Construction grows at fastest pace in 24 years – business news 7 July 2021.
James Salmon, Operations Director.
Construction grows at fastest pace in 24 years, SME exports via Amazon hit £3.5bn, hospitality companies expected to ditch compulsory face coverings, shell, population, interest rate threat, Morrisons and more business news.
PMI survey: Construction grows at fastest pace in 24 years
The construction sector expanded at its fastest pace in 24 years last month on the back of surging demand for new homes and commercial property. The IHS Markit/CIPS construction PMI exceeded forecasts to jump from 64.2 to 66.3 in June – the highest reading since June 1997 and well above the 50 mark that separates growth from contraction. “Total new orders expanded at one of the strongest rates since the summer of 2007, mostly reflecting robust demand for residential projects and a boost to commercial work from the reopening UK economy,” Tim Moore, economics director at IHS Markit, said. “Supply chains once again struggled to keep up with demand for construction products and materials, with lead times lengthening to the greatest extent since the survey began in April 1997. Survey respondents widely reported delays due to low stocks of building materials, shortages of transport capacity and long wait times for items sourced from abroad.”
SME exports via Amazon hit £3.5bn
Figures posted by Amazon show British small and medium-sized businesses selling on the platform recorded over £3.5bn in export sales last year. Amazon said more than 14,000 UK SMEs surpassed £100,000 in sales in 2020, while over 1,000 reached £1m in sales for the first time. John Boumphrey, UK country manager at Amazon, said: “2020 was a challenging year for many small businesses, and we’ve continued to provide business owners, start-ups and entrepreneurs with the tools and opportunities they need to succeed.”
Hospitality companies expected to ditch compulsory face coverings
Hospitality and leisure groups have pledged to throw off face mask mandates from July 19th – dubbed “Freedom Day” – putting employers on a collision course with unions over safety. Just hours after Boris Johnson announced that hospitality businesses will no longer legally have to enforce face coverings past that date, companies including Revolution Bars and Young’s Pub Group said they would scrap the requirement for customers and employees to wear masks. Other businesses are more cautious and are keeping their policy under review for now.
Royal Dutch Shell
Royal Dutch Shell said it would increase payouts to shareholders on the back of an improving economic outlook.Shell said that, subject to final board approval, it would increase shareholder distributions to within the range of 20-30% of cash flow from operations, starting at its second-quarter results announcement.
Population
For the first time since 1976, more people died than were born in Britain in 2020,, according to the Office of National Statistics. The covid-19 pandemic meant that more deaths were registered in the country than in any year since the first world war. Births also fell to their lowest level since 2003. Nevertheless, the population overall still increased because of immigration.
Rising interest rates threat to national debt
With Britain now burdened with a record peacetime deficit, the Office for Budget Responsibility (OBR) has warned that increasing interest rates to dampen inflation could make the country’s debts “unsustainable” and cause serious damage to the wider economy. In a scenario that sees the Bank of England respond to “persistent inflation” of 4% over three years, and where the UK is charged more to borrow in debt markets, the cost of servicing debt could rise from 1% to 4% of GDP by 2050 – around £80bn in today’s terms. The OBR said: “Were rates to return to levels that were more normal in the past, it would raise the cost of servicing a given stock of debt and could – in extreme circumstances – push the debt-to-GDP ratio onto an unsustainable path.” The OBR also raised red flags over unfunded COVID-19 legacy spending of £10bn a year and predicted the cost of hitting net zero targets over the next 30 years would be in the region of £469bn, swelling debt by 21 percentage points as fuel duty revenues fall drastically.
Kwarteng to seek assurances over Morrisons takeover
Business Secretary Kwasi Kwarteng is expected to seek a meeting with Morrisons chairman, Andrew Higginson, looking for reassurances over jobs, pensions and the chain’s UK operations after the supermarket chain agreed to be taken over by private equity firm Fortress. Kwarteng told the FT that he was “very interested in seeing how the situation develops” but would not be making rushed judgements before assessing the situation. He added that private equity buying UK businesses “was not in itself a bad thing”, and that “global Britain” would thrive on foreign investment.
Topshop administrators hand Lady Green £50m
The Telegraph reports that Lady Tina Green, wife of the former Arcadia tycoon Sir Philip, was given £50m by Topshop’s administrators in May. The money was lent to Topshop as part of an emergency restructuring in 2019 and secured against a former warehouse in Daventry, in Northamptonshire. New filings from administrators at Deloitte show the depot was sold for £83m. Arcadia collapsed in November owing creditors £800m and had a pension deficit of £510m. Meanwhile, the disposal of Topshop’s former flagship store on Oxford Circus is still being finalised with KPMG running the sale process. An update on Arcadia’s pension deficit is unlikely until this is complete.
Pandemic and tougher audit rules send fraud reports to four-year high
The Serious Fraud Office received its highest level of fraud reports in four years during the pandemic, increasing 13% on the previous year to 998 in the twelve months up to the end of March. Research by the Thomas Reuters business, Confirmation, suggests the jump in reports was down to a tough trading environment and the economic strain of the pandemic, along with increased pressure to report fraud in the wake of the Wirecard and Luckin Coffee scandals. City A.M. notes that the Financial Reporting Council said at the end of May that auditors need to obtain “reasonable assurance” that financial statements are free of fraud. Auditors need to comply with this rule by the 15 December of this year. “For individuals engaged in material fraud, auditors are now more likely than ever to be actively searching for any suspect activity,” said Kyle Gibbons, managing director of Confirmation. “Technology and AI can play a key role in keeping the audit industry on top of material misstatements due to fraud and in the driving seat,” he added.
Rishi Sunak under pressure as pensions costs surge
Pressure on the Chancellor to scrap the triple lock on state pensions is growing after the Office for Budget Responsibility (OBR) warned that retirement payments could surge this year in a £3bn hit to public spending. The Government’s official spending watchdog said payouts for pensioners could jump to 8% in 2021 as salaries recover from the impact of Covid. Conservative MP Mel Stride, chairman of the Treasury Select Committee, said: “Where the baseline and compositional effects of the pandemic on wage growth leads to unexpectedly and especially high average wage increases, then there is a strong case for the suspension of the triple lock given its costs to the public finances under these circumstances.” Sir Steve Webb, a former pensions minister who is now a partner at consultant LCP, said Rishi Sunak might be tempted to calculate earnings growth by measuring it “over a two-year period, taking out the dip and surge in the average wage.”
FTSE bosses criticised over virtual talks with CCP
The bosses of AstraZeneca, Clifford Chance, BP, Jaguar Land Rover, PwC, Rio Tinto, Abrdn, Standard Chartered and HSBC were among those who took part in a virtual meeting with the Chinese premier Li Keqiang on Tuesday. The meeting was organised by the lobby group the China-Britain Business Council, but was criticised by the Inter-Parliamentary Alliance on China. The Times points out that UK businesses with operations in China have faced scrutiny for their role in facilitating the communist party’s anti-democratic policies. A spokesman for the Alliance said: “The age of business lobby groups thinking they can conduct their own shadow diplomacy is over. Politicians around the world are going to increasingly hold the feet of big executives to the fire over human rights. These companies should think long and hard about whether they want to start a war with parliamentarians.”
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