Half of firms unable to run at full capacity -business news 3 September 2021

James Salmon, Operations Director.

Half of firms unable to run at full capacity. Acquisitions of SMEs up 60% in H1.  REC warns of continued staff shortages and supply chain disruption. Staff shortages may drive food production overseas. Food and drink exports to EU plummet. Retail sales climb in August and more business news.

Half of firms unable to run at full capacity
Half of all UK businesses are currently unable to run at full operational capacity, according to research commissioned by logistics firm One World Express. The poll of more than 350 decision-makers found that 50% have seen no improvement in business performance since lockdown restrictions began to ease in April. It was found that half of all businesses have experienced staff shortages as a result of employees being asked to isolate. This left 81% of small businesses understaffed, while the rate among firms with 250 or more employees was lower, at 54%. While half of UK firms have been unable to return to full operational capacity, among micro businesses – those with two to nine employees – the proportion is 71%. Close to two-thirds (63%) of respondents believe the Government should be clearer on long term financial support for businesses. Despite the impact of the pandemic and resulting lockdowns, 56% of those polled remain confident about the future.

Acquisitions of SMEs up 60% in H1
Data from Dealsuite suggests interest in acquiring SMEs surged in the first half of this year, with buyout firms and large companies looking to capitalise on undervalued high-growth businesses. The report reveals that the number of SMEs with revenue between £1m and £200m sold in the UK and Ireland was up 59% in H1 compared with the first six months of 2020. The research, which polled 318 mergers and acquisitions advisory firms found that UK and Irish SMEs were sold for 5.5 times their gross profit, on average.

REC warns of continued staff shortages and supply chain disruption
A report by the Recruitment and Employment Confederation (REC) suggests the economic impact of the pandemic could see continued labour shortages and potential supply chain disruption. Neil Carberry, REC’s chief executive, said that while “large numbers of people are finding new work post-pandemic as the economy reshapes … that realignment will take time.” He added that there is evidence to suggest that the market “will remain tight for some years to come, even if the current crisis passes.” REC’s jobs tracker showed there were almost 1.7m active job adverts during the final week of August, with demand for workers continuing to build amid ongoing staff shortages.

Staff shortages may drive food production overseas
The British Retail Consortium (BRC) has warned that staff shortages may force some of the UK’s food manufacturing overseas. Andrew Opie, the BRC’s director of food and sustainability, said shortages of HGV drivers and other supply chain staff meant that the sector was “just on the edge of coping”. He told a UK Trade and Business Commission meeting that while driver shortages are presenting a challenge, shortages in manufacturing and food processing are more of a concern. Mr Opie said that while the UK has a “very highly skilled, well run” food manufacturing sector, it is currently under such strain that without filling vacancies, retailers may have to “look elsewhere and will end up offshoring some of that production”. Meanwhile, Alex Veitch from UK Logistics told the meeting of challenges presented by driver shortages. He pointed to the impact of a backlog in HGV driver tests because of the pandemic and also called for a temporary visa enabling drivers to come and work in the UK.

Food and drink exports to EU plummet
Data from the Food and Drink Federation (FDF) shows food and drink exports from the UK have seen a steep decline, with a sharp drop in trade with the EU after Brexit a factor. While producers saw increased sales to non-EU countries, there was a £2bn fall in sales to the EU in H1 2021 compared to the first six months of 2019. Dominic Goudie, head of international trade at the FDF, described this decline as “disastrous”, adding that it “clearly demonstrates the serious difficulties manufacturers in our industry continue to face and the urgent need for additional specialist support.” Analysis of the figures by product category show beef was the hardest hit, with exports down 37%, while cheese was down 34% and milk and cream fell by 19%. The report shows that food and drink exports to Ireland fell by more than £500m in the first half of the year.

Retail sales climb in August
Data from BDO has revealed that retail sales continued a sustained rebound last month, with this driven by a continued boom in online shopping. Figures show that same store and online sales rose by 20.1% in August. Sophie Michael, BDO’s head of retail and wholesale, warned growth rates were slowing, commenting: “There is the risk that ongoing disruption and growing costs for retailers could lead to higher prices in the lead-up to Christmas.” She added that, while it may seem like a “distant concern”, with logistics experts suggesting that some issues are unlikely to be resolved until early 2022, “the next couple of months will require careful planning by retailers.”

Gym group

Gym Group reported a ‘rapid recovery’ in membership numbers as it reopened sites in the wake of enforced closures earlier this year. It came as the company, posted a £28.4 million pre-tax loss for the six months to 30 June.The firm saw its losses more or less static after revenue slumped by 21.4% to £29.3 million year-on-year.

