End of lockdown delayed – business news 14 June 2021.

James Salmon, Operations Director.

End of lockdown delayed by a month,  Sunak urged to extend help, Brexit hits trade with the EU,  Factories look to regain lost ground by end of 2022, recovery can’t happen until the pandemic ends,  Inflation warnings premature, Staff shortages may drive up wages, Company closures spark loan fraud fears & more.

End of lockdown delayed by a month

Sources have revealed that the Government is considering delaying the lifting of England’s remaining coronavirus restrictions, which are due to come to an end on June 21, by up to four weeks amid growing concern over increasing case numbers and the higher transmissibility of the Delta variant.

The variant, first identified in India, now accounts for nine in 10 coronavirus cases in the UK and Public Health England data suggests it is around 60% more transmissible than the variant first identified in Kent.

There may be some relaxation of restrictions on weddings and major sporting events, one official said.

Parliament must approve any extension, which will be particularly difficult for many Conservative backbenchers.

Sunak urged to extend help if lifting of restrictions is paused

With speculation increasing that the Prime Minister will push back the June 21 lifting of restrictions, the British Chambers of Commerce (BCC) has said Chancellor Rishi Sunak would need to delay the tapering of the furlough scheme and has called for cash grants to support firms. These measures, the BCC added, “need to be in place until the economy is able to reopen fully”.

Separately, Kate Nicholls, chief executive of UK Hospitality, said that full business rates relief, which runs until the end of this month, should be extended by three months if the end of lockdown restrictions is delayed. Industry estimates suggest a four-week delay to the end of restrictions will cost pubs, bars, hotels and restaurants £3bn in lost sales and £4bn to the economy overall.

Brexit hits trade with the EU

New data suggest Brexit is depressing UK trade with the EU, with imports and exports in the first four months of the year down by a quarter compared to 2019. The Office for National Statistics figures show trade with the EU in April was down 12% on that recorded in April 2019, with a 25% decline recorded when comparing figures covering the January-April period. It was also shown that trade with non-EU countries fell by just 4% between January and April and rose by 3% for April alone.

Thomas Sampson, associate professor at the London School of Economics, said: “Comparing changes in trade with EU versus non-EU gives a rough estimate of the Brexit effect”, saying Brexit has cut goods trade with the EU by 21% so far in 2021 compared to 2019.

Factories look to regain lost ground by end of 2022

A survey by trade body Make UK and BDO has found that manufacturers are upgrading their growth forecasts, with the sector on track to see output return to pre-pandemic levels by the end of 2022. Factories are expecting an increase in domestic and overseas orders, with this driving up hiring intentions.

While the sector saw output slip 10% in 2020, manufacturers are likely to recover much of those losses this year, with the sector set to outpace the growth of the wider economy. The report notes the positive impact of the temporary “super-deduction” which allows companies to cut their tax bill by up to 25p for every £1 they invest.

BDO’s head of manufacturing Richard Austin, said the super-deduction, which ends in 2023, “has provided the incentive manufacturers needed to bring forward their investment plans.”

Inflation warnings premature amid third wave

Richard Partington in the Guardian says that while a third wave of coronavirus infections threatens to delay the end of lockdown restrictions, “there has been very little focus among economists on the economic consequences”. He says that rather than worrying about the economic impact of a stalled exit from lockdown, “more attention is being paid to the dangers of the economy overheating”. Mr Partington says that while last autumn many economists remained concerned about downside risks despite “red-hot” economic growth as lockdown measures were eased, concern now seems focused on a “dangerous inflationary beast” rather than the risk being posed to growth. There are, he adds, “doubts about whether the current inflationary burst is simply a bottleneck moment, or the early signs of lasting upward pressure”. Noting the risk of over-emphasising the strength of the economy and the dangers for inflation, he argues that it “isn’t a time to count your chickens”, with the story of the pandemic “far from over”.

Biden: Economic recovery can’t happen until the pandemic ends

US President Joe Biden says the global economic recovery cannot occur until the pandemic is brought under control. Speaking at a G7 news conference, he said: “We know that we have to deal with the pandemic in order to be able to deal with economic recovery”.

Staff shortages may drive up wages

The Sunday Times said a labour market squeeze threatens to hamper the economic recovery, warning that while some commentators had suggested the pandemic would deliver a “jobs bloodbath”, Britain is now “desperately short” of workers due to an exodus of EU nationals and the furlough scheme. This raises the question of whether wages will need to increase.

Nigel Bolton, co-chief investment officer of BlackRock’s fundamental equity group, said he could see “early signs of wage inflation”, while James Reed, chairman of recruitment firm Reed, said wages being offered through his business are rising. Considering whether higher wages will be a key factor, Tony Wilson, director at the Institute for Employment Studies, said: “The point is going to be more about whether you can offer better terms and give workers more control over the hours they work”.

