Business news 27 October 2021
James Salmon, Operations Director.
Sunak to usher in a new post-Covid economy. Global warming. Plan B would harm economy while doing little to thwart virus . And more business news.
Sunak to usher in a new post-Covid economy
Today’s U.K. budget will be presented against a backdrop of soaring inflation and expectations of higher interest rates. That makes it highly likely that a cautious message will be delivered.
The Chancellor will set forth plans in his Budget to prepare the UK for a “new economy post-Covid”. Rishi Sunak will outline a vision for “an economy fit for a new age of optimism”, with the Chancellor prioritising Boris Johnson’s “green industrial revolution” while returning to some sort of fiscal discipline.
The Budget comes as new figures show GDP is set to grow by around 7% this year while borrowing has come in lower than predicted. Rishi Sunak is however likely to pocket most of the extra proceeds from a record rebound in Britain’s economic growth as he delivers his annual budget.
Meanwhile, the Speaker of the House of Commons, Sir Lindsay Hoyle has chastised ministers for giving briefings on an unprecedented number of spending plans to the media before they are announced in Parliament. Plans for spending on city regions, the minimum wage, the NHS, schools and training have already been announced.
Ahead of the Chancellor’s speech, Labour’s shadow chancellor Rachel Reeves issued a call to the government to create “a more resilient economy and take the pressure off working people”.
Global warming
Ahead of COP26, a UN climate summit that starts on Sunday, the UN environment programme said that under current national climate pledges, the world was on track for global temperatures of 2.7°C this century. That is well above the Paris climate agreement goal of within 2°C of pre-industrial levels
Construction stalls as UK shortage of skilled workers bites
The construction industry is suffering from a severe skills shortage with wages rising as materials costs soar, putting home building targets out of reach without visa changes and a huge training push.
Plan B would harm economy while doing little to thwart virus
The U.K. reported its highest daily death toll from coronavirus since the beginning of March, adding to fears that tighter restrictions might be needed this winter. Steadily increasing hospitalization and death rates have put pressure on the government to enact its “Plan B,” which could include mandatory face coverings and a recommendation to work from home.
However, the economy would be knocked back to the tune of £18bn if Plan B covid-19 restrictions were to be put in place, leaked government analysis shows.
The internal assessment concluded that fresh restrictions would have a severe economic impact while doing little to impact the spread of the virus. Vaccine passports for large venues may reduce transmission at nightclubs, gigs and festivals, but only between 2% and 13% of overall transmission of the virus took place in those spaces. So overall, vaccine passports would only reduce transmission of the virus in the community by 1% to 5%, the assessment found. Working from home would not do enough to reduce infection rates, it concluded, but issuing such advice would have a significant impact on businesses in city centres.
Markets
US Markets climbed to record levels again yesterday as major corporations continued to turn in solid quarterly results. Both Alphabet and Microsoft reported better-than-expected results for the third quarter. A jump in digital advertising helped increase revenues at Alphabet by 41% year-over-year, to $65bn. Meanwhile, the shift to remote work boosted Microsoft, whose revenues rose by 22% year-over-year, to $45bn, driven by its cloud-computing segment. Overnight, DOW rose 0.04%. S&P 500 rose 0.18%. NASDAQ rose 0.06%
The Oil price fell on Wednesday after industry data showed crude oil stockpiles rose more than expected and fuel inventories unexpectedly increased last week in the United States, the world’s largest oil consumer. Gold also retreated from $1800 as a robust dollar and higher US bond yields dented bullion’s appeal while investors assessed how central banks would address rising inflation pressures.
House sales
The UK Housing Market is set to hit the highest level of sales since 2007, with 1.5m sales forecast for 2021. According to the Zoopla September House Price Index, combined market activity is set to amount to £473bn in transaction values this year. This is a £95bn hike on 2020. House price growth is currently at 2.3% in London, below the UK average of 6.6%.
Wickes
Wickes said Q3 sales fell 1.6% year-on-year but stuck to its full-year profit guidance. Sales for the three months through Sept were expected to moderate as the company annualised tough 2020 comparatives. Compared to the same period in 2019, sales were up 16%.
Santander
Santander posted a large rise in year-to-date profit as interest margins and credit quality both improved. Pre-tax profit from continuing operations for the nine months through Sept jumped to $1.44 billion, up from £299 million year-on-year. Adjusted banking net interest margin rose 32 basis points to 1.91%, while the company also booked a £170 million gain from credit impairment write-backs, largely related to the UK economic recovery.
Tax is perceived as more unfair than ever
Matthew Smith, the head of data journalism at YouGov, explains in a piece for the Times how the public deems tax more unfair than ever before. Among 11 types of taxes, Britons are most likely to brand the BBC licence fee as unfair, at 57%, up from 51% in 2015. Only a fifth now say it’s fair, compared with 30% previously. Council tax is next, followed by inheritance tax, with opinion towards the latter having softened over the past few years. Finally, perceived fairness of national insurance as a form of tax has plummeted while public opinion on climate-friendly taxes has improved significantly.
Millionaires call on Rishi Sunak to tax the rich more
The Metro picks up on news that a group of British millionaires have called on the Chancellor to tax the wealthy more, arguing that the cost of recovery cannot fall on the young or on those with lower incomes. The more than 30 wealthy individuals, called the ‘Proud to Pay’ group, wrote to Rishi Sunak saying: “We understand the immense pressure on the Treasury to deal with crises both present and future – from inequality, to Covid, to climate change. We know there will be high expectations for you to find the money needed. We know where you can find that money – tax wealth holders like us.” One of the signatories, technology entrepreneur Gemma McGough, said: “If we endlessly tax working people and never tax where the big money is being made, our country will continue to suffer. Any business-minded person will tell you it makes good economic sense to balance your books. Where is the balance when wealth gets stockpiled by a small group of very rich people and the cost of the country falls to those on lower and middle incomes?”
Labour-controlled Slough council taken over after failed property bets
Ministers have taken over Slough council after the Labour leadership gambled £100m on property deals. Councils spent around £6.6bn of taxpayers’ money buying commercial property in the three years to 2018-19, according to the Public Accounts Committee. Slough’s problems have led to concern that more local authorities could be on the verge of bankruptcy. Rob Whiteman, chief executive of the Chartered Institute of Public Finance and Accountancy that carried out a review of Slough’s finances for the Government, said: “If we do see any more councils in that position. I think it’s going to be a handful rather than a significant number. The decision of the Secretary of State to intervene is really a culmination of several years of mismanagement rather than Covid. Covid may have accelerated their position.”
Top financial decisions of investment advisers
The Independent asks investment experts to reveal the choices that have most improved their personal circumstances. Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown says buying a flat when she was in her twenties was the most lucrative decision she’s made. “It doubled in value over the next five years,” she says. Elsewhere, Jason Hollands, managing director of corporate affairs at wealth manager Tilney Smith & Williamson, insists one of his best decisions was maximising his pension allowances in his thirties – before children and their associated costs came along. “It seemed a bit too boring and sensible at the time compared to buying a new car or designer clothes, but I don’t regret it,” he says. Finally, Danni Hewson, financial analyst at AJ Bell, believes opening a joint account with her husband to cover their main household expenses was a masterstroke.
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