Consumer credit falls – business news 2 March 2021.

James Salmon, Operations Director.

Consumer credit falls, manufacturing optimism up, new help to grow scheme for SMEs, firms fear taxing time as Budget approaches,  pandemic stalls women’s equality at work, apprentice scheme a failure, finance jobs moving to EU and lots more.

Consumer credit falls in January

Bank of England data released yesterday shows that consumer borrowing fell at its fastest pace since May 2020 in January. The £2.4bn decline in unsecured lending to consumers was the steepest fall since the £4.5bn recorded in May 2020. January’s total takes the year-on-year fall to 8.9%, the biggest decline since monthly records began. The figures show that British lenders approved almost 99,000 mortgages in January, down from 102,800 in December. British households paid back £2.4bn of borrowing on credit cards, personal loans and overdrafts in the first month of 2021. The total amount outstanding on credit cards and loans shrank to £199.4bn, falling below £200bn for the first time since April 2017.

Manufacturing optimism up

The IHS Markit/CIPS Purchasing Managers’ Index for February increased to 55.1 in February from 54.1 a month earlier, with UK manufacturing activity returning to its highest levels since the start of the most recent lockdown. The index, where a reading above 50 signifies growth, shows that optimism rose to a 77-month high last month. Despite this, 58% of companies reported longer delivery times from suppliers. Rob Dobson, director at IHS Markit, commented: “The UK manufacturing sector was again hit by supply chain issues, COVID-19 restrictions, stalling exports, input shortages and rising cost pressures in February.” He added: “Look past the headline PMI and the survey reveals near stagnant production, widespread shipping and port delays and confusion following the end of the Brexit transition period.”

£520m support for small businesses

Rishi Sunak is set to announce a £520m scheme that will help 130,000 UK SMEs access management training, technology advice and discounted software. The Help to Grow scheme will offer two streams, with the digital strand an online service offering free advice on how companies can improve their digital capability as well as vouchers for discounts on approved tech, while the management portion will provide subsidised training to “enhance the skills of leaders” in areas such as financial management and marketing. The Federation of Small Businesses welcomed the news but warned: “We cannot allow poor infrastructure through a lack of broadband or 5G to prevent small firms from getting a foothold on to important schemes like this.” The Chancellor said: “Brilliant small and medium-sized enterprises are the backbone of our economy – creating jobs and prosperity.” He added: “Help to Grow will ensure they are embracing t he latest technology and management training, fuelling our plan for jobs by boosting productivity.”

Firms fear taxing time and Budget battering

Matthew Lynn in the Telegraph says most businesses are expecting a “battering” in the Budget, pointing to speculation over an increase in corporation tax, an online sales tax and a rise in capital gains tax. He suggests that among the possible tax rises, the Chancellor should “at least throw a few morsels in the direction of business”, proposing increased incentives for investment and a “radical simplification that sweeps aside dozens of fiddly reliefs and allowances”. Mr Lynn, questioning the need for tax increases, says corporate taxes are “always passed on to individuals one way or another, it is just a question of how and when”.

Pandemic stalls women’s workplace progress

A report from PwC shows that the coronavirus crisis has halted and reversed years of women’s progress in the workplace, with women more likely to lose their jobs or be furloughed. The report says female-dominated industries have the highest share of furloughed jobs, with more than half of those on the scheme women, even though only 48% of the workforce is female. The report says the pandemic has halted nine years of “consistent gains towards women’s economic empowerment”, with PwC’s Laura Hinton saying the findings reveal the “very real” impact of the pandemic on women.

CIPD: Apprenticeships levy ‘has failed on every measure’

The Chartered Institute of Personnel and Development (CIPD) says employer investment in training has fallen since the introduction of an apprenticeship levy in 2017, with a decline in apprenticeship starts and fewer going to young people. The HR industry body says total apprenticeship starts have fallen from 494,000 in 2016/17 to 322,500 in 2019/20, with the number of apprenticeships going to under-19s falling from 122,800 to 76,300 in the period. Peter Cheese, chief executive of the CIPD, said: “On all key measures the apprenticeship levy has failed and is even acting to constrain firms’ investment in apprenticeships and skills more broadly.” He warned: “Without reform it will act as a handbrake on employer investment in skills, damaging firms’ ability to recover from the pandemic.”

43% of finance firms move jobs to the EU

A report from EY shows that 7,600 jobs in the financial sector have moved abroad because of Brexit, with 100 relocated since October. In total, 43% of businesses in the sector have moved or plan to move some of their operations or staff to the EU. EY found that Dublin and Luxembourg were the most popular alternatives to Britain. The firm’s Omar Ali commented: “Financial services firms across Europe have a number of chapters still to write before they can close the book on Brexit.” Meanwhile, more than a quarter of firms polled by EY said that Brexit was having a negative impact on their business.

House Prices

UK House Price Growth beat expectations last month rising to 6.9 per cent from 6.4 per cent in January, according to Nationwide’s latest figures. The 0.7 per cent growth more than offset the 0.2 per cent monthly decline recorded at the start of the year.

Housing market faces pressure

With Bank of England data showing borrowers took on an extra £5.2bn of debt for home purchases in January, Howard Archer, chief economic advisor to the EY Item Club, has warned that support to the housing market coming from the rise in the stamp duty threshold “has recently started to wane”. With it reported the Chancellor could extend the stamp duty holiday until June, Mr Archer says this “would likely provide near-term support to housing market activity and prices” but adds that the housing market is “likely to come under mounting pressure over the coming months”, saying the recent strengthening in the market “has been disproportionate given the economy’s contraction over 2020 and rising unemployment.”

European Manufacturing

The euro area’s factory output accelerated during February. The IHS Markit purchasing-managers’ index for European manufacturing rose to a three-year high of 57.9, much higher than the figure of 50 that separates expansion from contraction. The solid reading for Italy and improvements for France and Germany helped the Euro bloc to beat estimates.


Zoom announced that its revenue more than quadrupled in 2020, compared with 2019. The videoconferencing firm’s amazing year brought in $2.7bn, trouncing already sky high analyst estimates. Time will tell how much of the firms custom continues after the pandemic passes.

Taylor Wimpey

Taylor Wimpey reported a 68% slump in annual profit after construction markets were hit by the Covid-19 pandemic and associated lock-downs. The company, however, resumed dividend payments, citing a recent bounce bank in demand and its cash position.

Halfords reviewing tax perk payback

Halfords is to pay back £10.7m in furlough scheme cash to the Government after enjoying better than expected sales at the start of this year, however it has yet to confirm whether it will repay business rates relief, having previously said the issue was “under review”.

Dodds suggests Labour would back rise in corporation tax

Shadow Chancellor Anneliese Dodds has indicated that Labour would back a gradual increase in corporation tax across this parliament, saying that while the party would not back an immediate hike in tomorrow’s Budget it is open-minded about future increases. Ms Dodds, writing in the Guardian, says it is “hard to find a serious economist who believes that immediate tax rises would achieve anything other than damaging Britain’s recovery”, but says there is “a clear long-term case for rises in the rate of corporation tax”. She also said Labour would support reforms to tighten corporation tax loopholes. The Guardian reports that Labour would not automatically oppose the freezing of the income tax threshold. Meanwhile, Ms Dodds, in a speech to Bloomberg, said Labour would be “guided by the economic situation” on when taxes should be increased. She pointed to “tremendous anomalies” in the tax system, noting a “big gulf ” in the way high street stores and online retailers are taxed.


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