Business news 30 March 2023
James Salmon, Operations Director.
£21bn lost to fraud since the start of the pandemic. Call from Tech leaders to halt AI. Economic downturn will not last long. CBI Members also positive. Tech bull market. And more business news.
£21bn lost to fraud since the start of the pandemic
Around £21bn has been lost by the Government due to fraud since the start of the pandemic, according to the National Audit Office (NAO), with the spending watchdog warning that it was “very unlikely” that most of the taxpayers’ money will be recovered.
The data shows fraud losses rose from a total of £5.5bn in the two years before the pandemic to £21bn in the following two years. Of the £21bn, just over £7bn relates to support schemes introduced by the Government during the pandemic. The NAO said that the creation of the Public Sector Fraud Authority represents a chance for a “renewed focus on fraud and corruption,” but went on to argue that the authority needs to be “influential across government if it is to achieve the required changes in culture, preventive approach and robust assessment of risks.”
A Government spokesman said: “We are overhauling how we tackle public sector fraud to ensure we chase down every pound stolen from British taxpayers.”
Call from Tech leaders to halt AI
Artificial intelligence (AI) experts and industry leaders, including Elon Musk and Apple co-founder Steve Wozniak, are calling on developers halt the development of AI until industry wide safety protocols can be developed. With over 1,100 signatories, the petition calls for a six-month pause to allow for safety protocols to be agreed as AI could be an existential threat to society and even humanity.
“Recent months have seen AI labs locked in an out-of-control race to develop and deploy ever more powerful digital minds that no one – not even their creators – can understand, predict, or reliably control,” said the open letter published on the Future of Life Institute website. “Powerful AI systems should be developed only once we are confident that their effects will be positive and
their risks will be manageable.”
“AI research and development should be refocused on making today’s powerful, state-of-the-art systems more accurate, safe, interpretable, transparent, robust, aligned, trustworthy and loyal,”
Next boss: Economic downturn will not last long
Next CEO Simon Wolfson does not expect the downturn in the UK economy to last long, saying he anticipates a sharp recovery in 2024. He said: “The genesis of the problem is a post-pandemic supply side squeeze,” adding: “As those supply side problems begin to ease, inflation is likely to ease, and as long as there’s no structural damage to the economy we can see no reason why we shouldn’t see quite a sharp recovery next year.”
CBI Members also positive
British businesses expect a return to growth in the next three months for the first time since shortly after Russia’s invasion of Ukraine, according to a CBI survey. The survey said there were “signs of green shoots” with a majority positive for the first month since April 2022.
Tech bull market
The Nasdaq 100 Index entered bull market territory yesterday, having risen 1.9% on Wednesday, taking the index up 20.3% above its December closing low, marking the threshold that is considered the start of a new bull market. The index closed at its highest since August last year. Among the day’s big movers were Apple up 2%, Microsoft 1.9%, Amazon.com 3.1%, Nvidia 2.2%, and Meta Platforms (facebook) 2.3%. The move has boosted European & London stocks this morning.
Mortgage Lending
UK Mortgage Lending in February fell to its lowest level since 2016, excluding the pandemic, the Bank of England has said. But the number of mortgages approved by lenders rose slightly, suggesting the slowdown may be stabilising. Homeowners borrowed £700m in February, down from £2bn in January, the Bank said. That is the lowest level since April 2016 apart from the pandemic.
However, mortgage approvals have improved for the first time since August, with the Bank of England’s Money and Credit report showing net mortgage approvals for house purchases increased to 43,500 in February from 39,600 in January. However, lending fell to its lowest level since April 2016, excluding the pandemic.
Martin Beck, chief economic adviser to the EY Item Club, said: “The latest household lending data indicated continued weakness in housing market activity, albeit with signs that the worst may be in the past.” Karen Noye, a mortgage expert at Quilter, suggested people were still in “wait-and-see” mode as borrowing costs remained high – but added that the rebound in approvals meant “green shoots might be appearing” in the housing market.
