Freedom day – business news 19 July 2021
James Salmon, Operations Director
Freedom day arrives, Economic uncertainty remains as lockdown lifts, Consumer confidence climbs and hits pre-pandemic level, CBI in pingdemic warning and lots more news
Freedom Day
Its the 19th July and much of the country is celebrating freedom day while the rest of the country nervously looks on and the rest of the world watches our experiment on our population. Polling suggests a majority of Britons would like to see many of the current restrictions continue.
While almost all restrictions imposed to curb the spread of coronavirus were lifted in England today, sharply rising levels of Covid-19 mean the country is nowhere near returning to normal.
The Government argue that vaccination has driven covid-19’s fatality rate down from 0.8% of estimated infections to below 0.1%, the same as for seasonal flu.
The Government is lifting restrictions just as new cases of the delta variant spike and the UK is actually leading the world for new daily reported infections. Both sides estimate that new cases are going to hit 100,000 a day. The Government is pressing ahead because they wonder if not now, when will restrictions be lifted. The school holidays will provide a natural breaker on the spread alone, and as we spend more time outside in the hot weather that should help.
But the rise infections is highlighted by the new Health Secretary Sajid Javid contracting the virus and the prime minister and chancellor were forced into a U-turn and are now self-isolating after contact with him, after initially trying to say they would just test daily.
Meanwhile businesses are being ravaged by staff shortages as they lose increasing number to the virus and far more who are being pinged by the NHS app and told to self isolate after contact with someone infected. A record 520,194 people in England were “pinged” by the National Health Service Covid-19 app and advised to self-isolate in the week ending 7th July.
Many other businesses are ignoring the lifting of restrictions and maintaining the current Work From Home (WFH) protocols. And many transport networks are maintaining their rules on mask wearing.
Pressing ahead with Freedom day seems either hollow or fool-hardy. The world watches on.
Economic uncertainty remains as lockdown lifts
With England seeing an end to most of its pandemic-related restrictions today, Larry Elliott in the Guardian reflects on the economy. He says that “things have got very messy indeed”, with the lifting of restrictions having been delayed, uncertainty around some of the guidance and Government advice urging people to remain cautious – arguing that this “will affect consumer and business behaviour.” On positives, he highlights that the economy proved more resilient to the winter lockdown than initially feared; millions of workers have come off furlough; job vacancies are up; and that activity has surged as restrictions have been eased along the Government’s roadmap out of lockdown. However, Mr Elliott warns that the “economy still has ground to make up” and suggests the winding down of the furlough scheme may see redundancies. He considers how the withdrawal of support measures will play out and whether the Chancellor will need to rethink his strategy if the economy stalls. On economic policy, Mr Elliott suggests the Treasury and Bank of England may need to “err on the side of generosity”, warning that the risk for both is “assuming the economy is stronger than it is”.
Consumer confidence climbs…
With lockdown restrictions lifting, PwC analysis suggests that people are more eager to spend than at any point in at least 13 years, with its Consumer Sentiment Index showing its most optimistic reading since it was launched in 2008. The survey of 2,000 adults shows that in regard to disposable income, more households than ever said expect to be better off in the next 12 months. Optimism has been boosted by savings accumulated during the pandemic, with lockdown measures limiting spending opportunities. Lisa Hooker, head of consumer markets at PwC, said: “It’s fantastic to see consumer sentiment remain buoyant as we begin to emerge from the pandemic and all lockdown restrictions are lifted.”
… and hits pre-pandemic level
A Deloitte poll has shown consumer confidence to be at its highest level since Q4 2019, the last quarter before the pandemic started to have an impact. Outlook improved by two percentage points in the three months to June, according to Deloitte, while sentiment on the economy continued to recover and was up 23 percentage points from the start of the year. Confidence in both job security and job opportunities rose, by four and six percentage points on the previous quarter respectively, although there was a dip in confidence around personal debt. Debapratim De, senior economist at Deloitte, said: “We expect the six months between April and September to deliver greater growth than seen over the four years before the pandemic.” She added: “With an overwhelming majority of respondents reporting increased savings, the stage is set for a consumer driven rebound in activity.”
CBI in pingdemic warning
The Confederation of British Industry (CBI) has urged the Government to tackle the so-called pingdemic, with firms warning that the number of staff being told to isolate by the NHS Covid app is posing a risk business. The business lobby group has urged ministers to amend the self-isolation policy, saying “speed was of the essence” as staff shortages threatened to close shops and bring production lines to a halt. CBI president, Karan Bilimoria, said: “With restrictions being lifted and cases rapidly increasing, we urgently need a surefooted approach from government.” He added: “Building and maintaining confidence is key to securing the economic recovery.”
