Business news 28 March 2022
James Salmon, Operations Director.
The Spring Statement offers some respite for small businesses. Insolvency firms can expect further growth. Hundreds of thousands leave workforce in ‘Great Lie-Down’. Social anxiety can make the return to office life traumatic. UK retail sales drop as shoppers hit by inflationary fears. And more business news.
The Spring Statement offers some respite for small businesses
Martin McTague, national chairman of the Federation of Small Businesses, wrote in the Metro on Saturday on how small businesses owners might benefit from the Spring Statement. The Chancellor did opt to adopt FSB’s top ask which was to increase the employer discount on National Insurance to £5,000. This will make maintaining headcount easier, McTague says. A cut to fuel duty will make deliveries more viable while the business rates discount will also continue into next year and beyond. Other positive news was the Chancellor’s pledge to create “a new culture of enterprise” and launch a tax plan that will lead to more radical reform at the autumn budget. McTague concludes by stating: “By working with, and listening to, the voice of small business…the Chancellor can turn his vision for an economy founded on entrepreneurialism into a reality.”
Insolvency firms can expect further growth
The Mail on Sunday recommended Begbies and FRP Advisory stock as more companies face financial pressures. Both insolvency practitioners are likely to benefit from the economic woes currently facing the country, particularly as the Government’s pandemic support schemes have now dried up. Brokers expect Begbies’ profits to surge 50% to £17.4m in the year to April 30 and the dividend should rise by nearly 7% to 3.2p. At FRP, analysts expect slightly more restrained growth – with profits up 6% to £22.4m in the year to April – but the dividend is also likely to rise by 7% to 4.4p.
Hundreds of thousands leave workforce in ‘Great Lie-Down’
Some 400,000 people have left the workforce since the pandemic began, according to the Office for Budget Responsibility, with many opting for early retirement, leaving the country or simply becoming economically inactive. The phenomenon has been dubbed the “Great Lie Down” and has been witnessed across the globe. James Reed, chairman of the Reed employment group, said people had reflected during the pandemic on changing their way of life. “A lot of those were over 50. That might have been a combination of health concerns or reprioritising lifestyle choices, such as family over work.” The Office for National Statistics estimates there were 1.3m job vacancies in January.
Social anxiety can make the return to office life traumatic
The BBC reports on how mental-health and anxiety problems exacerbated by the pandemic are making the return to office life more difficult for an increasing number of workers. Younger people, who are still building stable identities, are particularly badly affected and those who entered the workplace during the pandemic, who may have only experienced work via Zoom calls while working from home, can be disoriented by a full-time return to the physical office. HR experts say people with social anxiety tend to thrive in workplaces with flexible options, such as remote or hybrid set-ups and recount numerous reports of sufferers blossoming when working remotely – both in terms of wellbeing and job performance.
UK retail sales drop as shoppers hit by inflationary fears
British retail sales fell in February despite the amount spent by consumers rising. The figures highlight the effect of inflation squeezing household finances and raise concerns that surging inflation was stunting the UK’s economic recovery well before Russia invaded Ukraine. “Consumers face a rocky road ahead, with rises in the energy price cap and NI [national insurance] contributions both coming next week,” said Helen Dickinson, chief executive of the British Retail Consortium. “Retailers are in for a very tough spell,” Samuel Tombs, chief UK economist at Pantheon Macroeconomics, added. “Real household disposable income now looks set to drop by about 2.5% this year, comfortably the largest annual drop since records began in the late 1940s, due to both high inflation and government policies.”
Poorest hardest hit by inflation
A report from EY Item Club reveals that the fifth of households on the lowest incomes will be hit the hardest by rising inflation – suffering a 9.6% rise in living costs compared with an average of 8.6% for the richest fifth of households. EY Item Club economists say inflation will peak next month at 8.5%, up from its February forecast of 7.2%. The Office for Budget Responsibility, however, forecast a later peak of 8.7% in October when another big rise in energy bills is expected to push up household bills. Growth will slow to 4.2% this year, down from the 4.9% previously expected, EY Item Club forecasters said. The OBR’s forecasts for growth this year have been revised down to 3.8%, from 6% over concerns that high inflation would erode the value of earnings and suppress demand for goods and services.
Britain’s ‘FBI’ outgunned by kleptocrats
The UK’s National Crime Agency (NCA) is being outgunned in the fight against kleptocrats who use an army of “enabler” lawyers, accountants and estate agents, the Telegraph reports. A recent report by anti-graft charity Spotlight on Corruption warned the UK is “losing the fight against economic crime” and that agencies including the NCA were “under-resourced, over-stretched, and out-gunned”. Dr Sue Hawley, Spotlight’s executive director, adds: “The NCA do the best it can, but they are operating with their hands tied behind their back. Until they are properly funded, until they’re allowed to have salaries worthy of an elite economic crime agency, until they can pay for the best legal advice, they are always going to be hamstrung – because they’re up against the people with the deepest pockets.”
