trn at the end of last month, representing around 99.2 per cent of GDP. The Office for National Statistics (ONS) now estimates that the government borrowed a total of £299.2bn in the financial year to March. The ONS said the cost of measures to support individuals and businesses during the pandemic meant that day-to-day spending by the government rose by £204.2bn to £942.6bn last year.
Vaccinated Travel
Just as various government spokespersons were dampening hopes for an overseas post-Covid summer, the Times has reported that the government is set to announce looser travel restrictions for people who’ve been fully vaccinated. An overhaul of rules, to be announced on Thursday, won’t add many destinations to the quarantine-free “green list,” but is likely to exempt the vaccinated from a 10-day quarantine when returning from amber-list areas starting in August, the paper said. Despite the spread of the delta variant, Prime Minister Boris Johnson said on Monday that England is still on track to lift domestic limits on social gatherings as planned on 19th July.
Oil
Brent hit $75 a barrel for the first time in two years with some analysts predicting $100 by 2022.
Cryptocurrency
China’s central bank instructed several banks and firms, including Alipay, the country’s biggest mobile-payments platform, to identify clients trading in cryptocurrencies and block related transactions. Yesterday authorities shut off electricity to bitcoin miners in several provinces. China’s clamp down on cryptocurrencies has caused bitcoin to slide towards $30,000 dragging other coins with it.
Belarus
The European Union slapped more sanctions on Belarus over its hijacking of a passenger plane last month inorder to kidnap journalist Raman Pratasevich. The EU will impose travel bans and asset freezes on eight companies and 78 individuals. The new measures target the country’s main export sectors. America, Britain and Canada followed suit.
Johnson insists triple-lock will stay, Kwarteng vouches for growth
Kwasi Kwarteng has said tax rises or a cut to pensions relief is not necessarily the best way to repair the post-pandemic economy, with the Business Secretary preferring to see growth bring in increased revenues in order to pay down debt. His comments come amid rumours the Treasury is looking to raid pensions as a means of balancing the books. Boris Johnson also insisted there were no plans to renege on the manifesto pledge to maintain the pension triple-lock, telling journalists yesterday: “I’m reading all sorts of stuff at the moment which I don’t recognise at all about the Government’s plans.”
Johnson’s promises on social care stymied by tax constraints
The Chancellor has his hands tied when it comes to releasing cash to fund social care reform, the Times reports. Paul Johnson, head of the Institute for Fiscal Studies, said that Rishi Sunak would find it “extremely difficult” to fund the commitment on social care. “If you’re not touching the three main levers of income tax, VAT or national insurance and you’ve already raised corporation tax your options are extremely limited,” he said. “You’d need a lot of fiddling around with lots of different taxes, it feels like a big constraint. You’re really squeezing the barrel. His one possible get-out-of-jail card is that the economy does better than expected in the budget, but that’s not a long-run solution.” James Smith, of the Resolution Foundation, suggested that a package of wealth taxes was the only plausible option for raising the necessary sums if the “big three” taxes were ruled out.
Flexible train tickets
From 28th June, train passengers in England can buy flexible train tickets, buying 24 tickets over a month instead of a full season ticket offering savings on routes for people who travel two or three days a week. The move is in response to the pandemic which has increased working from home. Stagecoach and Go Ahead both gained. Critics have pointed out that the tickets only offer a small discount on the full season ticket and that working any additional days could end up costing even more.
Booster jabs
Health Secretary Matt Hancock said plans for a covid-19 booster jab programme in the autumn will be set out in the next few weeks. He said ministers were waiting for results from trials of different combinations of vaccines. It comes after doctors and NHS trusts said planning for a booster rollout must start now as it will involve bigger challenges.
Goldman Sachs
Goldman Sachs is set to bring transaction banking to its clients in the UK after the Wall Street-based firm said today it has launched its £35bn transaction bank in the country. The global investment bank expanded its transaction bank business after launching in the US last year, while it eyes steadier revenue sources beyond its investment division. The bank will offer UK companies cash management services while it grows in its new financial market.
Morrisons
Morrison jumped more than 30% yesterday after the disclosure of takeover talks with private equity firm Clayton, Dubilier & Rice. Whilst the grocer’s board rejected the first approach, the FT has disclosed that the private equity giant is pushing ahead regardless and the board of Morrison have been talking to their institutional shareholders. Most observers have taken the view the initial approach will be improved and there is the possibility of a competing ‘white knight’ in the form of Amazon Inc.
In defence of private equity
Patrick Hosking defends private equity in the Times, following outcries over the bid for Morrisons by US firm Clayton Dubilier & Rice. Many fear if the supermarket is taken over by a private equity house it will be asset stripped, thousands will lose their jobs and investment and service levels will dry up. Although there are some “horror stories” and sectors ill-suited to such takeovers, the image problem private equity has in Britain is not a fair one, Hosking contends, going on to cite a PwC study of British flotations in the eight years to 2017 which found that previously private equity-owned initial public offerings actually did better than other IPOs. A sperate study by EY shows private equity-backed companies do not destroy jobs nor do they skimp on wages, but they are more frugal when it comes to capital spending. Hosking concludes that private equity can help improve its image by being more transparent, “especially if it hopes to start buying Britain’s biggest companies.”
Treasury looks beyond the EU for financial services ties
Economic secretary to the Treasury and City minister John Glen has said the UK is seeking deeper financial services ties with trading partners beyond the EU to help the Square Mile thrive post-Brexit. “When it comes to developing a more open industry, we’ve been working hard seeking new international financial services agreements,” said Mr Glen. “We’ve already signed a number and we’re continuing the financial services dialogues with other countries, including the US, New Zealand, Australia, Japan, Switzerland, Singapore, China, India and Brazil.” Mr Glen told the City Week conference: “While openness means deepening international relations, we think it also means improving our own domestic competitiveness too so that we can take full advantage of our new position on the world stage. And that means creating the right conditions for industry to thrive outside the EU.”
Treasury looks beyond the EU for financial services ties
Economic secretary to the Treasury and City minister John Glen has said the UK is seeking deeper financial services ties with trading partners beyond the EU to help the Square Mile thrive post-Brexit. “When it comes to developing a more open industry, we’ve been working hard seeking new international financial services agreements,” said Mr Glen. “We’ve already signed a number and we’re continuing the financial services dialogues with other countries, including the US, New Zealand, Australia, Japan, Switzerland, Singapore, China, India and Brazil.” Mr Glen told the City Week conference: “While openness means deepening international relations, we think it also means improving our own domestic competitiveness too so that we can take full advantage of our new position on the world stage. And that means creating the right conditions for industry to thrive outside the EU.”
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