Business news 28 October 2022
James Salmon, Operations Director.
Global Insolvencies on the rise. Many small firms unable to trade with EU. Sunak explores tax rises and spending cuts of up to £50bn. Cop out! UK car production goes into reverse. And more business news.
Global Insolvencies on the rise
Allianz research say that the rebound in global business insolvencies is already a reality with global business insolvencies set to rise 10% in 2022 and they predict to rise a further 19% in 2023. Taking insolvencies past pre-pandemic levels.
Many small firms unable to trade with EU
A survey by the British Chambers of Commerce reveals that one in five small UK exporters are unable to trade with the EU because of barriers created by Brexit. The organisation It is calling for the Government to act to cut customs delays and reduce other barriers to trade, and to make it easier to recruit much-needed workers.
Sunak explores tax rises and spending cuts of up to £50bn
Sources have told the FT that Rishi Sunak and Jeremy Hunt are considering tax hikes and public spending cuts worth up to £50bn a year in an attempt to fill the hole in the public finances. The £50bn figure is an increase on Treasury calculations of a fiscal hole of between £30bn and £40bn because attempts to fill it will worsen the economic outlook and consequently hit future tax revenues. The Chancellor is reportedly looking at hiking the windfall tax on oil and gas companies and extending the period over which it is paid. Meanwhile, Tory chairman Nadhim Zahawi intimated that the pension triple lock would remain in place because pensioners were “uniquely vulnerable” and the Prime Minister and the Chancellor “will be very, very conscious of that fact.”
Cop out!
The PM’scommitment to fighting global warming has been questioned after he demoted two climate ministers and announced he would not attend the annual United Nations climate change summit next month.
Markets
US markets ended yesterday’s trading on a mixed footing. This was due to disappointing earnings reports from some of the larger US technology companies, however other components of the US markets were able to deliver some more positive results. The DOW rose 0.61%, the S&P 500 dropped -0.61% and the NASDAQ dropped -1.63%. Apple beat estimates but warned of a Q4 slowdown. Amazon also predicted slow Q4 growth despite posting 15$% year on year growth in the last quarter.
The US annouced GDP rose 2.6% in the third quarter and had a drop in imports and rise in exports.
Natwest
NatWest reported flat quarterly profits this morning, this was following a busy week of UK banks reporting. NatWest posted a pre-tax profit of £1.1, slightly below £1.2bn that was predicted for its third quarter. Due to a worsening economic outlook, the bank set aside £247m for potential losses from bad loans. Its chief executive Alison Rose stated that the bank has not yet seen an increase of financial distress from its customer base, but was continuously monitoring the situation. They still expect to hit its return on equity target of 14-16% in 2023.
Twitter
Elon Musk has completed his $44bn purchase, arriving at twitter offices carrying a kitchen sink. He immediately removed the CEO, CFO and general counsel, took the CEO role himself and brought in Tesla engineers to check the code.
UK car production goes into reverse
Figures from the Society of Motor Manufacturers and Traders show car production in the UK fell in September for the first time in five months. Just 63,125 units were made in British vehicle factories last month – nearly half the levels seen in 2019, before the pandemic hit. SMMT Chief Executive Mike Hawes said: “Billions of pounds and thousands of jobs are dependent on the automotive sector and, increasingly, on electrified vehicle production.” He went on to call on the Government to work together with industry to create a competitive business environment for UK automotive manufacturing.
Stop the Squeeze calls for wealthiest to ‘pay proper share’ of tax
Pressure is building on politicians to support higher taxes on wealth, amid growing fears over the impact that a renewed austerity drive would have amid the cost of living crisis. A new coalition of 40 charities and campaign groups – including Oxfam, Save the Children and Christians Against Poverty – said Britain’s tax system was broken and those who paid the most should “pay their proper share”. The Stop the Squeeze campaign warned deep cuts to public spending would deepen poverty as soaring gas and electricity bills and the rising cost of a weekly shop leave households facing the biggest collapse in their living standards for 60 years.
HMRC defends commitment to tackling tax avoidance
HMRC has defended its work to tackle tax avoidance following a report from MPs calling for tougher action on tax avoidance enablers. A joint report from the All-Party Parliamentary Group for Anti-Corruption & Responsible Tax and TaxWatch recommended HMRC change its approach to enforcement by using existing criminal law to prosecute the advisers behind the most aggressive tax avoidance schemes. A spokesman stressed that HMRC was using all the powers at its disposal to tackle those who promote and enable tax avoidance schemes. They added: “That includes our standard tax powers, and specialist powers targeted at those involved in tax avoidance, all the way through to investigation with a view to criminal prosecution where appropriate.”
Shell prepared for windfall taxes following bumper profits
Ben van Buerden, chief executive of Shell, has conceded that there may be a case for a windfall tax on oil and gas companies to help fill a £35bn black hole in the public finances. He added: “The reality with the prices that we are seeing today is that many, many people in society, particularly the most vulnerable, are suffering very badly.” His comments came as the company revealed high oil and gas prices helped its global profits to more than double to $9.5bn in the third quarter. The result is Shell’s second-highest quarterly profit ever and it plans to reward investors by buying back $4bn of its own shares over the next three months and raising its dividend by 15% from the fourth quarter. It was also shown that Shell paid no tax on its UK North Sea operations in the third quarter as a result of “significant investments” that have reduced its taxable profits. CFO Sinead Gorman said: “We simply are investing more heavily than we have and therefore we don’t have profits which we can be taxed against.”
Industry furious at Sunak’s fracking ban
The UK’s leading onshore energy body has blasted Rishi Sunak’s move to re-impose the ban on fracking – just weeks after it was lifted by Liz Truss. Charles McAllister, director of policy for UK Onshore Oil and Gas (UKOOG), said: “If this is true then we are stunned that such an illogical U-turn would be taken by the Government in the middle of an energy crisis, at the expense of UK households and businesses. If reports are accurate, then a decision has been made to lock the UK into reliance on imported gas for decades. The geopolitical, environmental and economic consequences of such a decision will last far beyond the two years remaining of this parliament.” Mr Sunak previously expressed his support for fracking provided local communities supported it during the previous leadership campaign this summer.
Young workers see class background as barrier to success
A poll of 1,000 workers by BDO reveals a third of young people from lower socio-economic backgrounds continue to see class as a barrier to success. They believe a lack of networks in their chosen fields could have a negative effect on their careers, the research found. “These findings reveal a stark reality that many young people still feel that factors linking to their upbringing and socio-economic background are having an impact on their long-term career prospects,” BDO partner Sarah Hillary said.
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