Business news 26 May 2023

James Salmon, Operations Director.

British Gas launches ‘blend and extend’ contracts for struggling small businesses. R&D tax relief changes benefit larger businesses. UK crypto fraud losses jump 40%. HMRC delays stopping businesses from launching.  And more business news that we thought would interest our members.

British Gas launches ‘blend and extend’ contracts for struggling small businesses
British Gas and Octopus have launched ‘blend and extend’ contracts to help small businesses struggling with high energy bills. The move comes after the Federation of Small Businesses called on suppliers to cut tariffs for firms that fixed at the market peak last summer. The less generous Energy Bills Discount Scheme offers businesses a discount on the unit price of gas and electricity, while the ‘blend and extend’ contracts allow firms to extend their fixed contracts at a blended and lower rate. British Gas has also announced £15m worth of grants to help with energy costs. Other suppliers, including SSE, have also introduced ‘blend and extend’ contracts.

R&D tax relief changes benefit larger businesses
A shake-up in R&D tax relief measures announced at the Spring Budget has seen support pivot more towards larger businesses and the most R&D intensive SMEs. “Cashback for SMEs used to be up to 33% of qualifying expenditure on R&D. But this now only applies to companies where more than 40% of total expenditure is on R&D. For the majority of SMEs that won’t meet this new threshold, cashback has dipped down to 18%,” according to the Yorkshire Post‘s Steve Blacker. The changes will cut tax relief for hundreds of organizations across Yorkshire, representing a big financial hit for some.

UK crypto fraud losses jump 40%
Data provided by Action Fraud show UK losses to crypto fraud increased more than 40% over the past year, surpassing £300m for the first time.

Inflation is hurting older households more
Analysis by pension firm Aviva reveals that the over-75s are struggling under an inflation rate of 9.8% as older households spend a bigger proportion of their budgets on the essentials of energy and food. Inflation currently stands at 8.7% under the CPI measure.  The average household spends around 11% of their budget on food and around 5% on energy, while over-75s spend around 14% of their budgets on food and 8% on energy. Alistair McQueen, of Aviva, said: “The pressure is now shifting from heating towards eating: energy bills are coming down, which is lifting some of the pressure, but this pressure is being replaced by food inflation at a near all-time high of 19.3%. This is hitting older households hard.” People aged 65 to 74 have seen their expenses go up by 9.2%. By contrast, under-30s have had their costs increase by 8%. Inflation was 8.5% for those aged 30 to 49 and 8.6% for those 50 to 64, Aviva said.

HMRC delays stopping businesses from launching
The Telegraph reports on how delays at HMRC are now so severe that they are preventing new companies from opening bank accounts as its anti-money laundering department is apparently unstaffed. Chris Etherington, of the accountants RSM, said that HMRC customer service had been brought to its knees by underfunding and lack of resources since the pandemic. He said: “People manning the phones do not have sufficient training or expertise. It is easy to take it out on frontline staff but ultimately politicians need to provide HMRC with the proper funding it requires. If regular people cannot get through the taxman’s admin this will slow down economic growth.”

Retail

UK Retail Sales edged up on a monthly basis in April, while an annual decline softened, according to the Office for National Statistics. The ONS estimated that retail sales volumes in April rose 0.5% from the previous month, after a downwardly revised fall of 1.2% in March. The reading was slightly higher than market consensus of 0.3%. On an annual basis, retail sales volumes fell 3.0% in April, compared to a downwardly revised fall of 3.9% in March. Market consensus had expected a 2.8% fall in April, while March was initially reported as a 3.1% decline.

Labour to bar employers from hiring foreign workers below market rate
Labour has announced plans to bar employers from hiring foreign workers below the market rate for pay. The party aims to scrap rules that allow companies to pay foreign workers to do jobs on the shortage occupations list at 20% less than the going rate. The move is designed to force businesses to train more UK staff and boost skills to end firms’ reliance on overseas workers. The proposal mirrors a similar one by Suella Braverman, the Home Secretary, to raise salary thresholds for foreign skilled workers to force employers to train British staff to plug workforce gaps. However, an Ipsos poll of 1,000 adults found that Labour is now more trusted than the Conservatives on immigration, asylum, and its proposals to tackle the small boats crisis.

