Business news 23 August 2022
James Salmon, Operations Director.
Could we see 18% inflation next year? Markets. Oil. CVAs plunge after HMRC tightens debt recovery rules. And more business news.
Could we see 18% inflation next year?
Rising energy prices could push the UK over the 18% inflation mark next year, the highest rate in nearly 50 years.
A forecast from Citigroup said inflation was “entering the stratosphere” and would reach 18.6% in January, with affordability concerns “growing more deafening by the day”.
Elsewhere, the Resolution Foundation said inflation could reach 18.3% while Goldman Sachs and EY are forecasting a rise to closer to 15%. Officials at the Bank of England expect inflation to peak at just over 13% in October, when households receive their winter energy bills.
The revised forecasts came on the back of a decision by Gazprom, the Russian state energy company, to close the Nord Stream 1 pipeline to Europe for three days for what it described as maintenance reasons. This sent the wholesale price of gas up 37% on Monday.
Markets
Equity markets plunged on the inflation predictions amid fears of far greater interest rate hikes and a looming recession. A recession is likely to hit the UK in the fourth quarter. Overnight, DOW dropped -1.91%. S&P 500 dropped -2.14%. NASDAQ dropped -2.55% with investors watching the meeting of central bankers at Jackson Hole. The energy crisis is sinking the pound which is at its lowest point since the start of the covid pandemic. The pound buys $1.175 or €1.185.
Oil
The Saudi Energy Minister said “extreme” volatility and lack of liquidity mean the futures market is increasingly disconnected from fundamentals and OPEC+ may be forced to cut production. Meanwhile Russian shipments have all but recovered from their previous slump. Gas prices in Europe surged to a record high as Russian again shut down Nord Stream 1 for “maintenance”.
CVAs plunge after HMRC tightens debt recovery rules
Data analysed by Mazars show the number of struggling firms striking Company Voluntary Arrangements (CVAs) with creditors has plunged 47% in the past year since a 2020 change to the law made HMRC a preferred creditor when firms go bust. “It is understandable for HMRC to be a preferred creditor with a view to recover money owed to the taxpayer,” said Rebecca Dacre, Partner at Mazars. “But it must be recognised that the unintended consequence of this is fewer companies entering a CVA.”
Gatwick
Gatwick Airport said passenger demand was 74% of the pre-pandemic level in second quarter of 2022 and 59% in all of the first half. The airport, located south of London, said 13.1 million passengers passed through its terminals in the first half of the year, prompting it to raise its forecast for all of 2022 to 32.8 million passengers.
Apple
Apple which has long manufactured in China, is planning to manufacture the iPhone 14 in India as it seeks to mitigate the political risks of working in China.
UK urgently needs a microchip strategy, says Arm boss
The boss of Cambridge-based Arm Holdings has urged the UK Government to do more to shore up the country’s semiconductor industry. Rene Haas described chips as “the lifeblood to everything we do” and said Britain had “fantastic strengths in design capability and in compound semiconductors and both are fairly critical to the overall global supply chain that goes into the electronic space.” In terms of improving its digital autonomy, the UK is falling behind the US and Europe, which have both brought in legislation to make their semiconductor supply chains more resilient. Britain has yet to publish the findings of two reviews into the sector. Mr Haas said that he would like to see more research and development tax credits and greater support in bringing skilled workers into the UK.
Cross-government public sector strike expected
Ministers are preparing detailed contingency plans ahead of an expected cross-government strike by public sector unions, which could be announced next month. There is speculation that the scale of the unrest could approach that of the general strike from 1926 when millions of workers went on strike for nine days. One senior government source told the Telegraph the entire Civil Service could walk out at in a bid to pressure ministers to increase their pay, while others speculate that the scale of the disruption could approach that of the general strike.
‘Pandemic retirees’ return to work as pension values fall
Thousands of over-65s who left the workforce during the pandemic have been forced back to work as the value of their pensions plummets due to soaring inflation, the Times reports. Figures from the Office for National Statistics show there was a quarter-on-quarter net increase of 174,000 over-65s in work in the three months to June. Stephen Bevan, head of HR research development at the Institute for Employment Studies. “The cost of living is probably the main driver, but from the studies we’ve done older workers quite often miss work and the social connection…but I would say, in this last quarter, it’s much more likely to be driven predominantly by the cost of living.”
UK launches scaleup visa in latest post-Brexit reform
Britain has launched a new visa route for fast-growing businesses to hire skilled workers from abroad. The so-called Scale-up visa is open to skilled workers in professions such as engineering, architecture and software development, and marks the latest post-Brexit revamp of UK immigration rules. Kevin Foster, a Home Office minister, said: “By supporting our high growth tech, financial services and small businesses, we are ensuring the UK remains a global hub for emerging technologies and innovation.” Irene Graham, the head of the ScaleUp Institute, said the new visa “should provide a much-needed fast track service to enable local growth companies to access the talent they need more quickly.”
UK workers lured to City in search of higher pay
A new survey from KPMG shows around a quarter of Britons want to move into the financial services sector, drawn by the high salaries and bumper bonuses handed out by banks, brokers and insurers. City firms have been prompted to hike pay as they compete for talent and turn to historically under-represented workers to fill roles. “In the competition for talent, financial services firms should consider extending the scope of their search to include non-traditional pools of talent which can help boost diversity and inclusion,” Karim Haji, head of financial services at KPMG UK, said. Rising prices are putting household finances under intense pressure, forcing over a third of workers across the UK to look for a new job, KPMG said. “Given the rising cost of living and the broader economic uncertainty, it makes sense that many individuals will be considering their current roles,” Haji added.
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.