Markets
Global markets turned red on the fear of inflation and the resurgence of the virus’ Delta variant.
Profit warnings hit record low
Public companies issued the lowest ever number of profit warnings this spring, according to EY-Parthenon research, with just 32 listed firms saying their earnings were set to be worse than forecast in Q2. The record low comes in stark contrast to the all-time high of 301 see in Q1 2020.
GlaxoSmithKline
GlaxoSmithKline set out plans to transform a site in Stevenage, with the pharmaceutical company in the hunt for a development partner to turn the English town into a life sciences leader. GSK said it seeks to unlock £400 million in new investment from the private sector, and aims to create 5,000 “highly-skilled” jobs over the next five to 10 years.
OPEC
OPEC+ have reached an agreement to ramp up oil supply. The alliance will increase oil production by 400,000 barrels a day in a move expected to dampen soaring oil prices. As part of the deal, the group will reverse an existing cut of 5.8m barrels per day by September next year.
House Prices
UK House Prices have reached another record high, highlighting that demand in the housing market is still running hot, new figures released today reveal. The average price of a property coming to market jumped 5.7 per cent annually to £338,447 in July, according to property search site Rightmove.
Ocado
Ocado fears disruption this week after a major fire at a south east London warehouse. Several dozen firefighters were called to the company’s depot in Erith on Friday afternoon after a robot collision resulted in the conflagration. The Erith site handles up to 150,000 orders a week.
Workplace mental health: tech cuts the cost but therapybots raise concerns
Companies are increasingly offering mental health services to employees, with Deloitte analysis suggesting that every £1 spent on such support for staff yields an average return of £5.
Initial economic experiences affect relationships with work
Research from the Resolution Foundation suggests that the experience of young people entering the labour market during a downturn stays with them, with such workers shown to earn less for six years afterwards, compared with those starting work during an economic boom. The study found that graduates leaving university amid the financial crisis saw their chance of working in a low-paying occupation rise by 30%, with the likelihood remaining elevated for seven years. Detailing the findings in the Guardian, Resolution Foundation chief executive Torsten Bell notes separate analysis showing that those entering the world of work in bad economic times become risk-averse, attaching more importance to income than those who join the workforce when economic conditions are more buoyant.
UK falling short on female firepower in economics
Ruth Sutherland in the Mail looks at a lack of “female firepower” in economics in the UK, highlighting that while Janet Yellen is Treasury Secretary in the US, Christine Lagarde is head of the European Central Bank and Kristalina Georgieva is managing director of the International Monetary Fund, the UK has never had a female Chancellor or Bank of England governor. She says that regardless of high-profile role models, there is a widening gender gap at a grass roots level, with women “very poorly represented” in university economics departments. A recent study for the Royal Economic Society, Ms Sutherland says, “made for gloomy reading”, showing that women account for just 27% of economics students. Noting that there is also a “dearth” of economists from working-class backgrounds, she says under-representation “affects what questions economists ask and address, and the nature of the advice they give on public policy and to companies.”
Firms owe HMRC billions after VAT holiday
Firms that were allowed to defer tax payments during the initial lockdown still owe HMRC £2.7bn. This equates to 9% of the total of VAT that was deferred. Figures show £17.8bn has already been paid and £13bn is due through monthly instalments. While the June 30 repayment deadline has passed, 156,500 out of 590,000 businesses that took advantage of the VAT deferral have failed to contact the tax office over settling bills. HMRC has said that businesses that fail to get in touch to arrange VAT payment plans will face penalties of 5% of the money owed, plus interest. John Hood of Moore Kingston Smith notes that HMRC has new powers to make directors and members of businesses personally liable for debts where there is the risk the business will fold, adding that the tax office “will have no problem with unleashing the debt management unit to enforce and secure the debt.”
Labour would not oppose a social care tax
Shadow health secretary Jonathan Ashworth says Labour would not oppose a tax to cover social care costs, but suggested ministers “would need to guarantee that the yield from that tax rise is hypothecated for health and social care.” He told the BBC’s Andrew Marr Show: “We know that Rishi Sunak is a tax-rising Chancellor, he wants to put up taxes on hard-working families, so he’ll need to ensure, to guarantee, that everything that comes from that tax rise goes into health and social care.” His comments came in response to reports that the Government could introduce a tax as part of social care reforms. Elsewhere, former health secretary Jeremy Hunt addressed the issue on BBC Radio 4’s The World This Weekend, saying that fixing social care could cost between £7bn and £10bn a year. He suggested that to fund this “you are really talking about either tax rises or having to cut spending in other areas”, declaring tax the “most progressive way”.
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