Inflation drops – business news 19 August 2021
James Salmon, Operations Director.
Inflation drops to 2% in July. House prices climb at fastest rate since 2004. Caution urged over increased regulation. FTSE bosses take a pay hit. And referees score win in tax battle.
Inflation drops to 2% in July
UK inflation fell to 2% in the year to July, with data from the Office for National Statistics (ONS) showing that the Consumer Prices Index (CPI) fell from the 2.5% recorded in the year to June. July’s figure brings inflation in line with the Bank of England’s (BoE) 2% target and comes in lower than economists’ forecasts that suggested an increase of around 2.3% was likely. While price falls in clothing and footwear drove the dip in inflation, the ONS said decreases in other areas were “largely offset” by price rises in transport. KPMG’s chief economist Yael Selfin said the decline posted in July “masks the strength of inflationary pressures currently within the UK economy”, with inflation expected to climb “significantly above” the BoE’s 2% target as the year progresses. Debapratim De, senior economist at Deloitte, said that while July’s figures are lower than expected, “this does not signal an easing of underlying price pressures”, while Martin Beck, senior economic adviser to the EY Item Club, commented: “July’s data is likely to represent brief respite from the upward movement in inflation rates.” Tom Pugh, UK economist at RSM, said that while CPI inflation is expected to surge to 4% or higher by the end of the year, this is likely to be temporary and the rate should be back below the 2% target level by the end of 2022.
House prices climb at fastest rate since 2004
Figures from the Office for National Statistics (ONS) show that the annual rate of property inflation hit 13.2% in June, with this the biggest annual rise since November 2004. The data shows the average price rose by £31,000 to £266,000 over the past year, with pent-up demand and the Stamp Duty holiday helping drive the increase. Wales saw the biggest jump in house prices across the four countries of the UK, with an increase of 16.7% in the past year. In England prices were up 13.3%, while property price inflation hit 12% in Scotland and 9% in Northern Ireland. Regionally, North-West England led the way with an increase of 18.6% while London recorded the smallest annual increase at 6.3%. Reflecting on price increases, PwC economist Jamie Durham said: “Household savings have increased significantly for many during the pandemic, enabling buyers to put more towards their deposit and increasing the price they can afford.”
Caution urged over increased regulation
Reflecting on Office for National Statistics data showing that the unemployment rate has fallen to 4.7%, annual growth in average pay hit 7.4% and there were 953,000 vacancies in the last quarter, Annabel Denham and Len Shackleton in the Telegraph say it is “remarkable” that the labour market has remained so robust amid a year of uncertainty, restrictions and closures. However, they warn that “we’re not out of the woods yet”, saying the end of the furlough scheme could see a “temporary blip” in unemployment, while a future increase in coronavirus infections could see fresh restrictions.
They also voice concern that new employment rights sought by campaigners could pose a threat to the jobs recovery, pointing to calls for a right to work from home, a right to disconnect, a four-day week and greater restrictions on gig economy work. Denham and Shackleton argue that regulation is “in effect a tax on jobs”, with the burden falling largely on workers in terms of reduced pay and employment opportunities. Saying the failure to grow labour market productivity is one of the “unsolved economic problems” of recent years, they point to a survey suggesting that remote workers work longer but no more efficiently.
They suggest loosening or abolishing existing regulations may better minimise the impact of the pandemic than introducing new ones.
FTSE bosses take a pay hit
A report by the High Pay Centre think-tank shows that the median pay package of FTSE 100 chief executives fell to its lowest level since the financial crisis last year. Despite the dip, the rate was still 86 times the £31,461 median earnings of a UK full-time worker.
FTSE 100 bosses were paid a median £2.69m, a 17% decline on the £3.25m paid in 2019. The fall came as a number of CEOs saw reduced annual bonuses and voluntary pay cuts amid the pandemic.
Analysis shows that the number of FTSE 100 companies paying their chief executive a bonus fell to 64% from 89%, while those paying a long-term share incentive bonus dropped to 77% from 82%. Last year’s highest paid FTSE 100 chief executive was Pascal Soriot at AstraZeneca who received £15.5m.
The High Pay Centre said that the “substantial fall” in chief executive pay and a narrowing of the pay gap with the wider workforce “will be welcomed by anyone concerned about economic inequality”. However, it added that it is “questionable” whether the reduction in median pay “represents a sufficient economy” given the “immense hardship” experienced by many, the accumulated personal wealth of CEOs, and the fact that firms “will have been in a much worse position without government intervention.”
Referees score win in tax battle
Football referees have won a legal victory against the taxman, with HMRC having argued that match officials in England should not be classed as freelance workers for tax purposes but instead be reclassified as employees of their representative body, the Professional Game Match Officials Limited. Had the Upper Tax Tribunal agreed, it would have seen football referees – and potentially officials from other sports — pay National Insurance at 12%, the rate for employed workers, rather than 9%. However, the Upper Tribunal judge backed the referees body, saying that they should remain classed as freelance workers as they almost always had other day jobs. Reflecting on the Chancellor’s efforts to address issues around taxation of employment, Carolyn Brown of RSM said: “Ultimately, Rishi Sunak is looking to make sure that you have people who are either on payroll or off payroll, but can’t get the benefit of both situations for tax purposes.”
Why should you become a CPA member!
The Credit Protection Association (CPA) has been assisting thousands of UK businesses to get paid since 1914. We have seen many financial crises, this one will be particularly deadly for suppliers for some time to come.
CPA eases cash from tardy debtors – Efficiently, Effectively, Economically and Ethically. And we provide credit information so you can monitor and assess your key customers.
Unlike other credit management companies, we charge our members a fixed annual subscription irrespective of how high the debt value is!
It takes less than 17 minutes to see how you would benefit, do you have the time now?
No face-to-face meeting required – just call Peter Uwins, CPA’s National Sales Manager, on 020 8846 0000 (business hours) or email nsm@cpa.co.uk today.
When you see your money come in, you will be so glad you used CPA.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
Get compensated for previous late payments
Have you been paid late by business customers in the last six years?
Maybe you no longer work with them. Under legislation, you are entitled to compensation you for those late payments you have suffered.
You put up with the PAIN – now claim the GAIN!
Claim late payment compensation (LPC) from former business customers who paid you late in the last six years!
CPA (LPC) Recoveries is using our bespoke software and decades of experience to do just that for our clients
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.