Business news 28 July 2022
James Salmon, Operations Director.
Wholesale gas prices hit record highs as Moscow trims supply. Supply disruption and Brexit stalls growth in exports. World’s superpowers risk stumbling into nuclear war. Fed raises rates by 0.75 points for second month in a row. Lloyds reveals impact of soaring inflation on customers. Second Jobs. And more business news.
Wholesale gas prices hit record highs as Moscow trims supply
The UK’s energy price cap could rise to an average of £3,840 in January, analysts have warned, after Russia further curbed gas supplies to Europe. The move sent wholesale prices for this winter soaring to all-time highs and means a typical household faces paying £500 for its energy in January alone. The latest forecast from consultants BFY is likely to put more pressure on the Government to increase support for consumers.
Supplies through the Nord Stream pipeline fell to just 20% of capacity today. Kremlin insiders are privately admitting that the cuts are to pressure the West over sanctions. The EU is trying to reduce dependence on Russian Gas and announced agreed voluntary 15% cuts in usage. While the UK is far less dependent on Russian Gas (4% of input) we are affected by wholesale changes in price and the Europeans bidding for Norwegian and other gas supplies, pumps up the price we pay. Rishi Sunak announced today he would scrap VAT on domestic energy bills if he becomes PM – prompting calls that he had performed a U Turn on tax.
Supply disruption and Brexit stalls growth in exports
A survey by the British Chambers of Commerce has found the proportion of UK companies reporting a rise in their exports has remained flat at 29% for the fifth consecutive quarter. A quarter of exporters recorded a fall in sales in the second quarter while 46% saw no change compared with the start of the year. Manufacturers trading overseas are the worst affected, with only 39% expecting a rise in profits in the next year compared with 48% of service sector exporters. Companies trading within the UK saw more positive results, with 40% having a rise in sales in the period. William Bain, head of trade policy at the BCC, said supply chain disruption, soaring prices, and the impact of Brexit red tape were having a chilling effect on exports. “Recent ONS figures have shown an increase in exports to the EU, driven in part by shortages caused by the war in Ukraine,” he said. “But our data shows there are serious underlying issues – which are hitting smaller manufacturing exporters the hardest.”
World’s superpowers risk stumbling into nuclear war
The Times and the Telegraph report on a warning from Sir Stephen Lovegrove, the UK’s national security adviser, that the West risks stumbling into a nuclear conflict with China or Russia because backdoor channels between rival powers have collapsed. He said the world was entering a “dangerous new age of proliferation”, with threats from genetic weapons, space-based systems and lasers. “We should be honest – strategic stability is at risk,” Sir Stephen said in a speech at the Centre for Strategic and International Studies in Washington. “We need to start thinking about the new security order.”
Fed raises rates by 0.75 points for second month in a row
The Federal Reserve has raised interest rates by 0.75 percentage points for a second month in a row and vowed to lift borrowing costs even further despite rising concern that the US is already in a recession. The move lifts the target range on the Fed Funds Rate to 2.25% to 2.5% with markets expecting it to climb above 3% by the end of year. Fed chairman Jerome Powell said the rate-setters will likely decide to “slow the pace of increases” but did not rule out “another unusually large” jump in rates at its next meeting if needed.
The dollar weakened on the forward guidance of slower rate rises and cable is approaching $1.215 . Overnight, DOW rose 1.37%. S&P 500 rose 2.62%. NASDAQ rose 4.06%.
Lloyds reveals impact of soaring inflation on customers
A financial update from Lloyds Banking Group reveals how the bank’s customers are cutting back on spending as inflation soars. A fifth were having to adapt their spending “significantly” to rising prices, Lloyds’ chief executive Charlie Nunn, said, forcing them to refrain from purchases such as white goods and computers. Families are spending an average of £89 more a month on energy, food and fuel than they were before the pandemic, with many cancelling subscriptions to services such as Netflix to save money. About 1% of customers were “really struggling to make ends meet” Lloyds said.
Second jobs
Almost a third of UK workers plan to take on a second job to help pay the bills and cope with the harshest cost-of-living crisis in memory, according to new research by indeed flex.