Data from the Office for National Statistics and jobs agency Adzuna last week showed that there were more online vacancies than in the same week of 2019. Meanwhile, LinkedIn research suggests that jobseekers are being put off by fears of a “last in, first out” situation where they could be laid off by their new employer if there is a downturn.

G7 talks yield tax agreement

The Mail offers a breakdown of key topics covered by the leaders of the UK, Canada, France, Germany, Italy, Japan and the US at the G7 summit.

The leaders endorsed a global minimum tax of at least 15% on multinational corporations, a plan outlined by G7 finance ministers that is designed to stop businesses from using tax havens to shift profits and to avoid taxes. The paper says that while the G7 nations hope more countries will sign on, this is a “fraught proposal in nations with economies based on using low corporate taxes to attract businesses”.

Elsewhere, the Guardian reflects on the plans discussed at the summit, saying critics fear the G7 has “let multinationals off the hook” with a minimum tax rate that fails to prevent tax havens thriving, “and could force high tax countries in a race down to the 15% level”.

G7 leaders also roundly condemned China as they concluded their annual summit. The group of rich democracies criticised China over human-rights abuses in Xinjiang, the removal of autonomy from Hong Kong. A spokesman for the Chinese embassy said that “the days when global decisions were dictated by a small group of countries are long gone.”

Company closures spark loan fraud fears

Experts have warned that thousands of pandemic-related loans may have been fraudulently claimed and might never be returned to the taxpayer, with concerns raised after the number of companies being shut down jumped.

Figures from Mazars show that almost 40,000 firms were struck off in the first three months of the year, a rise of 743% on Q1 2020.

The increase has driven concern that some businesses deliberately stopped trading so they could be struck off and avoid repaying their loans. Mazars’ director of restructuring services Michael Pallott said: “Many of these loans will have gone to legitimate businesses who have not survived the last year. When it comes to those who were less honest, however, the task of pursuing bad debtors who never intended to pay these loans back will be costly and time-consuming without the right tools.”

Economy grows for third consecutive month

Office for National Statistics (ONS) figures show that GDP rose for the third consecutive month in April, with the economy growing 2.3% as the easing of lockdown measures delivered a rebound in consumer spending. While the increase marks the fastest monthly growth since July 2020, the economy is still 3.7% below a pre-pandemic peak recorded in February 2020. Analysis shows that GDP grew by 1.5% in the three months to April compared with the previous three months. While GDP shrank by 1.5% in Q1, on a monthly basis the economy has been recovering ever since a 2.5% contraction in January, posting growth of 0.7% in February and 2.1% in March.

Chancellor Rishi Sunak said that the ONS figures released yesterday were “a promising sign that our economy is beginning to recover”.

Debapratim De, a senior economist at Deloitte, said: “April and March’s GDP figures provide an early indication of the strong summer recovery coming the UK’s way”, while Yael Selfin, chief economist at KPMG, believes that economic activity levels in May and June will not rise at the same rate as the April rebound.

Small businesses at risk from double-booking plan

Small tourism-focused businesses in the UK could lose millions as holidaymakers plan to cancel at the last minute if restrictions change and they can travel abroad instead. Kurt Janson, director of the Tourism Alliance, said: “What is tending to happen is people are seeing they can cancel holidays at late notice and get full refunds and they’re taking advantage of that to do the double bookings”. A Visit Britain survey has found that 8% of people would cancel a UK trip to go abroad this summer, rising to 10% later in the year. Bed and Breakfast Association analysis suggests that if each of the UK’s 35,000 B&Bs had a week’s worth of cancellations over the summer, they could lose £17m in total.

Streaming cancellations jump

While Ofcom data shows that 12m UK adults signed up to new streaming services during lockdown, with 3m being first-time users, Deloitte analysis shows that cancellation rates for streaming services have nearly doubled from 20% before the pandemic to 37% from October to February. Deloitte vice chairman Kevin Westcott commented: “As fast as people are signing up to try new services, they’re deleting them once the trial period ends.”

Experience more valuable than postgraduate degree

A study has found that graduates who gained work or volunteering experience amid the pandemic are more employable than those who continued education. The Early Careers Survey 2021 from Prospects found that one in four university students took on a master’s qualification last year but the study warns that an additional qualification on its own will not help land a graduate job.

Charlie Ball, a graduate labour market expert at Prospects, said: “It was an extremely rational decision to swerve the jobs market for a year in 2020 but if all you’ve done is a master’s degree and no work experience at all, you’re going to struggle to show employers that you have those oven-ready work skills they need”.

Research by the Institute of Student Employers (ISE) shows that just 15% of employers believe postgraduates are more skilled than other graduates. ISE chief executive Stephen Isherwood comments: “Work experience is a far better predictor of graduates’ skills than a postgraduate degree”.

