Business news 25 November 2022
James Salmon, Operations Director.
Postal strikes disastrous for small firms. Small businesses that tapped UK Covid loans face having names made public. Global Slowdown. Sterling climbs to three-month high. BoE expects rates will need to rise further. And more.
Postal strikes disastrous for small firms
The general manager at eBay UK has said the Royal Mail strikes will do untold damage to Britain’s small businesses at a time when they are desperate to recover from two festive trading periods marred by the pandemic and battle the inflationary pressures threating this years’ sales. Murray Lambell says: “It’s sadly no surprise that a vast majority of small business sellers on eBay say the strikes will negatively affect them. Half go even further and describe the walk-outs as ‘disastrous’ for their business.” He adds: “Almost two thirds think they will fall short of their sales targets for this year, with others considering shutting up shop altogether. That’s a terrifying prospect for many small business owners who are already struggling to make ends meet.”
Small businesses that tapped UK Covid loans face having names made public
Campaign group Spotlight on Corruption has brought a case that could see the British Business Bank forced to disclose the names of small businesses that took UK Government-backed emergency pandemic loans.
Global Slowdown
The Institute of International Finance said the world economy will be as weak in 2023 as it was in 2009 after the financial crisis as the conflict in Ukraine risks becoming a “forever war”. Global growth will expand a measly 1.2% while the Eurozone will shrink 2% as the Ukraine war drags on. “The severity of the coming hit to global GDP depends principally on the trajectory of the war in Ukraine,” they said.
Sterling climbs to three-month high
The pound strengthened to its highest level against the US dollar in three months on Thursday, driven up by a combination of the US Federal Reserve signalling it will slow its aggressive interest rate hike cycle and a near reversal of the mini-Budget introduced by ex-PM Liz Truss’s chancellor Kwasi Kwarteng. Sterling climbed 0.7% against the dollar to $1.21.
BoE expects rates will need to rise further
A deputy governor at the Bank of England told a conference on Thursday that interest rates may need to be cut if households and businesses come under greater financial pressure than expected. Sir Dave Ramsden said that although his preference is “towards further tightening” to bring inflation under control, it may be appropriate for the Bank to cut rates if the UK’s recession proves persistent. Separately, the Bank’s chief economist Huw Pill dismissed suggestions the Bank should pay less interest on lenders’ reserves at the central bank arguing that, although this would reduce the cost of covering losses on the QE programme, it would suck money out of the banking system. Gertjan Vlieghe, an economic adviser to the Government, said if ministers want to claw back losses from the Bank’s bond buying scheme they should force banks to pay more tax.
Exodus from workforce could force BoE to raise interest rates
The Bank of England’s chief economist Huw Pill has warned that the surge in people leaving the workforce could force the Bank to further increase interest rates. “Rising inactivity among the working age population represents an adverse supply shock, which adds to the difficult shorter-term trade-offs facing monetary policy,” he said. However, Pill said there were some signs the labour market was beginning to “turn” as the economy falls into recession, including a stabilisation of jobs vacancies from historically high levels. “That will weigh against domestic inflationary pressure and ease the threat of inflation persistence,” he said. Elsewhere, former Bank of England chief economist and now chief executive of the Royal Society of Arts, Andy Haldane, writes in the FT on how the UK’s adverse health trends are contributing to the flatlining of UK productivity. To slow this damage, much greater support for preventive health measures is needed.
Flexible working key to reducing pay gap, civil servants claim
The Treasury’s annual pay report states that home working is one of the key policies it believes will drive down a 17% gap between men and women at the finance ministry. The proposal was included alongside other goals, such as a target for “50% representation at senior levels by 2024”. The report came as separate figures showed just 75% of Treasury staff were based on site during the week of the Autumn Statement. The figure was as low as 37% at the start of this year. Jacob Rees-Mogg, the former Business Secretary, said there was a correlation between poor productivity and home working in Whitehall. He said: “There’s been poor service from DVLA, the Passport Office, HM Revenue and Customs, and the Land Registry. All of them had high levels of working from home.” Singling out HMRC, Rees-Mogg continued: “HMRC has a backlog of cases, is not answering telephone calls, and is not providing a good service to constituents. Until they provide a proper service to constituents, people should be working in the office.”
Manufacturers report rise in output
The latest CBI industrial trends survey reports a rise in manufacturing output for the three months to November. However, respondents expected output to fall in the three months to February by 10%. Anna Leach, the CBI’s deputy chief economist, said: “The rise in manufacturing output this month appears to be at least partly driven by improvements to supply chains.” Julian Jessop at the Institute of Economic Affairs said the CBI’s latest survey gave “some glimmers of light”.
Rise in car output, but it may not last
Figures from the Society of Motor Manufacturers and Traders show car production rose in October. But the improvement may be short-lived, experts say, with the recession likely to tamp demand. Some 69,524 vehicles rolled off assembly lines last month, a rise of nearly 4,800, or 7%, on the same month last year. That increase brings the total for the year to 721,000, down 10% year-on-year. Richard Peberdy, the head of automotive at KPMG, said factories may be working through unfulfilled order books built up because of the long-tail supply chain disruptions from the pandemic, and that “consumer demand for vehicles is increasingly coming under threat as the cost of living rises”. He added: “The cost of producing cars is rising, with a range of materials more expensive due to inflation, and the industry is nervously awaiting the outcome of the government’s review into energy price support for businesses beyond the end of March.
UK motor insurers face largest annual loss in a decade
Ongoing inflationary pressures will lead motor insurers to a loss this year and next, according to analysis by EY. Net combined ratios will reach 115% this year, EY says. This is the worst year since 2010 and they will go down only slightly to 114% in 2023. A ratio below 100% indicates that the company is making an underwriting profit, while a ratio above 100% means that it is paying out more money in claims that it is receiving from premiums. “While consumer premium rates have risen since the changes to pricing rules earlier this year, they are still well below the level needed to keep pace with inflation,” says Rodney Bonnard, UK insurance leader at EY. “This means that not only is 2022 almost certainly going to be unprofitable, but 2023 is also likely to be loss-making, given the business written this year has been on relatively low rates.”
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.