Number of available rental homes dips
Analysis by Zoopla shows that the number of homes available to rent in the UK has fallen by a third over the past 18 months. Lettings agencies typically have 10 rentals compared to over 16 before September 2021. The dip has helped drive up rents for new tenants by 11%. Demand for rented accommodation has risen to more than 50% above normal levels, the figures show. Richard Donnell, executive director for research at Zoopla, says that while there has been a big increase in demand for rented housing, “at the same time, we just haven’t seen much new investment by landlords in rented housing.” This, he added, is creating a “real crunch in availability.” The report also shows that large numbers of landlords are leaving the market, with 11% of homes for sale on Zoopla previously rented out.
City has lost standing as pre-eminent hub, survey concludes
Research shows that London is no longer the world’s top financial centre, having seen New York pull level. The City of London Corporation has called for a long-term plan to stimulate growth. The research, which benchmarks the competitiveness of cities across 95 metrics, found that other hubs like Frankfurt and Paris also boosted their attractiveness at a faster pace than London.
Tax burden set to spike
New calculations by Interactive Investor suggest that Britons will face a tax bill of more than £15,000 each by 2027, while Office for Budget Responsibility figures show that the tax burden for the UK as a whole is at its highest level since 1948. Alice Guy, head of pensions and savings at Interactive Investor, says: “Depressingly, Britain’s tax bill is due to continue rising and reach 36.9% of GDP by the tax year 2023/2024 and 37.7% by 2025.” This, she adds, compares with a previous high of 35.1% in 1969 and a low point of 28.3% in 1993.
Hunt defends ‘stealth’ raid and admits tax system is too complex’
Chancellor Jeremy Hunt has told the House of Commons’ Treasury Committee that while the tax burden as a proportion of GDP has “gone up for the moment” due to a “once-in-a century global pandemic and a once-in-a-generation energy crisis,” he will look to bring it down. He added: “That is why the focus in the Budget was unlocking our long-term economic growth rate through addressing labour supply and business investment.” While an extended freeze on income tax thresholds has been described a “stealth” raid, Mr Hunt suggested this was a “better way” to boost the Treasury’s coffers than a direct increase in income tax. He added: “I have never hidden from the extremely difficult decision we took – extremely difficult decision for me as a Conservative because we want to bring down tax rates.” Mr Hunt also admitted the UK’s tax system is “far too complex” and promised to “make progress” on the issue.
Starmer in tax pledge
Sir Keir Starmer will today pledge that a Labour government would use a “proper” windfall tax on the profits of oil and gas companies to fund a freeze on council tax. The reform would see the windfall rate increased to 78%, with this backdated to raise £10.4bn across the next two years. As he launches the party’s local elections campaign, the Labour leader is expected to say: “There is a choice on tax. A Tory choice — taxes up for working people, tax cuts for the 1% — or a Labour choice, where we cut business rates to save our high streets and where, if there was a Labour government, you could take that council tax rise you just got and rip it up.” Saying the Labour will deliver a “tax cut for the many, not just for the top 1%,” Sir Keir will declare that “Labour is the party of lower taxes for working people.” He will also highlight Labour’s pledge to abolish non-dom tax status. Conservative chairman Greg Hands said Labour’s announcement was “dead on arrival” and “not worth the paper it’s written on.” He added: “If Labour were serious about cutting council tax, Labour councils would be doing it now.” On Labour’s plans for the windfall tax, Tory MP Craig Mackinlay said the levy on energy companies “has gone beyond a tipping point which will now drive away investment and much-needed energy security.”
UK and EU boost co-operation over new carbon border tax
Britain and the EU are increasing co-operation on efforts to tackle climate change, with Prime Minister Rishi Sunak saying there could be co-ordinated moves on a new carbon border tax.
Shell pays first UK tax for five years
Oil giant Shell paid just £7m in UK taxes last year and a further £8m in fees, despite record profits. This marks the first time since 2017 that Shell has paid more in tax than it was able to write off. The company was able to write down its tax bill by around £34m due to spending in the UK. Non-governmental organisation Global Witness said that Shell’s 2022 tax bill means that it paid just £4.50 per citizen in the UK, compared to £1,171 per person in Norway. Jonathan Noronha Gant, a fossil fuel campaigner with Global Witness, said: “Despite record profits and enormous CEO pay it’s clear the UK windfall tax simply hasn’t worked. This Government has failed to effectively confront the extreme wealth and power yielded by companies like Shell, much to the detriment of its own people.”
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.