Inflation Surged – business news 15 September 2021

James Salmon, Operations Director.

Inflation Surged.  Job vacancies hit a record high. Starmer outlines ‘new deal for workers’. MPs back tax hike to cover health and care costs. Chancellor warned over tax year reform and more business news.

Inflation Surged to 3.2%

The UK rate of inflation surged to 3.2% in the year to August, the largest increase since records began in 1997, as the economy continued to re-open.

The Consumer Prices Index (CPI) measure of inflation rose from 2% in July, according to the Office for National Statistics (ONS), drivenmainly by higher food costs.

It is now above the Bank of England’s 2% target, aimed at keeping price rises steady.

The cost of living rose less rapidly in July because of lower clothing and footwear prices.

However, the ONS urged caution in reading too much into August’s price increases, which it described as “temporary”.

Eating and drinking out cost more last month in comparison with August 2020, when the Eat Out to Help Out Scheme was running and diners got a state-backed 50% discount on meals up to £10 each on Mondays, Tuesdays and Wednesdays. At the same time, business owners in the hospitality and tourism sectors received a VAT discount, designed to help some of the industries worst hit by the pandemic and reduce prices

Jonathan Athow, deputy national statistician at the ONS, said: “August saw the largest rise in annual inflation month-on-month since the series was introduced almost a quarter of a century ago. However, much of this is likely to be temporary, as last year, restaurant and cafe prices fell substantially due to the Eat Out to Help Out scheme, while this year, prices rose.”

In August 2021, transport costs also increased. Average petrol prices stood at 134.6p per litre, compared with 113.1p a year ago, when travel was reduced under lockdown restrictions. Used car prices were also partly to blame for price rises as they increased by 4.9% in just one month. Since April, they have gone up by more than 18% amid a shortage of new model cars.

Analysts now expect interest rates to rise twice next year.

Job vacancies hit a record high
Figures from the Office for National Statistics (ONS) show that job vacancies have hit a record high, with the number of available posts rising above 1m in the three months to August. The ONS report also shows that employee numbers were back at pre-Covid levels in August, while monthly payrolls increased by 241,000 to 29.1m. The UK unemployment rate fell 0.3% in the quarter and now stands at 4.6%. ONS deputy statistician Jonathan Athow commented: “Early estimates from payroll data suggest that in August the total number of employees is around the same level as before the pandemic, though our surveys show well over a million are still on furlough.”

Commenting on the ONS data, Suren Thiru, head of economics at the British Chambers of Commerce, said firms are facing an “acute hiring crisis”, warning that with Brexit and COVID-19 “driving a more deep-seated decline in labour supply, the end of furlough is unlikely to be a silver bullet to the ongoing shortages”. He added that recruitment difficulties “are likely to dampen the recovery by limiting firms’ ability to fulfil orders and meet customer demand.”

Neil Carberry, chief executive of the Recruitment and Employment Confederation, urged ministers to act to “solve this crisis”, saying the Government should work with business to improve training opportunities, as well as allowing some flexibility in the immigration system.

Looking ahead, Yael Selfin, chief economist at KPMG, said: “While the pressure should ease as more people look to return to work and the furlough scheme ends, the UK labour market is set to remain choppy with vacancies taking time to fill due to skills shortages and reduced availability of overseas workers”.

Starmer outlines ‘new deal for workers’
Sir Keir Starmer has vowed to deliver a “new deal for workers”, telling the TUC conference that Labour will grant a raft of new rights to employees. He said a Labour government would introduce: a minimum wage of £10 an hour; a ban on fire and re-hire; more flexible working; higher sick pay; and day one rights including holiday pay, parental leave and protection from unfair dismissal. Sir Keir also said Labour would bring an end to zero hours contracts. He insisted Labour would deliver “a new deal for working people based on security at work, quality jobs, a fairer economy, opportunity for all and work that pays”, adding that this “would transform working life in Britain and make it the best place to work.”

MPs back tax hike to cover health and care costs
A £12bn tax increase designed to help fund health and social care has cleared the Commons, with MPs voting 307 to 251 in favour of the Health and Social Care Levy Bill. Ten Conservatives rebelled to oppose the legislation that will see people paying a higher rate of National Insurance as of next April. While the Prime Minister’s working majority was cut in the vote, it was not reduced enough to derail the legislation. The Bill will now be scrutinised the House of Lords. Under the plans that look to address a funding crisis in the health and social care system, National Insurance contributions will increase by 1.25% from April 2022 – a move that breaks a Tory manifesto pledge not to raise the rate of income tax, VAT or National Insurance. While Steve Barclay, Chief Secretary to the Treasury, insisted that the tax would raise money in a “responsible and fair way” and Treasury minister Jesse Norman hailed the “landmark” legislation, Shadow Treasury Minister James Murray said the measure amounts to a “tax on working people and their jobs”.

