GDP forecasts up – business news 23 April 2021.
James Salmon, Operations Director.
Hopes for consumption boom send GDP forecasts up, Zombies threaten to haunt the recovery, Public Sector Borrowing, Retail Sales and more.
Hopes for consumption boom send GDP forecasts up
A monthly survey of independent economists by the Treasury suggests that growth this year could be as high as 5.7%, up from the 4.7% predicted in March. The Times notes that JP Morgan, Oxford Economics and Bloomberg Economics expect growth of 7% or more, which would be the quickest economic advance in the post-war era. Allan Monks, UK economist at JP Morgan, is the most optimistic of the City forecasters, projecting 7.4% growth this year. The Treasury’s analysis also showed investment expanding at 7.4% and joblessness peaking at 6.2%, down from 6.4% expected last month.
Zombies threaten to haunt the recovery
The Times’ James Dean reflects on news that there are about 723,000 companies in significant financial distress in the UK and considers what can be done about these so-called zombie businesses. Most options are risky for the wider economy, at least in the immediate term, and there are as yet significant hurdles for these struggling businesses to overcome, such as the end of the furlough scheme, banks recovering loans and landlords collecting rent once again. Whatever remains will be fed by cheap debt and until interest rates rise they are likely to stagger on, dragging on the recovery.
Public Sector Borrowing
The cost of measures to support the economy during the coronavirus pandemic has pushed government borrowing to the highest level since the end of World War Two. Public Sector Borrowing surged to a record high in the past year after a huge rise in spending and tax cuts amid the pandemic. The UK Government borrowed £303.1bn in the last year, an increase of £246bn on the previous year, according to figures from the Office of National Statistics.
Retail Sales
UK Retail Sales continued to recover in March with a monthly increase of 5.4% as the nearing of restrictions loosening boosted consumer spending. This exceeded a prediction from economics of a monthly increase of 1.5% , data from the Office for National Statistics showed. Sales were 1.6% higher than in February 2020, before the impact of the pandemic.
Morgan Sindall
Construction company Morgan Sindall is ‘on track’ to deliver a full year performance which is ‘significantly ahead’ of its previous expectations. According to the latest update covering the first three months of 2021, the company said all divisions have made ‘positive operational and strategic progress’ in their markets and momentum across the group has continued to increase.
Small countries fight for best global tax solution
Ireland is embarking on a damage limitation exercise, Reuters reports, as it seeks to minimise losses from new global corporation tax rules. With consensus growing for a global minimum tax rate for multinationals, alongside taxes on sales in the country where they are realised, Ireland is pushing for the minimum to be as low as possible and for companies to be allowed to cut their tax bills in other ways. “The rate is the front line [for Ireland],” said PwC Ireland Managing Partner Feargal O’Rourke, adding: “There’s also the question of a minimum rate on what? The method of calculation and how it interacts with, for example, research and development and intellectual property, that’s all still in play.” Countries such as Hungary, which has a 9% corporate tax rate, share Ireland’s concerns and it too insists exemptions should be carved out for profits generated from real business activity such as research and development. Together with countries in the Baltics, the Nordics and Singapore, Ireland and Hungary have found themselves in an “alliance of small open economies” at the OECD.
Steep increase in new Scots tech firms
Analysis by RSM has found that 545 tech businesses were incorporated north of the Border in 2020, up from 485 in 2019. Ross Stupart, head of the firm’s technology and media team in Scotland, said: “Despite the acute impact of the COVID-19 and lockdown restrictions, it’s encouraging to see growth in the Scottish tech sector as entrepreneurs seize the opportunities that the pandemic has revealed for technology to support new ways of working and digital entertainment.” Additionally, in 2020, the UK attracted £11bn in investment, and ranks third internationally for tech incubations, according to the latest Tech Nation report – “demonstrating that the UK continues to stride ahead of other European countries, despite Brexit, and remains the first-choice tech hub after the US and China”.
HMRC only records 3% of salmon exports to EU
Us Salmons are are always undervalued. Scottish Salmon producers say HMRC has vastly miscalculated Scotland’s Salmon export figures for January. Speaking to the Scottish Affairs committee in Westminster, Hamish Macdonell, the Director of Strategic Engagement for Scottish Salmon producers, claimed the industry had sent 5000 tonnes of salmon to Europe in January, only for HMRC to record it as 80, or 3% of the total. “It is very difficult for you as a committee and for anyone else to assess the impact of Brexit when we don’t have a proper baseline on the stats,” Macdonell added.
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