Business News 3rd July 2017
We hope you enjoy reading the business news compiled by the Credit Protection Association on Monday 3rd July 2017 for its members and visitors.
Markets Round up
On Friday, U.K. GDP was revised lower from 0.3% to 0.2% in the first quarter of 2017 which contributed to the U.K. main index closing firmly in the red, finishing at month lows of 7312 – down 37 points. Oil continued its tentative rebound but Oil majors BP & Shell both slipped as the resurgent pound made their overseas earnings less attractive. US shares were trying to shake off selling pressure in the previous session as investors grappled with mixed economic data and attempted to close out a volatile week that could signal the reemergence of choppy trade on Wall Street. After seeing modest strength for much of the session, the major averages gave back ground going into the close of trading on Friday. The tech-heavy Nasdaq pulled back into negative territory, while the Dow and the S&P 500 remained positive. While the Nasdaq edged down 3.93 points or 0.1% to 6,140.42, the Dow rose 62.60 points or 0.3% to 21,349.63 and the S&P 500 crept up 3.71 points or 0.2% to 2,423.41. For the week, the Nasdaq tumbled by 2%, the S&P 500 fell by 0.6% and the Dow dipped by 0.2%. The mixed close on Wall Street came after the major averages showed wild swings back and forth over the past few sessions. The University of Michigan sentiment index came in at 95.1 above the expected 94.5 showing the resilience of the US consumer.Equity markets struggled to find direction in Asia as the second half of the year kicked off, tracking mixed signals from the U.S. markets. Oil prices continued to rally as a decline in US production eased concerns about a global oversupply. Gold prices looked set to notch a second-straight decline, capping an up-and-down week marked by a swift change in global-market sentiment as a world-wide bond rout drove yields higher and diminished appetite for precious metals. U.S. financial markets will close at 1pm Monday and completely shut down on Tuesday in observance of 4th July celebrations. While other global markets will operate on a normal schedule, trading volumes are expected to be lower.
Small companies more worried about cyber-crime than Brexit
A survey of 500 SMEs, conducted by Barclaycard, has found that small firms are more concerned by the threat posed by cyber-crime than they are about Brexit. Some 44% of SMEs are worried about being hit by cybercrime or a data breach, by comparison just 34% cited Brexit as a major concern. In response to cybersecurity fears, SMEs are planning to increase their spend on firewalls, security software and other defences to more than £3.8bn over the next 12 months.
UK saving rates fall
The proportion of UK residents’ disposable income that goes into savings has fallen to a record low. The savings ratio – which measures the outgoings and incomings that affect households – has been falling sharply for more than a year. The Office for National Statistics (ONS) said the ratio stood at 1.7% from January to March, down from 3.3% in the previous quarter. The UK economy grew by 0.2% in the first quarter of 2017, the ONS said. This was unchanged from an earlier estimate but confirmed the slowdown from the 0.7% rate seen in the final quarter of last year. Growth in the business services and finance sectors helped to offset slower consumer spending, the ONS said.
UK GDP
The final estimate from the Office for National Statistics confirmed on Friday that UK gross domestic product grew 0.2% in the first quarter, as expected. This was down sharply from 0.7% growth in the fourth quarter of last year and a 1.9% rise on an annual basis. Growth was driven by business services and construction, partially offset by declines in some consumer-focused industries, such as retail sales and accommodation. Growth in the services sector was revised down to 0.1% from 0.2%.
Energy Bills
A price cap on energy bills could be extended to many more households on low incomes, under plans being considered by regulator Ofgem. A limit on the cost of gas and electricity for those on pre-payment meters already saves about four million people £80 a year. This could be extended to about two million others on certain benefits. The proposals come after a much wider cap in the Conservative manifesto was absent from the Queen’s Speech. Instead, the government said ministers were “considering the best way” to protect those on the poorest-value tariffs. Business Secretary Greg Clark wrote to Ofgem to challenge the regulator to use its existing powers to reduce bills.
Macron luring Brit business
French president Emmanuel Macron is leading a campaign to lure corporate Britain to France, with upcoming plans said to include cuts to and a simplification of corporation tax and tax incentives for film makers. Estate agents say concerns over the prospect of higher taxes or visa restrictions after Brexit have led to increased demand from Brits for property in France, Spain, Italy and Portugal.
Tax hikes on self-employed would hurt SMEs
Kiki Loizou talks to experts including Emma Jones of small business network Enterprise Nation about the impact of higher taxes on the self-employed. Plans to hike NI contributions for self-employed workers were announced by Philip Hammond in March but swiftly abandoned, but a tax rise is still thought to be very likely. Ms Jones says the government wrongly thinks people are becoming self-employed to avoid tax. A crackdown on the tax benefits enjoyed by such workers would put them off self-employment and by extension harm small companies which rely on the flexibility freelancers offer, says Jones.
