Business news 24 December 2021

James Salmon, Operations Director.

More than 35,000 retailers in financial distress. Businesses need consumers to spend with more zeal. Omicron and fresh restrictions weaken consumer confidence. Rules of origin laws loom for trade.  And more business news.

Today is our last working day of 2021 at CPA.  We will see you all in 2022.

More than 35,000 retailers in financial distress

More than 35,000 struggling retailers are now in significant financial distress, according to new figures. New data from insolvency firm Begbies Traynor has also revealed that more than 20,000 bars and restaurants are also in a perilous financial position across the UK. The figures come as firms across the UK witness reduced footfall and cancellations during a key trading period. Julie Palmer, a partner at Begbies Traynor, said: “2020 was one of the toughest years ever experienced in the retail sector. Omicron could be the straw that breaks the camel’s back.”

Businesses need consumers to spend with more zeal
Research from KPMG found consumers who managed to save during the pandemic will spend just a sixth of the amount they have put away in the year ahead. The rising price of goods and services has created a deterrent to spending, with almost a quarter citing it as the reason for caution. Linda Ellett, UK head of consumer markets, leisure and retail, said: “This intended spend is much needed…but consumer confidence is such that even those willing and able to spend on average won’t spend more than a sixth of their pandemic savings in the coming 12 months. Businesses facing mounting cost pressures will be hoping that the effectiveness of the booster programme leads to a feel-good factor that increases spending intention further.”

Omicron and fresh restrictions weaken consumer confidence
Consumer confidence has been weakened by the Government’s reaction to Omicron, leading to restaurants suffering their worst week since the middle of May. The number of seated diners fell to 88% of the level in the same week in 2019 following advice to work from home where possible. Transactions at Pret A Manger locations in the City fell 29 percentage points to the lowest level since the week ending September 2 while retail shopper numbers in the week to December 18 were down 81%, according to data from Springboard. Andrew Goodwin, chief UK economist at Oxford Economics, said that although the Government had opted to defer a decision on introducing further restrictions until after Christmas, “it seems likely that a mix of greater consumer caution and reduced mobility will ensure that the UK’s GDP falls in December”.

Astrazeneca & Omicron

AstraZeneca announced data from a new laboratory study showing that a third dose of Vaxzevria significantly boosted levels of antibodies against the Omicron variant. Vaxzevria is the Covid-19 vaccine developed by AstraZeneca and the University of Oxford. In the study, the Anglo-Swedish drugmaker said that neutralisation titres for Omicron were raised following a third dose with Vaxzevria, compared to titres after a second dose. In addition, the levels after the third dose booster were higher than the neutralising antibodies found in those previously infected with and recovered naturally from the prior variants.

Omicron severity low, large numbers catching Covid in hospital
The UK Health Security Agency has confirmed that the Omicron variant of coronavirus is milder than previous variants, with people catching it up to 70% less likely to need hospital care. The latest analysis is based on all cases of Omicron and Delta in the UK since the beginning of November, including 132 people admitted to hospital with the variant. There have also been 14 deaths in people within 28 days of catching Omicron.

Separate NHS data show around a third of Covid patients may have caught the illness in hospital, leading scientists and MPs to urge the Government to exclude those catching Covid in hospital and patients who would have been in hospital anyway when deciding whether to impose restrictions.

Rules of origin laws loom for trade

The implementation of post-Brexit customs laws in January could see prices increase further for consumers with shortages also possible, according to Blick Rothenberg. Simon Sutcliffe, a partner at the firm said the postponement of rules of origin laws has “softened the impact” of the UK’s exit from the European Union, and that “things will get worse” when they are finally brought in. Meanwhile, Sean Glancy at UHY Hacker Young urged the Government to delay the certification rules around imports. “The UK Government should seriously consider delaying the rules of origin changes until Covid-related disruption is finally over,” said Mr Glancy. “Nobody wants to risk further snarl-ups in cross-border trade. Many UK SMEs are dependent on goods supplied from the EU. Additional customs checks put those supplies at risk.” A Downing Street spokesman said: “Overall trader readiness for the introduction of import controls is strong. The Government is also on track to deliver new systems, infrastructure and resourcing needed for these controls.”

City relocations slowed by Covid lockdowns
The relocation of bankers in the City and Canary Wharf to continental Europe was made impossible by coronavirus lockdowns, significantly slowing an exodus of finance professionals post-Brexit, according to EY. “Travel restrictions over the last two years have challenged the practicalities of relocation,” said Omar Ali, head of financial services for Europe, the Middle East, India, and Africa at EY. “Depending on the trajectory of the omicron variant and its impact on international travel in the short term, delayed moves should pick up over the coming year, not least due to ongoing pressure from EU regulators,” Ali explained.

Treasury accidentally omits £18bn of borrowing from the Budget
The Treasury has admitted missing out £18bn of borrowing from a key table in its Budget document. A table in the first chapter of the Budget omitted the estimated £25.3bn of additional borrowing incurred in 2022-23, replacing the figure with the following year’s prediction. The typographical error does not affect the Government’s overall finances, the Telegraph reports.

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