Business news 24 January 2022

James Salmon, Operations Director.

Two thirds of UK employees plan to launch own business. WFH rules led to increase in fraud. Bank of England urged to move faster over inflation. Business leaders call for urgent help with energy costs. Billionaire wants tax loop holes closed.  And more business news.

Two thirds of UK employees plan to launch own business
Two in three British employees plan to start their own business at some point, according to a survey by cloud accounting software firm FreeAgent. This is up over 10% on a year ago. One in ten Brits plan to start a business this year while a further fifth plan to do so in the next few years. Last year, when asked what motivated them to start a business, 41% of founders said it was the ability to choose what work they do and 36% said it was to earn more money. This year, 47% of respondents said a better work life balance was their chief motivation while just 27% were in it for the money. The pandemic had a mixed impact on budding entrepreneurs with half postponing a business start and a quarter moving plans forward and a further quarter saying it had no effect on their plans. The main concerns for those looking to start a business are the costs and dealing with taxes and regulations.

WFH rules led to increase in fraud
A survey of 500 mid-sized companies by BDO found more than eight in ten mid-sized businesses in the UK experienced fraud in 2021, up from 60% the year before. Cyberattacks were one of the most prevalent forms of fraud, with almost a third of respondents reporting security breaches over the period. The move to working from home during the pandemic was cited by many as a key factor in the rise, with 38% of frauds involving collusion between outsiders and employees, while more than a quarter were committed against companies solely by their own employees. Kaley Crossthwaite, head of fraud at BDO, said: “Disruption wrought by the pandemic . . . has magnified the risk for businesses. The increasingly sophisticated and opportunistic tactics being developed by fraudsters have also outpaced the protections being implemented by many firms.”

Bank of England urged to move faster over inflation
Sir Charlie Bean, a former Deputy Governor of the Bank of England, has said the Bank has taken too long to raise interest rates and will need to “move faster” to get a grip on inflation. Sir Charlie said that the Bank’s stance “has erred too much towards looseness through the course of the past few months”, adding that he was “surprised” by the decision to hold off in November. Analysts believe that inflation could reach 7% in April as energy prices spike.

Business leaders call for urgent help with energy costs
The Chancellor Rishi Sunak has been warned by five business groups that energy price rises on the horizon could push millions of people into fuel poverty. The British Chambers of Commerce, the Confederation of British Industry, the Federation of Small Businesses, the Institute of Directors and Make UK – said businesses were likely to be faced with further costs as existing fixed tariff contracts come to an end. “The scale of the crisis has left companies with little protection while they face dealing with soaring wage, shipping and tax costs,” the groups said. “Small and medium-sized businesses are the most at risk. Many companies will be left with little other choice than to pass costs on to their customers, adding further inflationary pressure.” A government spokesperson said: “We understand the pressures people are facing with the cost of living and are providing support worth around £12bn over two years to help families.”

After benefiting from tax loopholes, billionaire wants them closed
Phones4U billionaire John Caudwell has said all the tax avoidance loopholes he used when he was growing the mobile phone business should be stamped out. He told BBC Radio 4’s Desert Island Discs that at the time of his tax avoidance in the 1990s he was “scratching” his way forward: “Every pound that I could save, I could reinvest into the business. So paying as little tax as I could was really important.” However, Caudwell says his social conscience has now grown: “All of these tax fiddles, even though they were legitimate, need stamping out… Taxes are absolutely vital for the fabric of Britain.”

Tax Return deadline warning
Business experts are urging SMEs, sole traders and anyone else to complete this taxing return before the January 31 deadline. This is despite the £100 penalty fees being waived for late returns because the interest on overdue payments has not been and will start to accrue by February 1st.

Inflation and tax hikes drags on consumer optimism
The latest consumer confidence index from GfK shows optimism about household finances over the coming year shrank three points to minus two amid concern over rising inflation and forthcoming tax increases. Joe Staton, client strategy director at GfK, warned: “The UK’s financial pulse weakened further this January driven by concerns over personal finances and the general economic situation.” Staton warned that any brightening of the mood as a result of Plan B restrictions being lifted would be offset by the persistent cost-of-living squeeze. Separately, experts have warned that high street retailers will be among the first casualties of inflation. Jacqui Baker at RSM UK said: “Essential outgoings will increase with soaring energy costs, higher mortgage repayments and increased petrol prices all putting extra strain on disposable income.”