BBB pumps £30m into early-stage venture fund
The British Business Bank has invested £30m into a new early-stage venture fund as it looks to fill a funding gap for small firms amid a major investment slowdown this year. The state-backed development bank said it had provided the cornerstone investment for a new £50m pre-seed fund, launched by Concept Ventures, targeting early-stage pre-seed firms. Managing Director of Venture Solutions at the British Business Bank Ken Cooper said the bank’s Enterprise Capital Funds were helping lower the “barriers to entry for emerging fund managers” and those “targeting under-served areas of the market”. Concept Ventures is currently courting other investors to the fund and said it was oversubscribed.
Crowe welcomes continued funding for Made Smarter programme
The Department for Business, Energy and Industrial Strategy has agreed to commit a further £2.3m to continue the Made Smarter programme for another three years. The scheme has already helped hundreds of SMEs digitise their work, improve employees’ skills and become more productive. The move was welcomed by the head of manufacturing at Crowe, Johnathan Dudley. The announcement was made by Andy Street, Mayor of the West Midlands, as he opened the British Manufacturing Showcase which was hosted by Crowe at its Midlands office.
Don’t strengthen the UK corporate governance code — abolish it
Brian Cheffins, professor of corporate law at Cambridge, says the Financial Reporting Council’s Corporate Governance Code should be ditched “in favour of concise, governance-related disclosure requirements for listed companies.”
Corporate insolvencies in Scotland surge
Corporate insolvencies in Scotland leapt by almost 50% in the three months to June compared with a year earlier, new figures show. Richard Bathgate, chair of insolvency and restructuring trade body R3 in Scotland and restructuring partner at Johnston Carmichael, said the increase “suggests that many company directors are making the decision to close their businesses rather than attempting to carry on trading in the current climate.”
HMRC clamps down on R&D tax relief fraud
A clampdown by HMRC on fraudulent claims for R&D tax relief will mean companies face a longer wait for their claims, experts have warned. Where payments used to be made in 30 days, earlier this month HMRC told tax advisers to prepare their clients to wait up to two months. Fraudulent claims increased to 4.9% of all claims by small companies in the year to April, at an estimated cost of £469m. This rate had risen from 3.6%, costing £336m, the year before. Heather Williams, a R&D relief specialist at Azets, warned that the resulting delays could hit small and medium-sized enterprises hard. “If they’ve planned for people’s salaries and that money is not coming in for 60 days, that could be critical.” Additionally, from April 1, 2023, HMRC will require companies registering for R&D relief for the first time to pre-notify their intention to claim no later than six months before their financial year-end. Williams said more businesses stand to lose out as a result of the change.
MPs call for menopause to be protected characteristic
MPs on the cross-party women and equalities committee have called for menopause to be a protected characteristic under the Equality Act. They are also urging ministers to appoint a special ambassador to keep women in the workplace after a report showed a lack of support for menopausal symptoms is pushing “highly skilled and experienced” women out of work. The women and equalities committee chair, Caroline Nokes MP, said: “Menopausal women have been mocked and maligned for too long. It is time that the government seizes the opportunity to enact change. It is time to support, and celebrate, these women.”
Barclays
Barclays saw a slump in second-quarter profit after taking a substantial provision relating to a costly trading error in the US. The bank reported a £1.071 billion net profit attributable to shareholders, meeting expectations of £1.085 billion expected by analysts, according to Refinitiv data. It marked a a 48% slump from the same period a year earlier. Barclays took litigation and conduct charges of £1.9 billion for the first half of the year, including a £1.3 billion cost related to what the bank calls the “over-issuance of securities” in the US.
Shell
Shell has posted massive profits of $11.5bn for the second quarter, smashing its previous record three months of trading earlier this year when it reported $9.2bn earnings. The company’s performance has been driven by soaring commodity prices in an increasingly turbulent economic environment. The London-listed company has now announced a share buyback programme of $6bn, expected to be completed by the third quarter results announcement later this year.
National Express
National Express saw its biggest revenue increase in over a decade, as consumers swap cars for public transport. Following a difficult post-pandemic first-half of 2021 which had a £24m operating loss after tax, the group swung into the black with a £15.8m profit up until June. It brought in £1.3bn in revenue, a 34 per cent increase on last year, and the highest in a decade as National Express secured 16 new contracts in the period
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.