Chancellor warned over tax year reform
Chancellor Rishi Sunak has been urged not to rejig the tax year until at least 2023 due to costs involved and potential issues with IT systems. The Office of Tax Simplification (OTS) has argued that the last day of the tax year on April 5 should be moved either to March 31 or to December 31, saying the present tax year dates confuse workers, with some deadlines — income tax, national insurance and capital gains tax —calculated on an April 5 tax year end date, while others use March 31. The OTS says any reform should be delayed because of the technical upheaval it would cause, arguing that the Treasury should hold fire on changes until after the deadline for the digitisation of income tax in April 2023. The OTS has also noted that moving the end date from April 5 to March 31 could cost up to £2.2bn in lost tax revenue from the tax year directly beforehand as that tax year would be 5 days shorter. Reflecting on calls for change, Nimesh Shah of Blick Rothenberg said the move would make the tax system more efficient but warned that state departments had a huge task trying to avoid a “Millennium bug” situation when the “switch is flipped”.

Sunak: Private equity M&A boom highlights confidence in UK economy
Chancellor Rishi Sunak says private equity firms’ interest in British listed companies points to “a sign of confidence in the UK economy”. Speaking at a conference promoting tech companies, the Chancellor was asked about potential long-term dangers to businesses being taken private. He offered that if international investors are keen to invest their capital in the UK, “that is something that is good news for our economy”, adding: “And that’s what you’re seeing”. This comes with data from the Office for National Statistics showing that the value of deals in which a foreign buyer acquired a UK company hit £19.4bn in Q1 and surged to £27.7bn in the second quarter. However, the volume of M&A deals involving UK firms fell 31% over the quarter, dipping to 381 in Q2 from 556 in Q1.

Bailey questions EU over clearing raid
The Governor of the Bank of England has warned that the financial system could be damaged if the European Union succeeds in a raid on London’s currency clearing operations, saying it could undermine efforts to deliver greater stability in the wake of the financial crisis. Andrew Bailey said that if EU officials want to break the clearing system up and take some of the market from the City to the continent, “it is important to consider the risks to financial stability that come with fragmentation”, adding: “This is not an idle, ‘you would say that, wouldn’t you’ from the UK’s central bank: that is a real threat.” Mr Bailey also said that the UK will stick within global financial agreements on regulation, although some rules may differ from those in the EU as both sides need to evolve over time. Mr Bailey said: “Neither of us has got any interest … in diverging from international standards. What we do have is different markets”. He also spoke out over suggestions that European politicians are considering imposing more restrictions on London than other major financial centres.

Lack of housing stock is perpetuating the shortage
The market for selling a home is at its strongest in more than twenty years, according to OnTheMarket research, although potential buyers may see a lack of stock and need to move fast due to the rapid rate at which homes are being snapped up. The poll shows that 73% of buyers feel confident that they will purchase a property within the next three months, while 79% of sellers are confident that their property will be bought within the quarter. The analysis reveals that the speed at which homes are being bought has climbed 6% since August 2020. Reflecting on the market, OnTheMarket’s CEO Jason Tebb says sellers are “encountering challenges in finding a suitable property … due to the well documented lack of stock”, saying this in turn is causing them to hesitate putting their own property on the market, meaning “a lack of stock is perpetuating a lack of stock in the best market in which to sell a property in over two decades.”

Number of new homebuyers soars
The number of new house buyers has soared, with analysis showing that around 24% more people registered with agent Knight Frank as prospective new buyers in August than the five-year average. The number of offers made in the month was almost a third higher than normal levels, even though ministers cut back the savings on offer from the stamp duty holiday in June. It took only an average of 111 days for an offer to be agreed after a property was listed in the first eight months of 2021 – down from 128 in the same period of 2019. Snap figures prepared by Knight Frank for the first five days of September showed that the number of valuation appraisals was a tenth higher than the same period in 2019. However, the total was a quarter lower than in 2020, when the stamp duty holiday was fully in effect.


Redrow more than doubled its annual profit after construction markets bounced back as lock-downs eased. Pre-tax profit for the year through 27 June jumped to £314 million, up from £140 million year-on-year, as revenue rose 45% to £1.94 billion.


Fevertree reported a rise in half-year profit as a recovery in on-trade sales over the summer helped offset a fall in gross margin amid on-going global logistics disruption and cost pressures. For the six months ended 30 June 2021, pre-tax profit rose 17% to £25.3 million year-on-year as revenue jumped 36% to £141.8 million.

Restaurant Group

Restaurant Group posted a first-half loss as the pandemic continued to weight on sales, though it upgraded its annual guidance citing a recovery in demand since reopening. Pre-tax losses for the 27 weeks to 4 July amounted to £58.8 million, narrowing from year-on-year losses of £234.7 million that included hefty asset writedowns.


Trustpilot posted a deeper first-half loss owing to costs associated with its recent sharemarket listing, though its underlying earnings rose and it upgraded annual revenue guidance. Pre-tax losses for the six months through June amounted to £17.2 million, compared to year-on-year losses of £5.8 million.

Energy suppliers going out of business

Rising energy prices are hitting suppliers, leading to two energy suppliers that service more than half a million customers in the U.K. going  out of business. Utility Point and People’s Energy announced yesterday they would stop operating,the latest of recent failures at challenger suppliers as power and gas prices climb to record highs.


The government is facing calls for a looser immigration policy as a labor shortage is threatening the post-pandemic recovery. Nine out of 10 members of the Recruitment & Employment Confederation list the shortage of workers as one of their biggest concerns for this year, with the government so far resisting the easing of rules for workers from the EU.

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