Inflationary pressures hit record highs – business news 24 June 2021.
UK inflationary pressures hit record highs as economic activity rebounds. Most companies believe Brexit has strengthened ‘Brand Britain’ and lots more business news.
James Salmon, Operations Director.
UK inflationary pressures hit record highs as economic activity rebounds
A closely watched survey has revealed that cost pressures on UK businesses rose at the fastest rate for 13 years, while inflation of prices charged by firms hit its highest since records began in 1999.
The IHS Markit/CIPS Composite Purchasing Managers’ Index (PMI) gave a reading of 61.7, based on initial readings for June, down only slightly from 62.9 last month. Any figure above 50 indicates expansion.
“Businesses are reporting an ongoing surge in demand in June as the economy reopens, led by the hospitality sector,” said Chris Williamson, chief business economist at IHS Markit. Rhys Herbert, senior economist at Lloyds Bank, said that while the data pointed to a “strong ongoing recovery” overall, worker shortages, supply chain disruption and rising cost pressures were “starting to hold back output”.
Concerns over rising inflation come after annual consumer price growth hit a two-year high of 2.1% in the year to May. The Bank of England’s Monetary Policy Committee (MPC) is set to announce its latest interest rate-setting decision today.
Most companies believe Brexit has strengthened ‘Brand Britain’
New research conducted by Grant Thornton shows nearly two thirds of UK mid-sized businesses believe that Brexit has strengthened ‘Brand Britain’. About 70% of UK businesses said Brexit is helpful when trading internationally with only 7% disagreeing. However, Brexit has brought uncertainty regarding international growth with 60% of respondents saying leaving the EU has prompted their business to focus more on the domestic rather than international markets. Despite this, international expansion remains on the horizon with 40% of business expecting to invest more in their international growth plans over the next six months. Andrew Howie, head of international at Grant Thornton UK, commented: “Mid-sized businesses have proven their resilience and it is clear that, despite the challenges, many are currently feeling more positive about the impacts of Brexit than first feared.”
Outside the US, London remains world’s most important fintech hub
London remains the second most active city in the world for fintech, according to the 2021 Global Fintech Rankings, behind San Francisco. The Index compiled by Findexable ranks the fintech ecosystems of more than 264 cities across 83 countries. It found that although London remains Europe’s most important fintech space, a range of UK cities outside the capital are developing into thriving fintech hubs. “The UK continues to be a major player in fintech, but unlike the larger finance sector it is moving away from being largely London-based,” said Findexable’s founder and CEO Simon Hardie.
One in seven people have no savings at all
Research carried out for Yorkshire Building Society reveals that approximately one in five adults in the UK have less than £100 in savings. One in seven people have no savings to fall back on at all and more than a quarter have less than £500 put away. Tina Hughes, director of savings at Yorkshire Building Society, said: “This research continues to highlight just how fragile many people’s finances are.” However, on a positive note, 17% of people surveyed have reduced their outstanding debt during the pandemic.
Nasdaq & US PMIs
The NASDAQ hit an all-time high yesterday, helped by Tesla’s shares, as investors cheered data showing U.S. factory activity climbed to a record peak in June. Data firm IHS Markit said its flash U.S. manufacturing Purchasing Managers’ Index rose to a reading of 62.6 this month, beating estimates of 61.5, according to economists polled by Reuters. However, services sector PMI dropped to 64.8 from a reading of 70.4 in May.
Glaxo
GlaxoSmithKline said it will cut its dividend over the coming years as it prepares ambitious plans to step-up productivity and growth based on vaccine sales and its late-stage product pipeline. The Brentford, England-based pharmaceutical company said that, between 2021 and 2026, it expects a compound annual growth rate, at constant exchange rates, of 5% for sales and 10% for adjusted operating profit. Glaxo also outlined its plans to demerge the consumer healthcare arm via a demerger of at least 80% of Glaxo’s 68% holding in the business to Glaxo shareholders, with the new consumer healthcare company shares expected to attain a premium listing on the London Stock Exchange
Travel
Foreign Travel Rules are set to be reviewed later, after industry bosses united in a desperate plea for the green list to be widened. Transport Secretary Grant Shapps will face MPs this morning, with an update on the traffic light system expected in the afternoon. Travel bosses are calling for an exemption to quarantine for fully-vaccinated people from amber countries.
Bunzl
Bunzl expects to report a 1% rise in first-half revenue as a strong recovery in demand from food-service and retail sectors was largely offset by the anticipated decline in larger covid-19 related orders. Revenue was expected to increase by approximately 1% at actual exchange rates and to increase by 6% to 7% at constant exchange rates
Small businesses exempt from junk food advertising ban
A Government ban on paid-for junk food advertising online and before the 9pm television watershed will not apply to small businesses, Whitehall sources have said. It follows concerns raised earlier this year that small high street outlets could be prevented from drumming up business by posting images of products such as cakes and pastries on their social media accounts.
G20 to endorse deal on global minimum corporate tax
The world’s financial leaders will endorse on July 9-10 a deal setting a global minimum corporate tax, and call for technical work to be finished so they can approve the framework for implementation in October, according to a draft G20 communique. “After many years of discussions and building on the progress made last year, we have achieved an historical agreement on a new, fair and stable international tax architecture,” the draft said. It made no mention of a specific rate for a global minimum corporate tax nor other key details, which remain to be agreed by nearly 140 countries known as the Inclusive Framework meeting online next week in talks hosted by the OECD. “We endorse the core elements of the two pillars on the profit reallocation of multinational enterprises and the global minimum tax as set out in the statement released by the G20/OECD Inclusive Framework on Base Erosion and Profit Shifting (BEPS),” the G20 draft said in anticipation of those talks.
Time to scrap the triple lock
David Smith argues in the Times for the pensions triple lock to be scrapped as it is too costly and is widely deemed an outlier in strategies designed to protect pensioners from inflation: “Most economists have no problem with protecting the state pension against inflation. But nearly every think tank, from the Resolution Foundation to the Institute of Economic Affairs and Centre for Policy Studies, via the Social Market Foundation, opposes the triple lock.” With Boris Johnson blocking even a suspension of the triple lock to help the economy recover form the pandemic, Rishi Sunak is facing a £4bn bill for honouring the policy. As a result, the Treasury is again looking to tax private pensions more heavily, and add more uncertainty to retirement planning. Smith concludes: “Two wrongs do not make a right. There is a powerful case for suspending the triple lock this year. However, there is an even better case for scrapping it altogether.”
Private sector crypto against the public good
The Bank for International Settlements (BIS) has again hit out at private sector cryptocurrencies and stablecoins, particularly bitcoin, arguing that they are “speculative assets rather than money, and in many cases are used to facilitate money laundering, ransomware attacks and other financial crimes”. However, the Swiss-based bank for the world’s central banks did say that accelerating plans for rival digital coins supported by central banks could offer “finality, liquidity and integrity” and “form the backbone of a highly efficient new digital payment system”. The BIS insisted: “Central banks stand at the centre of a rapid transformation of the financial sector and the payment system.” However, “Innovations such as cryptocurrencies, stablecoins and the walled garden ecosystems of big techs all tend to work against the public good element that underpins the payment system.”
John McAfee apparently commits suicide
The antivirus software pioneer John McAfee has reportedly hanged himself in a Spanish jail hours after a court ruled he could be extradited to the US on tax evasion charges. However, McAfee has repeatedly said he would not commit suicide and 30 minutes after his death was announced a mysterious message was posted on his Instagram account: an image of the letter Q.
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