Banks may be boosted by stashed cash

Britain’s five biggest banks may see a £5bn windfall that could boost dividend pay-outs later this year, with a source telling the Mail on Sunday that while Barclays, HSBC, NatWest, Lloyds Banking Group and Standard Chartered stashed away cash to cover customer loans that turned sour during the pandemic, far fewer borrowers have defaulted or missed repayments than had been forecast. While Omar Keenan, an analyst at Credit Suisse, said the banks are “currently carrying about £5bn more in provisions than their current economic projections strictly say they need”, an unnamed banking chief executive said: “In terms of late payments and loan defaults, there’s been virtually nothing.”

IMF boss: Tax deal must be simple with ‘few deviations’

While Chancellor Rishi Sunak has suggested City of London firms should be exempt from the global tax plan agreed at the G7, International Monetary Fund managing director Kristalina Georgieva has suggested such a move may not be the way to go, saying the global tax plan should strive for “few deviations” from the broad principle. G7 finance ministers have agreed to try and push through a global minimum corporation tax of 15%, while also outlining plans to target large multinationals and make them pay 20% corporation tax based on where their sales are.

The Chancellor, who said the deal would get “the largest multinational tech giants to pay their fair share of tax”, has suggested that UK financial services firms should be exempt as the crackdown is aimed at US tech giants like Amazon and Facebook. However, Ms Georgieva says policies should “aim for simplicity”. She noted that developing countries have less capacity to administer tax, warning that anything that is more complicated “would create risks of derailing the purpose of generating more revenues to invest in health, education, infrastructure and the green transition”.


The Government is set to scrap half of its current steel imports safeguards, it was announced Friday, sparking cries of outrage from an already struggling industry. In 2019 the EU introduced the quotas to prevent the bloc from being flooded by excess steel products after Donald Trump imposed 25 per cent tariffs against imports to the US.

UK task force urges reforms to boost City and fast-growing sectors

A Government task force on innovation, growth and regulatory reform will recommend changes to rules governing financial services and fast-growing sectors to boost investment and take advantage of post-Brexit freedoms.

Sales at risk as stamp duty holiday deadline nears

A number of property sales are at risk of falling through if they are not completed before the stamp duty holiday deadline of June 30. Analysis by property data firm TwentyCi suggests that four in ten sales agreed before April 1 will not complete by the cut-off, meaning more than 160,000 buyers could miss out on tax savings of up to £15,000. The report from TwentyCi notes that more than 300,000 transactions were likely to have missed the original stamp duty deadline of March 31. However, the Chancellor opted to extend the tax break until the end of this month. Once the June 30 deadline passes, the stamp duty-free threshold on properties up to £500,000 drops to £250,000 until the end of September. Amid concern that deals failing to complete in time for buyers to benefit from the stamp duty holiday could cause property chains to collapse, a study by Rightmove shows that one in four buyers have said they would try to renegotiate the purchase price with the seller if they missed the deadline.

Demand may keep prices up when stamp duty holiday ends

The Sunday Mirror looked at what the end of the stamp duty holiday could mean for house prices. The tax break designed to support the housing market through the pandemic has seen a surge in deals and rising prices, with Halifax data showing that prices hit a record high last month, averaging £261,743. Reflecting on what may happen to the housing market once the threshold is reduced from £500,000 to £250,000 on July 1 – and £125,000 on October 1 – a Royal Institution of Chartered Surveyors spokesperson said: “Sales expectations on a 12-month horizon are flat, but expectations of further house price inflation appear to have intensified.” Halifax managing director Russell Galley said property prices will keep rising if demand stays high and notes a continued shortage of properties for sale. Meanwhile, a poll from mortgage broker First Mortgage shows that 61% of current first time buyers think the value of homes could drop later in the year, leaving them owing their lender more than the property is worth.

Record number of homes sell over asking price

A third of properties sold for more than their asking price in April, the highest number on record. Research from NAEA Propertymark also found the number of people looking for a house was at the highest level in April since 2004, with an average of 427 buyers registered with every estate agent branch. Mark Hayward, chief policy adviser at NAEA Propertymark, said: “The continued imbalance of supply and demand is a concern and has led to a strong sellers’ market.”

Mortgage interest burden lightens in spite of soaring UK house prices

Analysis of Bank of England data shows borrowers spent £31.6bn on mortgage interest in the year to April, the lowest annualised monthly figure in two decades, with average rates hitting 2.07%.

Boiler ban plan could be hit by heat pump shortages

A shortage of heat pump installers could hinder the Government’s plan to tackle climate change by banning gas boilers in new-build homes. While the homes standard will require low-carbon alternatives to gas boilers in all new homes by 2025, EY analysis shows that there are only around 1,200 qualified heat pump installers in the UK but almost 10,000 will be required by 2025. The report also suggests limited domestic manufacturing capacity and a lack of consumer awareness could have an impact on ministers’ climate-related ambitions.

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