Millions paid benefits without ever having to find a job
The number of people being paid jobless benefits who are exempt from looking for a job has risen by half since the pandemic, with Around 3.7m of the 5.2m people currently claiming out of work benefits not required to attend work-related interviews or training because they have been assessed as being too ill for work. Their benefits cost the taxpayer between £22.5bn and £26.5bn every year, according to the Centre for Social Justice. The former Tory leader Sir Iain Duncan-Smith, who co-founded the body, said: “There is no reason why many of these people on these benefits should not be in work. We’ve got a real problem.”

Mortgage rates increased after gilt yields rise on inflation data
Higher-than-expected UK inflation data pushed up gilt yields on Thursday, prompting lenders to hike rates on new mortgages. Markets were spooked by unexpectedly strong inflation data on Wednesday showing that prices rose by 8.7% last month, significantly more than the Bank of England’s expectations of an 8.4% increase. Britain’s borrowing costs are now the highest in the G7 for the first time since 2007, with the yield on ten-year debt up by almost 0.2 percentage points to 4.37%, putting it above Italy’s rate of 4.35%. Britain’s inflation rate is also the highest in the G7 and traders now expect interest rates to rise to 5.5% by the end of the year, up from 4.5% currently. Lloyds, Virgin Money and Halifax all announced small mortgage rate rises on Thursday, as did Nationwide Building Society. Gary Greenwood, a banking analyst at Shore Capital, said: “Other banks will need to follow suit if swap rates stay at their new level, which will push up the cost of borrowing for homeowners that have mortgages and so squeeze household finance.”

Ministers look at reshaping pensions lifeboat fund to give boost to business
The City minister has urged pension funds to embrace a “culture of risk-taking” amid fears that a reluctance to put money in the stock market is holding the economy back. Andrew Griffith spoke with the Telegraph about Treasury plans to bolster returns for savers using the industry lifeboat, the Pension Protection Fund (PPF), which currently protects people in retirement schemes when their employer goes bust. Jeremy Hunt, the Chancellor, is understood to be considering plans to hand control of underperforming schemes to the PPF which would then subsume the assets into a new superfund that can invest in a broader range of UK high growth assets.

Treaty would give WHO power over UK health policy
Conservative MPs are urging ministers to block a new “pandemic treaty” that would hand the World Health Organisation (WHO) sweeping new powers over the health policies of nation states. A draft update to the WHO’s International Health Regulations would see sovereign countries obliged to abide by a new Pandemic Preparedness Treaty, which would mean following the agency’s instructions when responding to pandemics, including by introducing vaccine passports, border closures and quarantine measures. Among the amendments to the regulations are changes to make the WHO’s advice “binding” and introduce a new requirement for countries to recognise it as the global authority on public health measures. Six conservative MPs led by Esther McVey, the former Cabinet minister, have written to Andrew Mitchell, a Foreign Office minister, to call for a Commons vote on the draft treaty and regulations before they are signed.

BP and M&S to vote on CBI future
Scores of blue-chip companies, including BP and Marks & Spencer, will be allowed to vote on the future of the CBI at an extraordinary general meeting (EGM) next month. The poll will be conducted on a ‘one member, one vote’ basis, regardless of a company’s size or subscription fee. The group’s director-general, Tony Danker, was sacked last month amid allegations of personal misconduct. His successor, Rain Newton-Smith, has vowed to lead the CBI’s rebirth, and has said it is likely to involve changing the group’s name. The scandal has also ensnared the CBI’s former president, John Allan, who acknowledged making an inappropriate comment to a colleague, and has since stepped down early as chair of Tesco and Barratt Developments amid allegations about his behaviour.

Counterfeit clothing boss sentenced for fraud worth more than £150m
Two Dubai nationals have been sentenced to a combined total of 31 years in jail after masterminding a £150m fraud. Sock manufacturer Arif Patel was sentenced in his absence to 20 years behind bars, while co-accused Mohamed Jaffar Ali was also sentenced in his absence to 11 years in jail. A joint probe by HMRC and Lancashire Police found Arif Patel, formerly of Preston, and his criminal gang tried to steal £97m through VAT repayment claims on false exports of textiles and mobile phones. They also imported and sold counterfeit clothes that would have been worth at least £50m, had they been genuine.

Nvidia

The chip-makers shares soared  24% yesterday as investors backed the maker of the the GPU chips essential to generative AI. The surge toook the value of the company to $939 billion, the biggest one day value rise for a US company. The company has forecast sales of $11 billion in Q2.

US Debt Ceiling

The Republicans and Democrats, are reportedly close to reaching an agreement to raise the US Governments debt ceiling. The reported proposal being considered would cap government spending on most items and raise the debt ceiling for two years. Any deal will need to pass the House and the Senate.

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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.