Business news 22 December 2021
James Salmon, Operations Director.
GDP revised down. Omicron grants. PM rules out Covid curbs before Christmas. Mixed views on new regulator for insolvency industry. And more business news.
GDP revised down
The UK Economy grew at a slower pace than first thought between July and September, at 1.1% compared with the 1.3% initial estimate, official figures show.
Omicron grants
Chancellor Rishi Sunak has announced yesterday afternoon that there will be £1 billion of grants in support for businesses most impacted by Omicron across the UK in the hospitality and leisure sector, including £30m further funding through the Culture Recovery Fund to help support theatres and museums. The government will be allowing more cultural organisations in England to apply for support during the winter, and the figure will build on nearly £240m of cultural grant support already allocated this financial year or currently available for organisations to bid for. Businesses such as pubs and restaurants will be eligible for a one-off cash grant of up to £6,000
Kate Nicholls, chief executive of the trade body UK Hospitality, welcomed the help, but said many individual businesses would still not be able to survive what is likely to be a bleak January. Additionally, the travel industry is dismayed at being left out of the scheme with Karen Dee, head of the Airport Operators Association, saying the Chancellor repeatedly “overlooks our sector when he announces sector-specific support measures.”
PM rules out Covid curbs before Christmas
Boris Johnson has said there will be no new coronavirus restrictions put in place before Christmas although the PM added that further measures could not be ruled out after the 25th of December. Mr Johnson’s statement came after Scotland announced tough new measures to start from Boxing Day. Large events will have limits on the number of people that can attend, and Edinburgh’s Hogmanay celebrations have been cancelled. Separately, Health Secretary Sajid Javid has announced that vaccinated people who have tested positive for COVID-19 will be allowed out of self-isolation after seven days, rather than ten, if they receive negative lateral flow results on day six and seven from tests taken 24 hours apart.
UK public borrowing fell in November
Data from the Office for National Statistics on Tuesday showed that public borrowing fell to £17.4bn in November as the end of the furlough scheme helped reduce spending. This is down £4.9bn compared with the previous year but is higher than the £16bn predicted by economists. The sharp rise in RPI inflation in recent months led to an increase in debt interest costs to £4.5bn in November, up from £4.1bn last November. Michal Stelmach, senior economist at KPMG UK, said: “Around a half of total public debt is linked to either inflation or the Bank of England’s interest rate via [quantitative easing], both of which will put further upward pressure on servicing costs next year.”
Mixed views on new regulator for insolvency industry
Plans to introduce a single regulator to improve consistency and confidence in the insolvency profession have been praised by the All-Party Parliamentary Group on Fair Business Banking. Co-Chair Kevin Hollinrake commented: “The Government is moving in the right direction, and if insolvency practitioners are doing their jobs fairly, they have absolutely nothing to fear from the introduction of a neutral and independent regulator. The Government should also go further and introduce an ombudsman to offer businesses a place to go if things go wrong.”
Although trade body R3 supports a single regulator in principle, its president Colin Haig fears a conflict of interest under the current proposals. “The Government would set insolvency legislation, regulate insolvency practitioners and then effectively compete with those same insolvency practitioners for work – while not being subject to the same regulation itself,” Haig said. Dr Roger Barker, policy director at the Institute of Directors, welcomed the plans which, he said, would “simplify” oversight of the industry. Finally, Giles Boothman, global head of restructuring at Ashurst said: “There is a lot to digest in this consultation – the devil will be in the detail.”
Government departments can’t get IR35 right
The 2020-2021 annual reports and accounts for the Ministry of Justice show that the department owed £72.1m to HMRC for incorrect IR35 determinations. Additionally, in its own annual reports and accounts, the Department for Environment, Food and Rural Affairs (Defra) was found by HMRC to owe £48m in liabilities for giving false IR35 determinations. The news comes after the DWP, Home Office and HM Courts & Tribunal Service were all forced to pay millions in tax penalties this year IR35 non-compliance. Andy Chamberlain, Director of Policy at the Association of Independent Professionals and the Self-Employed (IPSE), commented: “The fact that two major Government departments have run into trouble with their IR35 compliance shows just how complicated and confusing the regulations are.”
Pandemic inspires entrepreneurial spirit
The Standard reviews some of the creative design businesses that were set up during the pandemic, either because people lost their jobs or found more time to put their plans into action. Data from UHY Hacker Young show the number of start-ups surged by 14% in the year to July 2021, comfortably outpacing the global average of 6%. Almost 726,000 new businesses were created in 2020, up from 636,000 in 2019.
Scottish SMEs still suffering Covid-related hits
Analysis by the Association of Chartered Certified Accountants (ACCA) shows a quarter of Scottish SMEs have still not returned to pre-Covid levels of productivity or turnover. The ACCA also found that ongoing uncertainty and the pandemic debt burden has meant 92.4% of Scottish SMEs are not seeking finance to grow in the next six to 12 months, compared to a UK average figure of 81.7%. Data from the latest edition of the ACCA SME Recovery Tracker was gathered just as the Omicron wave was starting to hit Scotland and is based on responses from accountants representing almost 1,500 clients north of the Border.
UK legal services rack up £5.6bn surplus
A report from TheCityUK reveals that the UK’s legal services sector generated a trade surplus of £5.6bn over the past year, while the UK’s largest 100 law firms enjoyed revenue growth of 4% in 2021 to £28.8bn. The report says TheCityUK’s legal services group, which is chaired by former Herbert Smith Freehills senior partner James Palmer, has been “building and maintaining strong relationships with senior government, regulatory and industry stakeholders to maintain the competitiveness of the sector.”
High tax receipts could tempt Sunak further
HM Revenue & Customs (HMRC) figures show tax receipts for April 2021 to November 2021 came in at £448.1bn – £106.8bn higher than the same period last year. Inheritance tax receipts for the period came to £4.1bn – £600m higher than in 2020. IHT receipts have been boosted by the Chancellor’s decision in his March Budget to freeze the threshold for five years. Julia Rosenbloom, a tax partner at Smith & Williamson, said any further need to support the economy as the pandemic continues could tempt Rishi Sunak to increase personal taxes in the next Budget. The risk of this emphasises the need to carefully consider tax planning, Ms Rosenbloom said, urging people to make the most of current allowances in case other changes are introduced.
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