Business news 29 June 2022
James Salmon, Operations Director.
Struggling small firms dismayed over call to cut prices. Chancellor rebuffs demands for cut to corporation tax. SMMT issues warning over high energy bills. And more business news.
Struggling small firms dismayed over call to cut prices
A campaign by David Buttress, the Government’s new cost of living tsar, asking businesses to cut prices to help with living costs has been branded a “slap in the face” for small firms. The Federation of Small Businesses said asking struggling companies to “soak up additional costs just isn’t realistic”. Martin McTague, national chair of the FSB, said most small firms were “well beyond the point of being able to absorb extra costs without passing them on, which is often a last resort”. “It’s a slap in the face for government to spend the extra tax it is raising from businesses on state-run marketing campaigns – doubtless focused on big businesses with corporate offers that can now be rebranded as helping the cost of living crisis, and so boost their sales,” he told the BBC.
Chancellor rebuffs demands for cut to corporation tax
A scheduled rise in Corporation Tax in the autumn Budget will go ahead, the Chancellor has said, resisting a call from Tory backbenchers and reportedly Boris Johnson too for the increase to be scrapped. The levy is set to rise from 19% to 25% next year. But Rishi Sunak is looking to use some of the money raised to create a major new tax incentive to drive investment into the UK. Meanwhile, Jacob Rees-Mogg has said cutting taxes immediately may reduce inflation. The Brexit Opportunities Minister cited President Reagan’s move to cut taxes in a high interest rate environment in order to bring public expenditure under control – because it was unaffordable. The increased tax take and boost to the economy the tax cuts brought soon meant the budget deficit in the US got under control, Rees-Mogg explained.
SMMT issues warning over high energy bills
The Society of Motor Manufacturers and Traders has said recent criticism from the Chancellor about the level of investment business was misplaced, with its CEO Mike Hawes stating at the trade body’s annual conference in London that “investment needs stability. It needs trust, not uncertainty.” Brexit and sky high energy costs were damaging the industry, Hawes said. “UK electricity prices are the most expensive of any European automotive manufacturing country and 59% higher than the EU average, meaning that last year UK manufacturers could have saved almost £50m on energy costs if they were buying in the EU rather than the UK,” he explained. The trade body also warned in a joint report with PwC that the shift to making electric vehicles put more than 22,000 UK jobs at risk. About 15% of jobs in vehicle making involve making engines, exhaust systems and fuel tanks, the SMMT said.
Ofgem
Ofgem set out its price control plan for the next five years, saying most consumers could see a small drop in costs related to electricity network charges. Ofgem noted the average customer in the UK pays £100 per year toward the costs of operating local grids, which is in addition to what they pay for the electricity itself. The new price controls for 2023 to 2028 set the revenue that Britain’s 14 distribution network operators can earn from these charges.
Key industries over-reliant on foreign steel
Government figures show Britain’s defence and nuclear industries are buying more than two-thirds of the steel they need from abroad. The industries spent £150m on steel last year, of which just £45m came from British mills. The disclosures come as Boris Johnson prepares to extend steel tariffs to protect the British industry, a move some say will break WTO rules and push up costs.
Fracking firms could share in UK fossil fuel tax breaks
Tax breaks the Government is extending to oil and gas companies could be available to fracking firms, the Guardian reports. The Government’s windfall tax, which allows exemptions for companies that invest in the exploration of new fossil fuel resources, could provide a strong incentive to restart fracking operations if a moratorium in the UK is lifted, campaigners fear. A British Geological Survey report on fracking potential in the UK is due this week.
Hilco positions for Cath Kidston acquisition
The specialist retail investor Hilco is in discussions about buying the Cath Kidston brand and wholesale operations from Baring Private Equity Asia, Sky News reports. Cath Kidston collapsed into administration in 2020 with the loss of nearly 1,000 jobs. BPEA recently instructed advisers at PwC to find a new owner for the now wholesale-led company.
Purplebricks
Purplebricks continues to expect revenue of £70 million and to swing to a loss before interest, tax, depreciation, and amortization loss of £8.8 million for the year ended April 30, unchanged from the guidance in its last trading update in May. The company says it will report its full-year results in the first week of August.
B&M
B&M European Value Retail said revenue declined in its financial first-quarter as the variety goods retailer left guidance unchanged. For the 13 weeks to this past Saturday, group revenue was down 2.2% to £1.16 billion from £1.19 billion in the first quarter last year. For B&M UK, revenue was down to £957 million from £1.02 billion.
Capita
Capita posted “strong” results for the first half of 2022, after a series of “significant” government contracts boosted its H1 revenues. The outsourcing company said trading in the first half of 2022 sat in line with expectations, as it said its revenues were bolstered by the renewal of a £456m contract to run the BBC’s TV licensing service and the extension of its £94m contract to run the NHS’ primary care system.
Moonpig
Moonpig has posted plummeting sales as shoppers started buying gifts and greetings cards elsewhere once bricks-and-mortar shops reopened once more over the past year. In full year results to 30 April 2022, the firm admitted its group revenue had tumbled 17.3 per cent year-on-year, standing at £304.3m versus £368.2m in 2021.
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