Business news 3rd June 2024

Business news that we thought would interest our members.

James Salmon, Operations Director.

EMPLOYMENT

Gender pay gap continues to narrow, slowly
The gender pay gap in Britain is closing more slowly than it was, with companies still struggling to promote women to more senior roles. According to PwC, the average male worker earned 11.8% more than the average female last year, down from 12.2% in 2022. The rate of change remains modest, and it will take more than 45 years for the gap to close completely, PwC’s calculations suggest. Six in ten businesses reported an improvement in their gender pay gaps, but most reductions were less than two percentage points. A fifth of companies said their gaps had stayed the same or worsened. PwC’s diversity and inclusion consulting director, Katy Bennett, said that while progress is being made, societal barriers and difficulties in reducing reporting figures still exist. The Times’ Tom Howard reminds readers that the gender pay gap does not indicate that men earn more than women for the same job, but rather that more men hold senior, higher-paying positions.

Britons embrace side hustles to supplement income
A recent study commissioned by accountancy group Sage reveals that Britons have become a nation of side hustlers. The cost of living crisis has prompted people of all ages to seek additional income streams. While young people are still the most likely to have a side hustle, a quarter of middle-aged Britons now have a way of earning extra cash. The most common sources of extra income are selling second-hand clothes or upcycled furniture, freelance writing, technology jobs, and health and wellness advice. Side hustles can provide a significant boost to earnings, with 16 to 34-year-olds earning an average of £546 per month. Many young people aspire to turn their side hustles into full-time businesses. However, the research also suggests that many people may be avoiding paying tax on their second income. The number of workless households in the UK has reached a 12-year high, despite the rise in side hustles.

Visa sponsorship system fuels exploitation
Experts have raised concerns over the exploitation of migrant care workers in the UK, describing it as a national scandal with hallmarks of trafficking and modern slavery. Many foreign workers who paid agents thousands of pounds to secure jobs in British care homes have found limited or no employment upon arrival. They are now struggling to pay off debts and working in irregular jobs for below minimum wage. The Royal College of Nursing has called for a government inquiry into the treatment of migrant care workers.

TAX

High-tax Britain is driving out top earners
The Telegraph talks with relative high earners about how their lifestyles do not correlate to their six-figure salaries, with high taxes and costs leaving them scrimping to get by. One example is a compliance director at a large bank earning around £145,000. She says: “I get almost 50% tax on everything. I worked out I have to earn £45,000 a year to get to work. It’s exhausting, quite frankly, watching every penny and working really hard. It’s just endless bad news.” The feeling is not uncommon, but some are deciding to leave rather than continue with the struggle. Simon Goldring, a self-employed tax adviser moved to Dubai last year. He has moved several British clients to Dubai and he can’t see it getting any better. He says: “The higher tax rates get, the more you create a disincentive effect and the more you make the UK less attractive.”

Opinion: we need to talk about the super-rich
A Guardian editorial says a conversation needs to be had about the super-rich and their “exploitation” of loopholes to cut tax liabilities. In July, G20 finance ministers will discuss new proposals for an annual 2% global tax on the wealth of the world’s 3,000 or so billionaires. The architect of the plan is French economist Gabriel Zucman, who claims the wealth tax could raise $250bn a year. Brazil, France, South Africa and Spain have expressed support for the idea but some are sceptical such a tax could be implemented. Regardless, the debate should be had in good faith, the paper contends, pointing to the successful implementation of the minimum corporation tax as a sign that “an age in which footloose, mobile capital could please itself may be coming to an end.”

SKILLS

Labour’s pledge to cut work visas worries business
Sir Keir Starmer on Sunday promised to cut net migration by training unemployed Britons to do jobs normally taken by overseas workers. Yvette Cooper, the shadow home secretary, told media it was clear net migration must come down, although she declined to set out a target. Labour intends to reform the points-based migration system and require sectors applying for foreign workers visas to train British people to do the jobs first. The FT talks to policy experts who say linking visa rules to training may not solve long-standing skills and labour shortages. Professor Jonathan Portes says: “Actually, you just need to get skills policy right – and migration will solve itself.”

CORPORATE

HSBC likely to take haircut on Logistics Group debt
HSBC is owed £143m by the Barclay family’s delivery business, The Logistics Group, which collapsed into administration earlier this year after HSBC demanded repayment of money owed. Administrators at Teneo are warning that the bank is unlikely to be paid in full. Teneo estimated it could recover £57.5m from a sale of delivery business Arrow XL, which is the company’s main asset.

