Households repay £377m in consumer credit – business news 3 June 2021.
James Salmon, Operations Director.
Households repay £377m in consumer credit; Reopening hospitality in England fails to boost retail footfall in May; Small business boost as shoppers pick independents; Furlough scheme could hinder economic growth; Ministers will take gentle approach to office returns and more business news.
Households repay £377m in consumer credit
Bank of England figures show that households collectively made a £377m net repayment in consumer credit in April, with this including credit cards, personal loans and overdrafts. Analysis shows that while people have been making significant net consumer credit repayments since the first lockdown in March 2020, April’s net repayment was lower than the average £1.7bn that has been paid back each month over the past year. The amount of cash in bank accounts rose by £10.7bn in April. The fact this is far lower than the figures recorded in recent months suggests people are starting to spend more as the economy reopens, with a 9.2% rise in retail sales over the month also suggesting this may be the case.
Reopening hospitality in England fails to boost retail footfall in May
While data shows footfall to retail destinations was down 27% on levels seen in 2019 in May, KPMG’s Paul Martin notes that more shoppers than usual are spending, not just browsing
Small business boost as shoppers pick independents
A poll suggests small businesses may be set for a post-pandemic boost, with a third of shoppers saying they are now more likely to support independent retailers. A poll of 2,000 people saw 34% say they have used small businesses more frequently amid the crisis and intend to continue doing so, with half of this group saying they would rather spend their money with a small business than a large national firm. Just over half (52%) said they had made a conscious effort to shop more with small businesses than larger chains in the last year. The Vistaprint analysis suggests younger consumers are more likely to support smaller firms, with 49% of 18-24 year-olds and 43% of 25-34 year-olds declaring an intention to do so compared to 24% of those 65 and over. Reflecting on the report, futurist Andrew Grill said: “The pandemic has shifted retail behaviour, and SME’s nimble nature means they are positioned to take advantage of this new paradigm.”
Furlough scheme could hinder economic growth
Reed says it saw the best month for vacancies since February 2008 in May but has warned that the furlough scheme is hindering the hiring process. The jobs listing site added 275,000 roles in May, a 26% month-on-month climb and 237% year-on-year increase. Chairman James Reed said that while the job retention scheme “was a vital weapon in our fight against the pandemic last year … as time has worn on, it could hinder the economy’s recovery and growth,” saying the initiative is making it “harder to recruit” workers. Pointing to the impact of the pandemic and Brexit, Mr Reed stressed the importance of luring back workers to plug skills gaps, saying: “A relaxation of work visa rules for EU migrants or another policy which encourages these workers back will be essential in the coming months”. “Otherwise, the UK’s economy may not be able to grow as quickly as many hope,” he warned.
Ministers will take gentle approach to office returns
City A.M. reports that ministers will not take a hard-line approach to getting people back into the office once restrictions are fully eased, with a source telling the paper there needs to be “a co-operative, gentle reminder” that “is about extolling the virtues of people going back into work”. This contrasts to a stance taken last year where it was suggested firms could sack those who refused to stop working remotely post-lockdown. City A.M. says some business groups are calling for officials to help enable firms to implement a more flexible model. The British Chambers of Commerce wants businesses to be given “clear guidance, information and best practice resources” to help them “embrace the broadest range of remote, workplace and flexible working options as we emerge from the pandemic”. It is noted that firms including EY say they will utilise hybrid working schemes.
Mortgage lending falls back in April
Mortgage borrowing fell back in April from the record high seen in March, Bank of England (BoE) data show. Net mortgage borrowing totalled £3.3bn in April, down from £11.5bn in March. April’s total was also lower than the £5.7bn monthly average for the six months to February. The decline in April follows a rush to snap up homes the month before, with buyers looking to complete transactions before the end of the stamp duty holiday, with the tax break originally expected to conclude in March but now extended to June. The BoE report also shows that the number of mortgage approvals increased in April, hitting 86,900 compared to 83,400 in March.
HMRC in scam warning
HMRC has warned tax credit claimants to look out for scams, saying that as it sends out the remaining annual renewal packs, the timing could leave some customers vulnerable to fraudsters. Myrtle Lloyd, HMRC’s director general for customer services, said: “We’re urging all of our customers to be really careful if they are contacted out of the blue by someone asking for money or bank details”. Officials identified more than 576,960 bogus tax rebates in the last financial year.
B&M
BM European Value Retail reported 2021 revenues of £4.8bn a rise of 26% whilst profit rose to £525.4m. The board said the company was experiencing strong trading.
Tech giants avoided £1.5bn in UK tax
Analysis by campaign group TaxWatch suggests eight of the world’s richest tech giants avoided £1.5bn in UK tax in just one year. The report says Amazon, Apple, eBay, Adobe, Cisco, Google, Facebook and Microsoft made an estimated £9.6bn profit from sales to British customers in 2019 but by moving money the out of the UK or using clever accounting they paid less than £300m in corporation tax. George Turner, director of TaxWatch, said: “The UK is unarguably a significant source of corporate profits for these companies. But a glance at the accounts of their UK based subsidiaries shows that little of this profit ends up in the UK.”
US sets and suspends tariffs over digital taxes
The US has announced 25% tariffs on over £1.4bn worth of imports from six countries over digital services taxes it says discriminate against American companies. The Trade Representative’s office approved tariffs on goods from Britain, Italy, Spain, Turkey, India and Austria before suspending the duties immediately for up to 180 days to allow negotiations on international taxes to continue. US Trade Representative Katherine Tai said the US “remains committed to reaching a consensus on international tax issues”. She added: “The US is focused on finding a multilateral solution to a range of key issues related to international taxation, including our concerns with digital services taxes”.
Sunak: US tax plan ‘something we can work with’
Chancellor Rishi Sunak has suggested that a proposal on global tax put forward by the US that would see a focus on the world’s 100 biggest and most profitable firms could work. Reflecting that the G7 are making “really good progress” on reform plans, Mr Sunak said of the US plans: “It’s certainly something we can work with as long as it meets our objectives of getting at the right companies and on the face of it, it can”. “We just need to work through the details,” he added. While he said he could not go into detail over plans to simplify taxing multinational corporations by targeting the profits of the biggest companies that have benefitted most from globalisation, the Chancellor said the approach that has been set out in principle “is something that we can work with.”
Government opts against stamp duty reform
The Government will not cut or reform stamp duty, despite a holiday on the levy rolled out amid the coronavirus crisis helping to boost the housing market over the past year. Ministers say the tax, which raised £8.4bn in 2019/20, is an important source of revenue at a time when the public purse needs topping up after taking a hit during the pandemic. MPs on the Treasury Committee had recommended that stamp duty be reformed after its inquiry into tax head it described as not being fit for purpose. However, ministers said the levy is “an important source of Government revenue … is simple to collect and administer, and helps pay for the essential services the Government provides.” The Government response to the inquiry also warned that a permanent cut or removal of stamp duty “would be likely to have a significant cost to the Exchequer.”
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