Business news 31 January 2023
James Salmon, Operations Director.
Britain the only G7 economy forecast to shrink in 2023. Brexit and the economy. Over 50’s not wanted by employers. PM warns of inflation ‘vicious cycle’ over pay hikes. And more business news.
Britain the only G7 economy forecast to shrink in 2023
Britain is expected to be the only major industrialised country to see its economy shrink this year, according to the International Monetary Fund. The IMF said it expected the UK economy to contract by 0.6% this year – 0.9 percentage points worse than it had pencilled in just three months ago and slower even than sanctions-hit Russia. The IMF said that while the prospects for every other member of the G7 group of leading developed nations had improved or remained unchanged since October, rising interest rates and higher taxes had made the outlook for the UK gloomier.
IMF Chief Economist Pierre-Olivier Gourinchas told the BBC that for 2022, the UK had had “fairly robust” growth at 4.1%, which he said was “one of the strongest growth numbers in Europe.” “But it is true that we are forecasting a sharp slowdown in 2023, with growth that would turn even negative for the year,” he added.
Brexit and the economy
Dharshini David, BBC News’ global trade correspondent, in considering the impact of Brexit on the UK economy, noted on trade, that it has not bounced back post-pandemic as fast as it has in other major nations, saying that overall, the UK’s trade with the rest of the world, as well as trade with the EU, has fallen relative to the size of the UK economy. Ms David says investment has stalled since the referendum, as businesses remain wary of the outlook for the economy. On jobs, she cites a study by the Centre for European Reform and UK in a Changing Europe think-tanks which suggests there are 330,000 fewer workers in the UK as a result of Brexit. While this is just 1% of the total workforce, sectors such as transport, hospitality and retail have been particularly hard hit. Ms David goes on to note Office for Budget Responsibility analysis suggesting that the UK will ultimately be 4% worse off than it would have been had it remained in the EU.
Over 50’s not wanted by employers
We have a shortage of workers in the UK. Employers are struggling to find candidates to fill positions. The Government is encouraging all the over 50’s who retired early during the pandemic to return to the workforce. But are employers willing to take them back?
A new survey shows only 42% of employers would consider a worker aged 50 to 64. New research from the Chartered Management Institute (CMI) suggests firms are much less open to hiring older workers than they are to bringing in those aged 18 to 34 (who scored 74% in the survey of 1000 employers).
The number dropped furthest for applicants in the over-65 aged group. Just 18% of managers said they were open to a large extent to hiring people in that category.
Much of the economy is suffering from acute staff shortages. Yet a quarter of those of working age don’t have a job, some 10 million people don’t have jobs. These are people who still have a lot offer, in experience, ability and the desire to work.
Paperchase collapse on the cards?
Stationery chain Paperchase could be at risk of collapsing amid reports that it is in talks to secure a pre-pack administration deal. The company has appointed advisers at Begbies Traynor to prepare for a possible administration, with PwC drafted in to consult buyers on a sale.
PM warns of inflation ‘vicious cycle’ over pay hikes
Rishi Sunak says he would “love” to give striking nurses large pay rises but argued he cannot because he does not want to increase taxes or fuel a “vicious cycle” of inflation. The Prime Minister said an important part of “getting a grip of” inflation is making sure the Government is responsible with its borrowing, “because if that gets out of control that makes it worse.”
“When we’ve had periods of high inflation, what happened in the past is everyone said: ‘OK, inflation was at 15%, we should all get paid 15%,’ and then you have a kind of vicious cycle which you never recover from,” he added. Mr Sunak also ruled out increasing taxes, saying: “ we can’t put them up any more … and we need to be getting them down.”
Hospitality faces £100m hit from strikes
The retail and hospitality sector expects to see a huge financial hit from strike action set to take place tomorrow, with Kate Nicholls, chief executive of UKHospitality, estimating that industrial action will result in £100m in lost sales.
Action needed over tax credit scams
A House of Lords committee has warned that changes to tax incentives for business investment will not be enough to prevent abuse of taxpayer money. The Lords’ economic affairs finance bill sub-committee said HMRC must invest in extra resources and conduct tighter scrutiny of claims under research and development tax credits schemes. Government reforms plan to require applicants to provide HMRC with more detailed information about the nature of a claim; name tax advisers involved in preparing claims; and require that claims are endorsed by a senior officer of the company. However, the committee said these changes “would not be effective in isolation” and that “improvements to HMRC’s compliance capability are also required.” Meanwhile, Lord Leigh of Hurley, chairman of the sub-committee, says ministers should consider unwinding changes made by the Chancellor which drastically cut the reliefs for small businesses.
Over 600k to miss tax return deadline
Over 600,000 people are expected to miss today’s self-assessment deadline, meaning HMRC is set to pull in £60m in late penalties. Those who fail to file to file their tax return by midnight on January 31 are handed a an automatic £100 fine, whether or not any tax is owed. If the taxpayer has still failed to submit their tax return after three months, they are charged £10 a day. After six months there is a further £300 penalty. Of the 12m people expected to file a tax return, HMRC data shows 2.7m had yet to do so before the weekend just gone. Research by Handelsbanken Wealth & Asset Management shows that over 600,000 self-employed workers will not file on time this year. Seb Maley of insurance company Qdos highlights that HMRC will not be waiving penalties this year as it did during the pandemic, with the Treasury “desperate to raise tax revenue.” He adds: “Added to this, along with fines for missing the deadline and interest charged on the outstanding amount, the longer a tax bill goes unpaid, the higher the risk of an individual being investigated by HMRC.” Sarah Hollowell, tax director of investment company Killik & Co, notes that HMRC may be willing to waive the fine if it decides the taxpayer had a “reasonable excuse” for filing late.
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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.