Business news 31 March 2022
James Salmon, Operations Director.
FSB warns over April flashpoint and poor payment culture. Royal Mail technology ‘mischarging’ small firms. Cost pressures force families to cut back on essentials. Shop price inflation hits 2.1%. And more business news.
FSB warns over April flashpoint and poor payment culture
The Federation of Small Businesses (FSB) says thousands of small firms and sole traders are at risk due to new administration requirements and cost pressures.
The FSB has flagged concern over imminent changes that will see firms having to pay all VAT deferred in the period to June 2020 under pandemic reliefs, an end to the 12.5% VAT rate for the hospitality sector, and the 1.25 percentage point increase in NICs rates. These, it is noted, come just days after protection from eviction for commercial tenants came to an end.
FSB research shows that 5% of small firms fear imminent collapse.
Highlighting its concerns, the federation said: “This April flashpoint will push some firms to the brink. We are in the grip of a poor payment culture which has 400,000 small businesses worrying about the future, simply because clients refuse to pay on time.” It added: “By taking forward our proposal to make audit committees directly responsible for prompt payment practice, the Government can spur real change.”
Royal Mail technology ‘mischarging’ small firms
Royal Mail has been accused of mischarging small firms thousands of pounds a month in penalties after it installed faulty technology designed to catch fraudsters. Hundreds of firms say they have been incorrectly fined for failing to pay the right postage and are being sent penalties up to three times the original cost of sending their packages. The issue has been raised with the Federation of Small Businesses (FSB), which said that Royal Mail needed to address the problem urgently. FSB chairman Martin McTague said: “With spiralling overheads already eroding margins, the last thing small businesses need is retrospective charges on letters that they’ve been assured are fine to send.” Ofcom, which regulates the Royal Mail, said the issue had been brought to its attention and commented: “If we see evidence of widespread issues that could be in breach of our rules, we’ve shown we won’t hesitate to step in and take action.”
Cost pressures force families to cut back on essentials
An Office for National Statistics (ONS) poll shows that the cost-of-living crisis is forcing some households to cut back on food spending and reduce their use of gas and electricity. The survey of 13,000 people saw 83% say they have seen an increase in their cost of living this month, up from 62% in November. While 34% of those saying costs have risen said they were using less gas and electricity at home, 31% are spending less on food. It was also found that half of respondents have cut back on non-essentials. Household gas and electricity bills are expected to rise by 54% from Friday, while average band D council tax bills in England are expected to go up by £67. Inflation has hit a three-decade high of 6.2% and the Bank of England expects it to climb to 8% this spring and warns it could rise close to 10% later this year. Frances O’Grady, general secretary of the TUC, has called on ministers to do more, saying support already announced by the Chancellor “has been little more than thin gruel.”
Shop price inflation hits 2.1%
Data from the British Retail Consortium (BRC) shows that annual shop price inflation has hit its highest rate since September 2011, climbing to 2.1% in March compared to 1.8% in February. The BRC-NielsenIQ Shop Price Index shows food inflation has jumped to 3.3%, while non-food inflation reached 1.5%. The data shows that consumers have seen their fifth consecutive month of rising prices. BRC chief executive Helen Dickinson said: “Our Shop Price Index has been rising more modestly than other inflation measures as retailers were able to limit price rises on many essential goods.” However, she added: “With overall inflation likely to rise even higher according to the Bank of England, consumers will not have an easy ride this year. The war in Ukraine and volatility in commodity markets is likely to further dampen consumer confidence in the coming months.” Mike Watkins, head of retailer and business insight at NielsenIQ, added: “With cost-of-living increases accelerating, the next few months will be a difficult time for consumers.”
Oil
The Oil price fell almost $4 per barrel overnight as the White House said it was considering a large release of crude oil from the strategic petroleum reserve to combat inflation. US President Joe Biden also criticised the Indian government’s insistence on buying Russian oil at discounts of up to $35 per barrel. BP has approached national oil companies in Asia and the Middle East in an attempt to test interest in its 19.75% stake in Rosneft.
Nuclear
Boris Johnson has said small nuclear reactors could be in place, contributing to the national grid by the end of the decade, accelerating the previous timetable in response to the current energy crisis.
Wage inflation
In response to the a record number of companies expect to increase wages over the next year as the war in Ukraine deepens the cost of living crisis, according to the Lloyds Bank Business Barometer which found that a quarter intended to boost average wages by at least 2% in the next 12 months.
Starbucks pays just £5m UK corporation tax
Starbucks paid just £5.4m in UK corporation tax last year despite making a gross profit of £95m, according to accounts filed at Companies House. The UK division collected sales of £328m from its 1,000 UK stores in the year to October 3, 2021, with this up from £243m in the previous year when shops were temporarily closed during the lockdown. Starbucks Coffee Company (UK) made a £95.1m gross profit for the year, but after swallowing administrative expenses of £78m, its pre-tax profits were reduced to £13.3m, on which it paid £5.4m tax. A year earlier the coffee chain received tax credits of £4.4m after recording a pre-tax loss of £40.9m. Paul Monaghan, chief executive of the Fair Tax Foundation, said: “Starbucks’ main UK subsidiary maintained its tradition of paying little corporation tax in the UK, and this was once again down to the payment of hefty royalty and licensing fees to entities further up the corporate group.”
Economists question tax plans
Economists have criticised plans to increase taxes on working people while shielding other forms of income from levies. Torsten Bell, chief executive of the Resolution Foundation think-tank, has told the Treasury Committee that increasing National Insurance contributions 1.25 percentage points in April instead of using income tax to raise revenue is the “opposite of what everybody thinks we should be doing.” City AM’s Jack Barnett notes that while the Chancellor has raised the threshold at which people start paying NI, in effect cutting taxes, and announced a 1p in the pound cut to the basic rate of income tax by 2024, freezing income tax thresholds for four years will offset most of the giveaways. Meanwhile, Gemma Tetlow, chief economist at the Institute for Government, says there is no rationale for cutting the basic rate of income tax by 1p in 2024.
PM heckled over tax-cutting Tories claim
Boris Johnson was heckled by opposition MPs after claiming he wants to cut taxes just days before hikes including an increase in National Insurance come into effect. Speaking in the Commons, Labour leader Sir Keir Starmer asked if the Prime Minister still thinks that he and the Chancellor are tax-cutting Conservatives, to which Mr Johnson replied: “I certainly do, because this is the Government that has just introduced not only the biggest cut in fuel duty ever, but the biggest cut in tax for working people in the last 10 years – 70% of the population paying National Insurance contributions will have a substantial tax cut as a result of what the Chancellor did.” “If you take together what we are doing with income tax and National Insurance it’s the biggest tax cut … for 25 years,” he added. This not only drew heckles from the opposition benches but also prompted Sir Keir to urge the PM to “cut the nonsense”, saying the Government is giving £1 back for every £6 taken in taxes and has delivered the highest tax burden for 70 years. The Prime Minister hit back, saying: “This is a Government that is getting on with reducing the tax burden wherever we can.” Meanwhile, Sir Keir has renewed his calls for a windfall tax on the profits of oil and gas companies, saying: “Income stealth tax: a tax on working people. Tuition fee raid: a tax on working people. National insurance hike: a tax on working people.”
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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.
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