Business news 27 September 2022
James Salmon, Operations Director.
Small business owners feel they have “nobody to confide in”. UK SMEs brace for steep rise in redundancies . Markets remain jittery despite statements from Bank and Treasury.UK mortgage lenders pause new lending and more business news.
Small business owners feel they have “nobody to confide in”
Nearly half of small business owners feel they have “nobody to confide in” about their problems and the stress they are under, according to research commissioned by AXA UK and Ireland. A poll of 500 SME owners found 48% found it hard to know who they can talk to about the stress they feel, with two-thirds not wanting to worry their family and friends. As a result of this, 44% feel they are unable to do the best possible job both for themselves and their staff. The top causes of stress for SME owners include the cost-of-living crisis (45%), finding new customers (37%), and inflation (35%). Claudio Gienal, chief executive officer for AXA UK and Ireland said: “It can be a very lonely place being an SME owner, which is why it is so important to ensure you can confide in someone who can relate to how you feel.”
UK SMEs brace for steep rise in redundancies
New research from Citation has found SMEs are starting to brace for widespread redundancies as inflation continues to surge and worries around an incoming recession grow. The employment expert, which specialises in SME advice, saw a 184% increase from June to July* in the number of inbound queries from employers looking for advice around redundancies. Gill McAteer, director of employment law at Citation, said: “These are very challenging times for businesses, with inflation of goods and services, including the energy crisis and economic uncertainty causing worries for firms of all sizes, but in particular SMEs.”
Markets remain jittery despite statements from Bank and Treasury
The Treasury and the Bank of England put out coordinated messages on Monday in an attempt to calm markets panicked by a sharp fall in the pound following the Government’s decision to fund £45bn of tax cuts through increased borrowing. The Treasury said Kwasi Kwarteng will announce a package of supply side reforms next month as part of a “medium-term fiscal plan” which would include “changes to the planning system, business regulations, childcare, immigration, agricultural productivity, and digital infrastructure”, as well as post-Brexit changes to financial services regulation. Details will also be provided on the Government’s fiscal rules and a clear plan to reduce government debt. BoE governor Andrew Bailey said the MPC will not hesitate to change interest rates by as much as needed to get inflation under control. Markets were looking for an emergency rate rise but Bailey said the MPC would not act until its next planned meeting in November, sending the pound down again after a slight recovery on Monday’s morning’s record low. Economists are now forecasting that rates will rise from 2.25% at present to as much as 6% next year.
Currency traders are betting the UK’s pound will slide to a level that was virtually unthinkable only recently, parity with the dollar or even lower. Options trades show extremely bearish sentiment to the pound.
US markets slid deeper into losses on Monday to their lowest level for the year, with the major indices closing lower as investors fretted that the Federal Reserve’s aggressive campaign against inflation could throw the US economy into a sharp downturn. Overnight, the DOW dropped -1.11%, the S&P 500 dropped -1.03% and the NASDAQ dropped -0.60%.
Goldman Sachs downgraded equities to underweight in its global allocation for the next quarter and overweight cash, saying rising real yields and the prospect of a recession suggest the stock market rout has further to go.
UK mortgage lenders pause new lending
A slew of banks and building societies have stopped offering new home loans as lenders rush to reprice mortgages following a steep rise in UK gilt yields. The Chancellor’s mini-Budget sent the pound down sharply and it hit a new record low of $1.035 against the dollar after Kwasi Kwarteng pledged further tax cuts at the weekend. The Bank of England has pledged to step in but has so far ruled out an emergency rate rise, sticking instead with its scheduled November 3rd review. Halifax, Virgin Money and Skipton Building Society said that they would withdraw fixed-rate deals for new customers amid higher funding costs and concerns that they would be swamped by desperate borrowers. Markets are now predicting that interest rates could more than double by next spring to 5.8% from their current 2.25%, to curb high inflation.
Labour will revive plans to raise corporation tax
Shadow chancellor Rachel Reeves said on Monday that Labour would reverse Liz Truss’s move to cancel a planned rise in corporation tax to 25% from its current 19%. Speaking at the party’s conference in Liverpool, she said the decision to scrap the rise as “wrong” and that it would not boost investment as promised. The shadow chancellor also said the 45p top bracket of tax would be reintroduced and used to pay for an extra 10,000 nursing and midwifery placements. Referring to Liz Truss and Kwasi Kwarteng as “desperate gamblers in a casino” Ms Reeves said: “They’ve lost credibility, they’re losing confidence, they’re out of control,” she said, adding to cheers that Labour was now the party of economic competence.
Tory chairman says tax cut critics “don’t believe in Britain”
Jake Berry, the new chairman of the Conservative Party, told the Express in an interview that those attacking Liz Truss’s tax cutting vision are the same people who attacked Brexit. Speaking at CCHQ yesterday, he said: “If I am really honest with you and I think about the collective voices which we have heard doubting the fact that Britain can go for growth, I mean it really is the same people who opposed Brexit.” Berry continued: “Those same voices, in fact in many cases the exact same people, who have gone from being experts on European law to experts in the financial market overnight, saying we can’t do this.” He added: “The message I would clearly give is that they were wrong about Brexit and they are wrong about this government’s ambition to grow this economy.”
Writing in the Telegraph, John Longworth says Liz Truss has a mighty challenge ahead of her to finally drag Britain into some semblance of post-Brexit success in time for the next election. A radical agenda will need to be pursued, he says, and failure will leave Britain at the mercy of the fifth column in the UK agitating to re-join the failing EU project.
Biffa
Biffa backed a £1.3 billion takeover from Energy Capital Partners. ECP will pay 410p cash for each share in the waste management firm, a 27% premium to its closing price on Monday. “ECP is an experienced investor in environmental infrastructure and sustainability assets and offers a supportive environment to accelerate the group’s further development and growth as a leading enabler of the circular economy,” Biffa Chair Ken Lever said.
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