Scrapping NICs rise would help struggling households, and the PM
Pressure is growing on Boris Johnson to scrap plans to increase National Insurance Contributions with the move now the chief demand from backbenchers after dropping Covid restrictions. Former cabinet minister Robert Jenrick supports postponing the hike claiming it would illustrate that the Government’s Conservative instincts remain and would be the “quickest way to alleviate the pressures on household budgets”. Additionally, the director of the National Institute of Economic and Social Research, Professor Jagjit Chadha, has said scrapping the move would absolutely be possible given the Government’s finances, adding that shelving the NIC increases “would help the economy to grow, injecting some demand. Given the cost-of-living squeeze, that would make a lot of sense”. Labour has capitalised on the issue with shadow chancellor Rachel Reeves describing the Conservatives last week as “a high-tax, low-growth party”, pointing to an incoming “triple whammy” of higher NICs, increased council tax and a freeze on income tax thresholds. Separately, the Mail on Sunday reports that Tory MPs who have met Chancellor Rishi Sunak to call for action on the cost of living crisis have been left with the impression that he is trying to distance himself from the hike in NICs, describing it as “the Prime Minister’s tax”.

National Insurance rise should be scrapped, say former ministers
Two former Conservative Cabinet ministers have urged Boris Johnson to cancel his planned increase in National Insurance. The former Brexit secretary David Davis urged the Prime Minister to cancel the introduction of the health and social care levy in April “in the interest of working families and the growth of the economy”. Meanwhile, Robert Jenrick, who voted for the increase when he was housing secretary, said the increase should be delayed in order to help families struggling with the cost of living. Separately, City AM claims that Rishi Sunak is trying to distance himself from the NI hike, with the Chancellor telling Tory MPs that it is the “Prime Minister’s tax”. The Resolution Foundation think-tank estimates families will be around £1,200 out of pocket this year just from the National Insurance rise and the expected increases in energy bills. One senior minister told the Mail there would be “no objection” from the Cabinet if Mr Sunak halted the increase. This comes after Dominic Raab, the deputy PM, told media over the weekend that, although he would prefer the rise not to be needed, the Government could not duck the issue of social care.

Sunak told to resist doom loop policies
Chancellor Rishi Sunak has been urged to cut the basic rate of income tax by five pence in the pound and reduce business taxes by 10%. A new report from Professor Patrick Minford of Cardiff Business School claims the tax cuts combined with targeted investment in the north of England would boost the economy by up to £23bn a year and help bring down the national debt. Professor Minford said: “We must close our ears to the voices of gloom that urge the need to raise taxes and cut spending to reduce the Covid debt. That way lies only a downward spiral of falling growth and a rising debt ratio – a doom loop of stagnation, austerity and worsening public finances.”

Over-50s quitting work risk poverty in old age
The number of over-50s in the workforce has fallen by 186,000 since the start of the pandemic, the Telegraph reports, leaving the economy short of a vital source of growth. But for the over-50s there is also the risk of missing out on higher incomes now and tapping into their pension savings earlier than they would have, leaving them poorer in later life. Former pensions minister Baroness Altmann said the development was “dangerous” and bad news for “the long-term health of the economy and pensioners”. Laura Suter, of AJ Bell, cautions: “Retiring even five years earlier can have a dramatic impact on how long your pension pot lasts, meaning that you’ll either need to find money from elsewhere to fund the rest of your retirement or significantly change the amount you take from your pension each year.”

Number of people who died of COVID-19 with no underlying health conditions revealed
In response to a Freedom of Information request, the Office for National Statistics (ONS) has revealed that 17,371 people without pre-existing health conditions have died from COVID-19. The figures cover 2020 and the first three quarters of 2021. Some 13,597 of those were people 65 or older. The figures also show that the average age of death due to COVID-19 is higher than the overall average age of death. The Government’s data dashboard shows that, as of Friday, January 7, there have been 175,256 deaths where COVID-19 was on the death certificate.

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