Business news 28 April 2023
James Salmon, Operations Director.
Business confidence climbs. PwC expects Britain to avoid recession. Cost-of-living hike drives more 35 to 44-year-olds to borrow. Poll reveals cost concerns. And more business news.
Business confidence climbs
Business confidence has reached the highest level since May 2022, according to the latest monthly sentiment index by Lloyds Bank. Confidence reached 33% in April, marking a slight increase from 32% recorded in March.
The survey of 1,200 businesses found that overall economic optimism rose by five points to 28%, which is also close to a one-year high. The increase follows an 11-point rise in March. The survey shows that 61% of businesses expect to increase their prices in the coming year, while 47% are looking to recruit. Pay growth has hit its highest level in seven months, with 27% of businesses expecting to increase wages by at least 3%.
Paul Gordon, managing director of relationship management, business and commercial banking at Lloyds, said: “It is great to see business confidence continuing to increase, hitting a near one-year high.”
PwC expects Britain to avoid recession
PwC has joined the Bank of England and Office for Budget Responsibility in forecasting that Britain will avoid a recession this year. PwC estimates that the UK economy will grow by 0.1% this year before returning to 1% growth by the end of 2024. It believes GDP will rise by 1.6% by the end of 2025. Barret Kupelian, senior economist at PwC, said: “Our analysis suggests the UK has very much passed through the eye of the inflationary storm compared with last year, and is showing signs of a return to some sort of normality this year.” With PwC predicting that prices will be 20% higher at the end of 2024 than they were at the start of 2021, Mr Kupelian said: “What is important, as the immediate inflation pressures abate, is to look seriously at the structural issues facing UK productivity.”
Cost-of-living hike drives more 35 to 44-year-olds to borrow
A study by the Resolution Foundation think-tank almost two-fifths of 35 to 44-year-olds have had to borrow to make ends meet amid the cost-of-living crisis. The research found that 37% of people in the age bracket relied on formal lending, such as credit cards, overdrafts or loans in March. This was more than double the 16% of over-55s who did so. Across all age groups, the proportion was 26%. The poll also shows that a quarter of 25 to 34-year-olds received financial help from family or friends in the past year, compared to 13% of those 45-54 and 2% of over-65s.
The so-called Bank of Mum and Dad is providing financial support to 10.8m family members between 18 and 34, with more than one in five receiving financial help from family or friends in the three months to March. The Resolution Foundation found that 26% of people aged 65 to 75 gave financial support to family or friends in the year to March. The study shows that three quarters of adults have had cut back on the amount they spend because of high inflation.
Poll reveals cost concerns
Renters, single people and those aged 35-54 are particularly likely to have lost confidence in their ability to cover their housing costs. Research from HSBC and housing charity Shelter found that one in five people feel less confident than they did six months ago about being able to pay their rent or mortgage on time for the rest of the year. The survey of more than 2,100 adults across the UK shows that those in the 35 to 54 age bracket were the most likely to have lost confidence, with 28% feeling this way. Renters were also found to be particularly worried about making ends meet, with 65% saying they often worry about how they are going to cover all costs, compared with 38% of homeowners.
Car production accelerates in Q1
The number of cars made in the UK increased by 6% in Q1, hitting 219,887, according to Society of Motor Manufacturers and Traders figures. This was up 12,540 year-on-year. The report also shows that exports increased 6.6%. Around two thirds of exported cars went to the EU, with shipments increasing by 4.9%. Those to the next biggest markets, the US and China, fell by 4.1% and 8.3% respectively. The combined volume of hybrid, plug-in hybrid and battery electric vehicles rose by 75% in March, compared with a year earlier, hitting 32,546. Considering what lies ahead for the sector, Richard Peberdy of KPMG said: “Big questions still remain unanswered about how the UK will produce electric vehicles at much larger scale.”
CBI to be renamed as part of root and branch reform
New director-general Rain Newton-Smith says the Confederation of British Industry will be renamed as part of a “root and branch” reform of the scandal-hit lobby group, calling for a “refocused” organisation.
