Business news 25 April 2023

James Salmon, Operations Director.

Credit agency restores UK’s AA rating . Firms struggle to find workers. Bills should reflect lower costs of renewables sooner. CBI hired ‘toxic’ staff.  And more business news.

Credit agency restores UK’s AA rating
Britain’s economy has been handed a vote of confidence, with ratings agency S&P Global upgrading the UK’s credit outlook to ‘stable’ from ‘negative’. This reverses a downgrade issued in the wake of September’s controversial mini-Budget. S&P said: “The Government’s decision to abandon most of the unfunded budgetary measures proposed in September 2022 has bolstered the fiscal outlook.” The ratings agency also reaffirmed its AA rating on UK debt. S&P predicts that the UK’s economic output will shrink by 0.5% this year, before growing by an average of 1.6% a year between 2024 and 2026. Separately, the EY Item Club has said that while the UK will avoid a recession, growth this year will be subdued.

Firms struggle to find workers
Companies are struggling to find new workers, according to a poll by the British Chambers of Commerce (BCC). The survey shows that around 60% of Britain’s businesses are looking to recruit staff. Of those actively hiring, 80% have reported difficulties in finding suitable workers, with this just below the record 82% who said the same in December. Jane Gratton, head of people policy at the BCC, said: “People shortages are a massive issue and employers can see little sign of improvement,” adding: “The high number of unfilled job vacancies is damaging businesses and the economy.” She argues that “urgent reform” of the Government’s shortage occupations list is needed, saying this will make it easier for companies to fill certain positions with overseas workers. The BCC report also warns that investment in training remains “stubbornly low,” with just 25% of firms saying they have increased their training plans over the past three months, while 14% have cut back.

Ovo boss: Bills should reflect lower costs of renewables sooner
Ovo Energy chief executive Raman Bhatia has urged ministers to speed up plans to separate electricity prices from gas prices, saying this will ensure that the lower costs of renewables are reflected in household bills. Currently, power prices for electricity are dictated by the UK’s energy mix, which remains highly dependent on gas. This means soaring fossil fuel prices have caused electricity bills to soar, even if power is sourced from renewables. Ovo is not the only supplier calling for reforms, with Octopus Energy having also raised concerns over the role of gas in power prices. The Department for Energy Security and Net Zero recently published the conclusion of a consultation on its review of electricity market arrangements, with 80% of respondents from within the industry saying current market arrangements are not fit for purpose.

Hunt defends corporation tax hike
Chancellor Jeremy Hunt says corporate tax is higher than ministers would like it to be, insisting: “We would like to bring it down.” “The way we will bring the tax burden down is through growth,” he added. Defending the Government’s decision to raise corporation tax from 19% to 26%, Mr Hunt said that the evidence showed that the cut to 19% in 2018 did not lead to greater business investment. He added: “If we look at the long-term causes of our lower productivity compared with Germany and the US, one of the key things is that those countries invest around 12% of GDP and business investment. We only invest about 10% of GDP. I want us to have the most competitive business taxes in the world.”

Retail profit warnings down 44%
Only five UK retailers issued profit warnings in Q1, marking a 44% fall compared to the opening quarter of 2022, when nine retailers raised concerns about their profits. Despite the year-on-year decline, the report from EY notes that 30% of listed retailers have issued two or more profit warnings since the start of 2022 – far exceeding the 8% total for all sectors. Richard Hunter, head of markets at Interactive Investor, commented: “Survival of the fittest has rarely been more appropriate in a retail sector which has had to battle with the fallout from the pandemic, supply chain issues, pressured consumers and typically fierce competition.” He added: “Only the largest of the retailers and supermarkets are able to minimise passing on increased costs by absorbing some of the inflationary pain, meaning that the next 12 months is likely to see a continuation of smaller retailers needing to admit defeat.”

FTSE firms see more executive exits
Analysis by advisory firm Russell Reynolds Associates shows an increase in the number of chief executives leaving the UK’s leading companies. The report shows that 38 FTSE 350 chief executives left their roles in 2022, more than double the 18 that departed in 2021. While 13 FTSE 100 companies saw a change in leadership, CEO exits from FTSE 250 companies increased from 10 to 25. Luke Meynell, managing director of Russell Reynolds Associates, said the increase was driven by a “greater level of change and instability” in the UK economy. Globally, the number of CEOs that moved on hit a five year high of 175 in 2022, from 133 in 2021.

CBI hired ‘toxic’ staff
The Confederation of British Industry (CBI) has admitted it hired “culturally toxic” staff and failed to fire those guilty of misconduct. The CBI said a failure to act allowed a “very small minority of staff with regressive – and, in some cases, abhorrent – attitudes towards their female colleagues to feel more assured in their behaviour, and more confident of not being detected.” CBI president Brian McBride said the lobby group had been “complacent” and apologised for “mistakes in how we organised the business that led to terrible consequences.” This comes following allegations of sexual misconduct at the CBI, including claims that two women were raped by colleagues. Law firm Fox Williams has been conducting an investigation into the CBI and, in response to its recommendations, the lobby group is hiring a chief people officer and all staff will complete compulsory anti-bullying and harassment training.

Morrissey: CBI scandal could deter women from the City
Fund manager Helena Morrissey has warned that the scandal at the Confederation of British Industry (CBI) could deter women from entering the City. With the Prime Minister taking questions from executives at the Business Connect event in London, Baroness Morrissey said: “It’s a bit of the elephant in the room but we’re meeting as horrible allegations swell around the CBI.” Saying that “we need everyone to feel they’ll be respected and included if they join industry,” she added that she is “personally worried that this might put women off joining industry.” Rishi Sunak said the Government was working to support women becoming successful entrepreneurs, going on to cite a review into female entrepreneurship carried out by NatWest chief executive Alison Rose.

PM told ‘tourist tax’ move was a ‘spectacular own goal’
Rishi Sunak has been criticised for scrapping VAT-free shopping for foreign tourists, with Gerry Murphy, chairman of luxury retailer Burberry, saying the move was a “spectacular own goal” that made the UK “the least attractive shopping destination in Europe.” Mr Murphy’s comments came at a Business Connect summit in London where the Prime Minister was trying to woo corporate leaders. The Burberry boss noted that the decision to remove a tax break for holidaymakers that allowed them to claim back VAT on items brought in the UK was made by Mr Sunak while he was Chancellor. The Prime Minister insisted there “were good reasons” for the move but said he would look at the data to “see if things are panning out as we expected to, or not.” Mr Murphy’s comments follow a letter from retail, hospitality and tourism bosses who have urged Chancellor Jeremy Hunt to reinstate tax-free shopping for overseas tourists.

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