Europe luring UK non-doms
Tax experts say the super-rich are being tempted to leave Britain for other European countries such as Italy as non-doms are lured with rival schemes. George Osborne introduced charges for non-doms to maintain their status and the current Chancellor Philip Hammond had been planning to force longstanding non-doms to pay the full tax on their foreign earnings, the Mail’s Alex Hawkes reports. Italy has launched an attractive non-dom system, as have Malta and Portugal while France is in the process of reforming its system. Mr Hawkes points out that the 116,000 people in the UK claiming non-dom status paid £6.5bn in income tax two years ago, and wonders whether, with concerns over Brexit and a possible tightening of UK rules, the UK will soon lose some of this income. Jo Bateson, at KPMG’s private client division, said clients were looking at the Italian model but the UK still remains one of the best places to be
Tech giants to boost Brexit
The government’s bid to grow the digital economy post Brexit will receive a boost today from Apple, Google and Facebook. The industry giants are to attend the first meeting of the Digital Economy Council chaired by Culture Secretary Karen Bradley, which aims to build on the UK’s £118bn-a-year tech sector. The council aims to make the UK “the best place to start and grow a digital business”.
City fears it’s been sidelined in Brexit plans
Senior City sources have warned that unless Theresa May prioritises the financial services sector in her Brexit plans she risks crashing the British economy. City figures believe the PM is focussing on sectors such as car manufacturing and fishing as the public regard them as more important than banking or financial services. William Wright, the managing director of think tank New Financial, said: “Banks, asset managers and insurers will have to assume the worst-case scenario unless they get the answers they need in the next few months.”
Pensions tax relief could be targeted
Experts are predicting that the new Conservative government could push through cuts to pensions tax relief in the wake of the decision to keep the pensions triple lock, as demanded by the DUP. Former pension minister and director of policy at Royal London Steve Webb said the likelihood of getting cuts to pension tax relief through Parliament was probably greater considering the DUP’s decision to back Conservative Finance Bills. A flat rate of tax relief has been argued for by critics of the current system. Darren Philp, director of policy and market engagement at The People’s Pension, said the system is in “desperate need of reform to make it fairer, equitable and more sustainable.”
Sunday Express
Workers must be trained to cope with rise of AI
Businesses and the government must ready the nation’s workforce for the rise of artificial intelligence to ensure companies can ride out the “cliff edges” created by the technological revolution, according to PwC. Experts believe the rise of AI poses a threat to workers across the professions, from staff in fast-food restaurants to journalists, accountants and doctors. Jon Andrews, PwC’s head of technology and investments, said we can predict which business systems will be affected by new technology and must “re-train people to think what other jobs those people can do ahead of that.” Around 30% of UK jobs are at high risk of being eradicated by AI by 2030, PwC has estimated.
Conservatives split over lure of fantasy economics
Squabbling amongst Conservatives over whether they should cave in to Labour pressure and abolish university tuition fees or hike public sector wages has intensified, with the focus on whether austerity measures should be abandoned and tax hikes introduced to pay for increased spending. The Treasury has insisted the UK must “live within its means” and continue to work to cut the deficit but others suggest the Chancellor is considering cutting pension tax relief for high earners or cancelling a planned cut in corporation tax to save around £4bn. Most commentary posits that the Tories should resist adopting Labour’s proposals to scrap tuition fees, which Sir Vince Cable described as a “ridiculously populist programme”, and should work harder to make the argument for responsible economics.
Europe’s SMEs risk becoming big losers of ‘hard Brexit
A study has found that SMEs in Europe could be among the biggest losers of Brexit because they will forfeit financing from UK-based lenders if ties are not retained.
Raising retirement age to 75 will not plug black hole
Analysis of official projections by Legal & General has shown that raising the retirement age to 75 will still leave the Government with a budget deficit of more than 5.5% of GDP compared with just over 7.5% of GDP if people retire at 66. James Carrick, global economist at LGIM, said with life expectancy rising faster than anticipated and a slump in birth rates there isn’t the tax base to pay for the pensions and healthcare of retirees. Theresa May had started to address the issue with her social care plan, he added, but the conversation has just disappeared – “there are various options, but all of them are painful.”
Post-Brexit UK will see return to strong growth
New forecasts from the Centre for Economics and Business Research (CEBR) predict the UK economy overall will grow by just 1.3% this year – down from an earlier forecast of 1.7%. The forecast for 2018 has also been revised down to 1.2%, putting the UK on course for the slowest GDP growth since 2009. However, the CEBR assessment is less downbeat on the Brexit outcome. It believes a deal with the EU will emerge and that confidence will rebound, leading to stronger growth after 2018. The CEBR expects GDP to expand by 1.6% in 2019 and by 1.9% in 2020, upward revisions from pre-election forecasts of 1.5% and 1.8%. Nina Skero, head of macro economics at the CEBR, said: “Our data on confidence show that the newly created political uncertainty is highly likely to weigh on growth in the short term. This means that we now do not expect an interest rate rise until the end of 2018.”
Pay for under-40s is 11% lower than in 2008
Typical hourly pay for the under 40s is at least a tenth lower than before the 2008 financial crisis, according to a report from the Resolution Foundation. Real hourly pay for 22 to 39-year-olds was down by 11% on its peak, compared with 5% for workers in their 50s and 2% for those in their 60s, it added. However, the National Living Wage has been a “bright spot amidst this bleak picture on pay, delivering a 12% rise over the last two years”, the Resolution Foundation added.
BBC News
Skills shortage
The Guardian reports that skills shortages costs British businesses £2bn a year. The findings will add to concerns that employers are struggling to fill key jobs even before a potential clampdown on immigration after Brexit.
Amazon
Bloomberg have an interesting article on how retailers can fight back against the threat of Amazon.
bloomberg
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Business News 30th June 2017
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