Business news 27 January 2023
James Salmon, Operations Director.
Hunt calls for ‘disciplined’ approach. Retail sales volumes slide. Haldane warns of rising mortgage costs. BT, Britishvolt, divorcing staff, foreign student workers and more business news.
Hunt calls for ‘disciplined’ approach
Chancellor Jeremy Hunt says the Government must maintain its “disciplined approach” to the public finances as it looks to bring down inflation. A Number 10 report on a Cabinet meeting at Chequers details that Mr Hunt and Prime Minister Rishi Sunak said inflation was only predicted to fall because of the “tough decisions” taken in the Autumn Statement. The Chancellor said it would be necessary to “retain this disciplined approach in order to reduce inflation, because it is the greatest driver of the cost of living.” This comes amid calls from some Conservative MPs who have urged the Chancellor to cut taxes in his Budget in March.
Jeremy Hunt will set out his plan to boost growth later today, amid criticism over the government’s strategy for the economy. In his speech in central London, Mr Hunt will outline the opportunities in what he called “the growth sectors which will define this century”. He will also pledge to build on “the freedoms which Brexit provides”.
Retail sales volumes slide
Retail sales volumes have fallen at the fastest rate since April 2022. The Confederation of British Industry’s (CBI) sales balance, which polled 59 retailers between December 22 and January 13, fell to -23 from +11 in December’s report, meaning more store chains reported a drop in retail sales than a rise. CBI economist Martin Sartorius commented: “Retailers began the new year with a return to falling sales volumes, as the sector continues to face the twin headwinds of rising costs and squeezed household incomes.”
Haldane warns of rising mortgage costs
Former Bank of England chief economist Andy Haldane has warned of “more pain to come” from rising mortgage costs, while also predicting that real wages will fall again this year due to high inflation. With the Bank forecast to hike its main interest rate from 3.5% to 4% next week as it looks to cool inflation, Mr Haldane said: “It is painful and I fear there is more pain to come as those mortgage rate rises from last year begin to hit people’s bank accounts over this year.” Mr Haldane told BBC Radio 4’s Today programme that households and businesses have faced a “terrible double whammy” of the pandemic and the cost-of-living crisis. He said there has been a “lost decade and a half in terms of pay rises in inflation-adjusted terms,” going on to say that 2022 saw real pay fall “and we are most likely to see that same happen again.” This, he added, “is putting acute financial stress and indeed mental stress on a great many households.”
Covid Write offs
The government have written off almost £15 billion spent on PPE, drugs and coronavirus testing equipment during the pandemic that will now never be used according to the latest accounts for the Department of Health and Social Care (DHSC). The figures show that in the past year the government has discounted £3.5 billion spent on PPE, vaccines and medication that it made commitments to purchase but no longer expects to use. A further £2.5 billion has been written off on £11.2 billion of equipment.
BT
BT is to recruit more than 400 apprentices and graduates later this year, the telecoms firm has announced. The September intake will include positions in engineering, customer service, applied research, and cyber-security to support the UK’s fast-growing digital sectors and the company’s plans to build and extend its 5G network around the UK
Britishvolt collapsed owing £120m
Battery start-up Britishvolt owed as much as £120m to creditors when it collapsed last week, with sources saying creditors are only expected to recover a very small proportion of the debts. There are understood to be several bids for the company and its assets, with EY handling the administration.
Divorcing staff to be given time off
A number of big employers are backing a scheme that gives time off to parents who are splitting up. Under the Positive Parenting Alliance’s scheme, employers will amend human resources policies so a separation is given similar status to a family death or serious illness. Participating employers, including PwC, will provide leave or flexible working as well as access to support services, such as counselling. A poll of 200 workers by the alliance saw 90% say their work was adversely affected when they divorced, while 95% reported that their mental health at work also suffered. Around three-quarters felt they were less efficient at work, while about 40% had taken time off as a result of their separation. Sir Andrew McFarlane, president of the family division of the High Court, says he hopes that other employers, including the civil service and NHS, will adopt the scheme.
PM plots rethink on foreign student working hours
Foreign students could be allowed to work longer hours under plans to boost the economy, with ministers looking at ways to encourage students to take more part-time jobs to tackle shortages in certain sectors. While Britain’s 680,000 overseas students are limited to 20 hours of paid work a week during term time so as to prevent student visas from being used as backdoor routes to UK jobs, officials are contemplating raising the cap to 30 hours or removing it entirely. The plan comes at a time when there are 1.3m vacancies, almost half a million more than before the pandemic. Work and Pensions Secretary Mel Stride is leading a review that will assess ways of tempting some of the UK’s 9m economically inactive people back to work and encouraging those already in employment to do more hours. Students could be targeted to fill vacancies in hospitality and retail, with such roles often taken by those working their way through college or university.
Dealmaking dips to a five-year low
Mergers and acquisitions involving Europe’s leading banks fell to their lowest level in five years last year, according to S&P Global Market Intelligence. Just 103 deals were closed involving banks in Europe in 2022, down from 123 in 2021 and well below the pre-pandemic total of 224 recorded in 2019. The decline came as monetary policymakers increased rates in a bid to ease soaring inflation, reducing access to the cheap cash that had driven dealmaking. Despite the decline, bankers have predicted a rebound in activity this year. Analysts at Peel Hunt forecast that the number of smaller deals will increase as firms finance their own deals without the need to borrow. PwC’s head of deals, Lucy Stapleton, says a combination of stabilising interest rates and “increased certainty” could kickstart a surge in M&A activity as private equity funds seek to deploy their stores of dry powder. Tim Allen, a partner at PwC, added that there “is still an appetite in the market for deals in financial services, energy transition and where technology is involved, as companies are keen to increase their digital capabilities.”
US GDP
The US Economy finished 2022 in solid shape even as questions persist over whether growth will turn negative in the year ahead. Data showed the US economy grew at an annual rate of 2.9% in the fourth quarter of 2022, stronger than the consensus forecast for 2.8%, but slower than the 3.2% growth posted in the third quarter.
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