Brexit
Business and Trade Secretary Kemi Badenoch told a private meeting of Euroskeptic Conservative MPs on Monday that it would not be possible to fulfill it’s pledge to carry out a “bonfire” of legislation dating from Britain’s membership of the European Unionto remove the laws, some 4,000 pieces of legislation, by the end of this year, instead focusing on around 800 EU laws.
HMRC eyes reform of IR35 double-taxation
HMRC has launched a consultation to address a tax rule that causes freelancers to be overtaxed. Off-payroll working rules known as IR35 mean that contractors working through an intermediary must pay income tax and National Insurance contributions when it is deemed that they are working as an ordinary employee. If HMRC decides a contractor has a tax liability, then it does not take into account the tax the freelancer has already paid on that income. The worker is then overcharged and must claim the money back.
Susan Ball of RSM said IR35 rules have been “causing headaches for workers and hiring organisations for years now.” Any change would not come into force until April 2024 and Ms Ball has voiced concern that hiring firms would “drag their heels” with any HMRC compliance checks in the meantime. She said: “Typically, a case can take 18 to 21 months to conclude, and we may see organisations procrastinating over any HMRC compliance checks in the hope that they can take advantage of the new rules when they are introduced.”
Treasury plans tax crackdown on EOTs
The Treasury is set to crack down on entrepreneurs who give their companies to their employees. It will look into on employee ownership trusts (EOTs) amid claims they are being used for “unintended tax planning.” Under an EOT, those distributing the shares are exempt from the capital gains tax and the company can pay its employees bonuses without incurring income tax.
The Treasury said the consultation – which could see the tax benefits restricted or removed entirely – will aim to “ensure that the reliefs are targeted closely at incentivising EOTs as an employee ownership business model whilst preventing the reliefs from being used for unintended tax planning.”
Considering the aim of reform, Tim Stovold of Moore Kingston Smith said: “If an employee trust is put in a tax haven, or when the trust sells the business on, there’s no tax paid – and that wasn’t the intention.” He went on to warn that plans to restrict tax benefits could disincentivise business owners from using the EOT initiative, adding that some might rush into the scheme before tax laws are changed.
AstraZeneca chief warns over high tax Britain
Pascal Soriot, chief executive at drugmaker AstraZeneca, has warned that high taxes are making Britain “very unattractive” for businesses to invest and operate in. Urging ministers to consider ways of making Britain a better place to invest, he said: “We’re well aware of the challenges that exist, financial challenges, with inflation, with the cost of interest rates going up, the cost of the war, but at the end of the day, it’s important for any government to also keep their eye on the long term.”
US GDP
US GDP slowed more than expected during the first three months of the year as interest rate increases and inflation impacted an economy largely expected to slow even further. Gross domestic product rose at a 1.1% annualized pace in the first quarter, compared with an expected 2%, the Commerce Department reported Thursday.
Sainsburys
Sainsburys reported a drop in annual profit, after its said it has spent £560 million on keeping prices low for customers amid the cost of living crisis. The grocer reported that revenue in its financial year ended March 4 rose by 5.3% to £31.49 billion from £29.90 billion a year earlier. However, pretax profit fell by 62% to £327 million from £854 million.
Accounting the sweariest sector
A poll from research group Perspectus Global has found that more than half of staff believe swearing is acceptable in their workplace. Accountancy was found to be the sweariest profession, with 24% of staff in the sector admitting to regularly using swear words, followed by builders, bankers and doctors.
Strikes
A major union representing train drivers in the UK rejected an offer from rail operators. Meanwhile a court blocked half a coming nurses strike as their mandate to strike is expiring.
Gambling
TheGovernment set out a much-delayed overhaul of the rules governing the gambling industry, redressing the power between punters and operators with major curbs on online platforms to reduce problem gambling, setting limits on stakes per spin on slot games, setting affordability and spending checks.
Natwest
Natwest has beaten profit expectations during the first three months of this year. NatWest, which includes Royal Bank of Scotland and Ulster Bank, recorded a pretax profit of £1.8bn in the three months ending 31 March. The total comes in ahead of analysts’ expectations of £1.6bn for the quarter and ahead of the £1.2bn during the same period last year.
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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.