Employers face a rising climate conundrum
Pilita Clark reports in the FT on research by Deloitte which shows how an increasing number of younger workers, particularly in financial services, are pressuring their employers to take action on global warming.

TECHNOLOGY

Tax tech firms that put profit above child safety – Russell
The father of Molly Russell, Ian Russell, is calling for a windfall tax to be imposed on tech firms for prioritising profits over children’s safety. The Molly Rose Foundation, established in Molly’s memory, has proposed the tax as part of a five-point manifesto. The foundation believes the tax would be a form of pay back for the profits earned through algorithms that prioritise content to generate advertising revenues. Molly took her life at 14-years-old after receiving 16,000 “destructive” posts encouraging self-harm, anxiety and even suicide in her final six months. Mr Russell stresses the need for decisive action to protect children from online harms and urges political parties to commit to bold measures.

LOCAL GOVERNMENT

Councils gear up for £1.4bn fire sale
Experts warn that UK councils are preparing a record £1.4bn fire sale of assets and cancelled investments to address a debt black hole. The Government has given 18 councils permission to sell-off assets and delay projects to release cash before the upcoming election. The use of “capitalisation directions” has surged by 58% since 2023/24, allowing councils to meet day-to-day costs using capital resources. Birmingham Council, which declared bankruptcy last year, will be allowed to release £685m this year. Experts warn that fire-sales will worsen the fiscal crisis, as councils are selling commercial property at a time when prices are depressed due to the shift to remote working. Analysts predict that more councils will be pushed into bankruptcy as they lose money on sales and vital sources of income. Grant Thornton warned earlier this year that four in 10 local councils are at risk of going bust over the next five years, the Telegraph notes.

SMEs

Half of small business owners forced to use personal savings, survey finds
Half of small business owners have had to use their personal savings to fund their companies, according to a survey by Shawbrook Bank. The survey found that almost half of small businesses that applied for finance from lenders in the past year said it did not meet their needs, leading them to use their own savings, credit cards, and other finance products. Among bigger companies with turnovers of up to £50m, the figure rose to 63%. Shawbrook Bank has called for lenders to provide more personal support for small to medium-sized enterprises (SMEs) and improve the borrowing process. The survey also highlighted the need for the next government to cut taxes, simplify regulation, fund training schemes, and improve access to home and international markets for SMEs.

REGULATION

Tories will rewrite Equalities Act to better protect women
The Prime Minister is promising to rewrite the Equality Act to make it absolutely plain that when it talks about the protected characteristic of sex, this means biological sex – and not the gender someone identifies with. The move is designed to ensure that trans women can be legally barred from women’s spaces such as toilets and changing rooms. Rishi Sunak said on Sunday: “The safety of women and girls is too important to allow the current confusion around definitions of sex and gender to persist.” Kemi Badenoch, the Equalities Minister, said the Conservatives would “clarify that sex in the law means biological sex and not new, redefined meanings of the word.” Writing in the Times, she said: “Whether it is rapists being housed in women’s prisons, or men playing in women’s sports where they have an unfair advantage, it is clear that public authorities and regulatory bodies are confused about what the law says and what to do – often for fear of being accused of transphobia…clarification is required.”

ECONOMY

Britain’s post-recession boom is coming to an end
Britain’s post-recession boom is petering out, with the economy returning to normal growth levels, new data are expected to show this week. For the first quarter of this year, GDP grew by 0.6% after a “shallow recession” in the second half of last year. The S&P Global / CIPS purchasing managers indices are expected to show a slowdown in services and construction, while manufacturing is seeing a resurgence. Capital Economics senior UK economist Peter Wishart said the PMI forecasts imply that GDP growth eased in May. UK chief economist at EY, Peter Arnold, stated that the fall in construction and services output, and increase in manufacturing, is consistent with more normal growth rates for the economy.

ENERGY

Opec extends production cuts to prop up prices
Unexpectedly high US oil production and an economic slowdown in China has prompted Opec to squeeze production further into 2025 in order to keep prices up. In a statement, the cartel said the move aimed to “achieve and sustain a stable oil market, and to provide long-term guidance and transparency for the market”.
 

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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.