Companies to sponsor jobs for Ukraine refugees
Recruiters FDM and PageGroup are among a consortium of companies, including PwC, Portman Dental Group, that have signed up to a scheme that will sponsor hundreds of Ukrainian refugees seeking employment in the UK.
First-round bids for Footasylum due
Bids for Footasylum are due in this week with Mike Ashley’s Frasers Group, private equity firms and turnaround investors expected to make offers. JD Sports has been forced to offload the high street chain after an investigation by the Competition & Markets Authority. The sale process is being run by Deloitte. The Sunday Times notes that the CMA fined JD Sports and Footasylum a combined £4.7m in February after the watchdog found that the companies had shared commercially sensitive information, a breach of its rules.
Investors bet Ukraine war will prompt companies to bring production onshore
The FT reported yesterday on how investors including Blackrock’s Larry Fink and Oaktree Capital Management co-founder Howard Marks are recognising that the Ukraine crisis and the pandemic-induced supply chain disruption are signalling an end to globalisation, and a new era of re-shoring is nigh. Marks says how far the pendulum swings toward onshoring depends on whether “the need for dependability and security” defeats “the desire for cheap sourcing.”
Business investment could rise 20% with right relief
The Confederation of British Industry has predicted that business investment will soar 20% if the Chancellor opts to slash business taxes permanently following the end of the “super deduction” next year. The “super deduction” takes 130% of investment off taxable income. CBI director-general Tony Danker says allowing companies to write off 100% of their investments against tax straightaway…could see a 20% rise in business investment so that is I think the best prize.”
MPs cast doubt on HMRC’s ability to reduce tax debt
MPs on the Public Accounts Committee said on Saturday that HMRC should develop a plan to reduce the tax debt, which now stands at about £39bn, up from the pre-pandemic level of around £16bn. But the committee said it was “not confident” about how the tax authority will bring tax debt back down noting that HMRC is having to “strike a difficult balance” between actively pursuing those who can pay their tax debts but are choosing not to and supporting individuals and businesses struggling with the continuing impact of the pandemic. Dame Meg Hillier, chairwoman of the committee, said HMRC must “push much harder at the doors” of “high-wealth individuals and companies who take use every trick in the book to avoid and evade tax”.
Rishi Sunak branded ‘Mr Tax’ as backlash to Spring Statement grows
Labour has gone on the attack after Rishi Sunak’s Spring Statement accusing the Chancellor of deliberately putting people into poverty in order to serve a political agenda. Shadow work and pensions secretary Jon Ashworth dubbed Sunak “Mr Tax” and accused him of overseeing the biggest real-terms fall in the state pension for half a century. Analysis by the party indicates the decision to downgrade the triple lock amid soaring inflation will mean a £427 hit this year. Mr Ashworth told Sophy Ridge On Sunday on Sky News: “Rishi Sunak absolutely had more room for manoeuvre in this spring statement and mini budget, but rather than acting in the interests of the British people, he was playing games. He was acting in his own interest because he thinks by offering an income tax cut in two years that’ll help him politically with Conservative MPs if there’s a leadership contest or that’ll fit the Tory election grid. I don’t believe that putting 1.3m people into poverty because you’re imposing a very severe real-terms cut to universal credit, you’re imposing the biggest cut to the pension in 50 years, is fair.”
Alas poor Rishi, in charge of fixing the unfixable
As the Chancellor did the obligatory media rounds on Friday, he was forced to defend his Spring Statement and hit back at claims he was “gaslighting” the public with his assertion that he was cutting taxes. The Chancellor said what his team had done was “substantial” but the policy decisions wouldn’t be able to “mitigate all the difficulties that high inflation is causing.” He added: “No chancellor could do that.” His comments came as Tory backbenchers continued to express their frustration at the spiralling cost of living and taxes at the highest levels for 70 years while the Resolution Foundation pointed out that Mr Sunak’s policies will mean the average family will suffer a £1,100 real-terms hit in 2022-23, increasing to £3,200 for the top 10% of working-age households. Elsewhere, Merryn Somerset Webb sympathises with Rishi Sunak’s plight in the FT, saying for the most part his Spring Statement was not much help, but then, “If you know you can’t fix something, why try.”
UK dairy industry under “unsustainable” pressure
Rising costs are putting UK milk production in peril as Arla, Britain’s largest dairy co-operative, warns of “unsustainable” costs. Arla has increased its farmgate prices by 36% but many farmers are still not breaking even, prompting some to reduce production next year. Ash Amirahmadi, the managing director of Arla Foods UK, said supermarkets and restaurant chains would have to pay more to ensure farmers can keep the milk flowing.
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