Indefinite WFH for Treasury civil servants
Treasury civil servants will be allowed to work remotely indefinitely, jobs adverts have revealed. Listings seeking HM Treasury staff say they will be allowed to work from home in a hybrid pattern on a permanent basis, spending an average of two to three days a week in the office. City A.M. notes that there are about 484,000 government workers, with each department allowed to decide on how to manage flexible working arrangements.

Sipp commercial property queries surge
The pandemic has seen a surge in interest in commercial property from self-invested personal pension (SIPP) advisers and clients, according to adviser Curtis Banks. The firm has seen a 56% increase in commercial property queries in the first half of 2021 compared with H1 2020. It noted an increase in queries regarding connected party purchases – deals where a person uses a pension to purchase a property they already own, such as business premises. This, it suggests, stems from owners looking to release cash back into their business. Curtis Banks says commercial property is a popular investment due to the tax efficiency of the investment, including rent being paid tax free directly to a Sipp, and there being no capital gains tax on disposal.

PM set to announce tax increase to cover care reform costs
Boris Johnson is set to announce a tax rise to cover the cost of social care reform, with the Prime Minister expected to insist that National Insurance must be increased. The move will come despite an election pledge in 2019 that saw the Conservatives promise not to raise the rates of income tax, National Insurance or VAT. The expected increase in NI will see around 25m people pay extra tax, with this enabling officials to cap the amount an individual will ever pay in social care costs. A source has told the Telegraph that officials are yet to agree on the scale of the tax rise, with Downing Street reportedly eyeing a 1% rise while the Treasury calls for a steeper increase of as much as 1.25%. Elsewhere, the Times reports that Health Secretary Sajid Javid has called for a 2% increase in National Insurance, arguing that a 1% increase for employers and employees that would raise about £10bn will not be enough. Meanwhile, Fraser Nelson in the Telegraph reflects on the plan to up the National Insurance rate, pointing to a manifesto claim that the Tories “not only want to freeze taxes, but to cut them too”, saying that if this is “to be junked in favour of the opposite agenda”, the move will “need a fair bit of explanation”. Suggesting that it may be another decade before the Conservatives can fight an election promising not to raise taxes, he deems this “quite a political price to pay”.

Down-valuations hit 400k as house prices rise
Nearly 400,000 property transactions were down-valued last year, as more mortgage lenders were affected by rising house prices. Around 390,285 homes have been down-valued by surveyors working for lenders, according to data from Benham & Reeves. The estate agent says the average down-valued property saw a price drop of between £5,000 and £10,000 last year. An average drop of £7,500 means the average down-valued UK house fell in price by 2.8%.

Financial services exports to Europe rise
Financial service exports to the EU rose in the quarter after Britain left the EU, Office for National Statistics (ONS) figures show. The bloc imported 1.4% more from UK banks, insurers and other finance firms in the first three months of the year compared with the same period of 2019 – with 2020’s figures omitted due to pandemic-driven distortions. The data also shows that financial services exports from the EU to the UK fell by more than a third. During the same period, exports of legal, accounting, management, consulting and public relations services to non-EU countries rose by more than a third, while sales to the EU slipped by 1%. It is noted that financial services exports are worth £56bn annually and just over a third go to the EU, according to industry body TheCityUK.

DWP: 88% of eligible workers enrolled in workplace schemes
The number of people saving in workplace pensions has remained stable during the coronavirus pandemic, according to figures from the Department for Work and Pensions (DWP). Overall, 88% of eligible employees, or 19.4m, were participating in a workplace pension in 2020 – a similar proportion as was the case in 2019.

Executive pay comes under increased investor scrutiny
Analysis shows that the most recent AGM season saw investors in Europe’s seven biggest markets increase their opposition to executive pay and the re-election of some directors. The report from consultancy firm Georgeson found that contested director elections – votes seeing significant dissent of more than 10% of votes cast – increased 37% year-on-year across the UK, the Netherlands, Germany, Spain, France, Switzerland and Italy. This marks an 18% increase on 2020’s AGM season. Spain saw the highest proportion of contested pay resolutions at 60.6%, with this up a third from the year before. France and Switzerland saw the highest levels of rebellion against the re-election of directors, with the respective rates up 77.3% and 142%. Domenic Brancati, CEO for UK and Europe at Georgeson, said the report serves as “a warning for companies to focus on their shareholder engagement and education”.

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