Business news 26 January 2023
James Salmon, Operations Director.
Business confidence and SME optimism dip . UK economy has a ‘star striker’ and a leaky defence . Cost-of-living crisis widens wealth gap. UK Car Industry, Tesla, call for energy price probe, producer prices and more business news.
Business confidence hits 13-year low
A poll by the Institute of Chartered Accountants in England and Wales (ICAEW) shows that business confidence has fallen to the lowest level since 2009 amid tax rises, soaring prices and lacklustre growth prospects. Suren Thiru, director of economics at the ICAEW, said a six percentage point increase in corporation tax in April and less Government support for energy costs means many companies “are starting 2023 at a really weak point financially.” He added: “The concern is once these taxes start to come in and you also start to see the real impact of interest rate rises over the past year, that could really create a cliff edge moment for a lot of businesses.”
Small firms see optimism dip
Confidence among small business owners fell again in the final months of 2022, with retailers and hospitality companies among the hardest hit. The Federation of Small Businesses’ (FSB) small business index, which polled more than 1,000 companies, fell to -46 in the final quarter of 2022, down from -36 in Q3. This marks the lowest reading since the -49 seen in December 2020 – a period which saw Britain go into lockdown for the second time. Between October and December, 43% of small companies reported a drop in revenues compared with the previous quarter, while only 33% saw an increase. Martin McTague, the FSB’s national chairman, said: “There’s no way to sugar-coat these figures,” adding: “Clearly, falling consumer spending, inflation, and high energy bills are all taking a toll.” Describing small businesses as the “engine room of any economic recovery,” McTague argued: “The more rapidly small firms pull through, the more rapidly we can all recover.”
Gove: UK economy has a ‘star striker’ and a leaky defence
Michael Gove has likened the UK economy to a football team that boasts a star striker but underperforms elsewhere on the pitch. Saying the political economy has been too reliant on London and the South East, the Levelling Up Secretary argued: “The UK economy has been like a football team with a star striker, but a midfield that consistently struggles to get the ball upfield and a defence full of holes,” adding that “no forward, not even Lionel Messi, can do it on his own.” Speaking at the Convention of the North, Mr Gove said: “We all know we can’t prosper so much as a state if we rely so much on one region, and within that region, on one city,” going on to say the UK has an “enduring and entrenched geographical and social divide.”
Cost-of-living crisis widens wealth gap
The cost-of-living crisis and the freeze on the income tax threshold has increased the disparity between Britain’s richest and poorest earners. Office for National Statistics (ONS) figures show that while the richest Brits have managed to increase their household disposable income by just over £1,000 in the last year, the poorest are £600 worse off on average. The data shows that the wealthiest fifth have seen a 1.6% increase in their pay, with the average salary of those in the top bracket coming in at £66,000 a year. The ONS report says: “Wages and salaries increased by 3.2% across all households, however, the poorest fifth of people saw a 7.5% decrease, while the richest fifth saw a 7.8% increase.” Laura Suter, head of personal finance at broker AJ Bell, said: “The poorest fifth of the UK was hit by two factors: their wages failing to keep up with inflation and benefits falling in real terms, both of which had a dramatic impact on their spare cash.”
Producer price growth continues to slow
Office for National Statistics (ONS) data shows that producer price inflation continued to slow in December. Producer input prices – the price of materials and fuels bought by UK manufacturers – rose by 16.5% in the year to December. This marks a slowdown from the 18% increase recorded in the year to November 2022 and the record high of 24% posted in the year to June 2022. December was the sixth consecutive month that the annual rate of input producer price inflation has slowed. Producer output prices – the amount UK producers receive for goods they sell to the domestic market – rose by 14.7% in the year to December. This compared to 16.2% in the year to November and 17.5% in the year to October. The ONS said the prices of equipment and petrol had driven the decline in both input and output producer price inflation. The annual rate of inflation for services sold by UK companies, known as the Services Producer Price Index, was 5.2% in Q4. This was down from a record high of 6.2% in Q3.
Pub body calls for energy price probe
The British Beer and Pub Association (BBPA) has accused energy firms of profiteering, saying it has received “countless examples” of “price hikes and poor practice” which have negated Government efforts to support struggling businesses. The trade body has written to sector regulator Ofgem – as well as the chairs of the Treasury and Business Select Committees – calling for an investigation. BBPA chief executive Emma McClarkin said: “The spiralling cost of energy has been our members’ number one concern for close to a year now and remains so. Now, multiple reports of poor practice have compelled us to speak up on behalf of suffering businesses and make this urgent call.”
Soaring costs drive down number of lone borrowers
Analysis by Halifax shows that just 37% of first-time buyers taking out a mortgage are purchasing a property on their own, marking a steep decline on 2014, when 57% of those getting on the property ladder bought on their own. The higher cost of living has played a part, with banks now willing to lend less as rising food and energy bills reduce how much people can afford to pay for their home loans each month. Higher mortgage rates also mean people may not be able to borrow as much and pass affordability tests, particularly if the application is based on one salary. The Halifax report also shows that while the overall number of first-time buyers is still higher than pre-pandemic levels at 362,461, this is down 11% on 2021’s record high of 405,320.
Windfall tax generates less than expected
The Office for Budget Responsibility says the windfall tax on North Sea oil and gas operators failed to generate the Government’s expected takings last month. Cash receipts for December were £600m below expectations, with this representing a 24.5% shortfall on Government forecasts. This was the first installment of Energy Profits Levy payments on 2022 profits, with the second and final installment due this month.
PM has never paid a tax penalty
Downing Street has confirmed that Rishi Sunak has never paid a tax penalty to HMRC. This comes amid the ongoing debate over the position of Conservative Party chairman Nadhim Zahawi after it was revealed he paid a penalty as part of an estimated £4.8m bill he settled with HMRC. Mr Sunak has ordered an investigation into whether Mr Zahawi broke ministerial rules. A poll for the Independent saw 64% of respondents say Mr Zahawi should detail how much it took to settle his tax dispute with HMRC.
Car Industry
UK car production falls 10% in 2022 from 2021 to the lowest level in 66 years with 775k. In 2019 prior to covid, we produced 1.3m.
Tesla
Tesla announced quarterly net income of $3.7bn, up by 59% year on year. Revenues rose by 37% from the same period a year ago, to $24.3bn. The company recorded a gross margin of 25.9%
Trump & Facebook
Meta said it would soon restore Donald Trump’s Facebook and Instagram accounts, two years after suspending him from the social-media platforms for stoking the Capitol riot on January 6th 2021
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