Service Sector optimism leaps – business news 27 May 2021.

James Salmon, Operations Director.

Service Sector optimism leaps, businesses face staff shortages and wage hikes,  London accounts for nearly 25% of UK GDP, RAF Tempest jet will ‘add £1bn to East of England economy’, City Corporation extends deadline for SME support and more.

Service sector optimism grows at fastest rate on record

According to the CBI’s latest quarterly Service Sector Survey, sentiment about the general outlook for the professional services sub-sector jumped from a positive 23 per cent to a positive 63 per cent, the fastest rise on record.

And for consumer services sector, driven by the reopening of non-essential retail and hospitality, optimism see-sawed from a negative 55 per cent to  positive 33 per cent.

As lock down restrictions ease, optimism over the future of the service sector has leaped in the three months to May with the UK’s economic recovery from the pandemic gathering steam.

The CBI’s data comes after IHS Markit’s flash PMI reading for May earlier this week showed that business activity in the UK expanded at its fastest rate since 1998 this month.

Businesses face staff shortages and wage hikes

The economist Paul Ormerod warns in City AM that wage inflation is upon us with staff shortages across the board amid a jobs boom as employers come out of lockdown.

Although we are not facing the double-figure price rises witnessed in the 1970s and 1980s, a tipping point has been reached, Ormerod continues, adding: “Staff shortages, wage rises, inflation – these are all back on the agenda.”

London accounts for nearly 25% of UK GDP

The capital accounted for 22.7% of total UK GDP in 2019, according to new figures from the Office of National Statistics, and 23.8% of total Gross Value Added. London business leaders said the figures demonstrated the need for “concerted action” to ensure the capital continues to power the country’s economy in the aftermath of the pandemic.

RAF Tempest jet will ‘add £1bn to East of England economy’

A report from PwC states that a project to develop the RAF’s new Tempest combat aircraft will bring at least £1.1bn of added value to the East of England economy. PwC’s report said the project would boost investment in technology in the region and keep some of the UK’s “most important defence technology skills on-shore for another generation”.

City Corporation extends deadline for SME support

The City of London Corporation is extending the deadline for submissions to its Covid Business Recovery Fund to 30 June 2021.

The Covid Business Recovery Fund offers up to £50m of support for SME businesses which contribute to the Square Mile’s vibrancy at street level and which directly provide services to returning City workers, visitors and residents.

Policy Chair at the City of London Corporation, Catherine McGuinness, said: “ Extending the application deadline for support from the Covid Business Recovery Fund to the end of June will enable more City SMEs to access this financial lifeline…This fund will play a vital role in supporting the City’s economic recovery and will help us, in partnership with our SMEs, to build back better.”

Providers have one month to update processes, ombudsman warns

The Pensions Ombudsman expects providers to update their transfer processes, due diligence checks and member communications within one month of new regulatory guidance being issued. The new time frame is significantly less than the three-month period the ombudsman had previously indicated would be acceptable.

It followed a case brought against Aegon, in which the client complained the provider had failed to update its processes in time, leading to a transfer that otherwise would not have happened. The PO did not find against Aegon but told providers it was now expecting them to act faster.

Is a revolution in tax around the corner?

Speculation over the future of global corporation tax rules continues after Ireland’s finance minister said the country would continue indefinitely with its own tax plans.

Paschal Donohoe reiterated Dublin’s resistance to any minimum corporation tax rate in an interview with Sky News but Alex Cobham of the Tax Justice Network believes Ireland cannot block either Pillar 1 or Pillar 2 plans if there is a “coalition of the willing”.

Meanwhile, the French and German finance ministers said on Wednesday that talks to rewrite the rules of cross-border taxation are in the home stretch with Olaf Scholz believing a “revolution” in international corporate taxation is just weeks away, a view echoed by his French counterpart Bruno Le Maire.

Separately, a letter to the FT from US economist Gary Clyde Hufbauer shames the G7 for dictating tax rules to small countries that will not have the means these seven countries have to easily offset the prescribed minimum with all kinds of subsidies for their favourite industries.

Finally, the Guardian claims Boris Johnson is coming under increasing pressure to agree to the plans with the paper citing former PM Gordon Brown who claims the only reason for Mr Johnson to reject the proposals would be because he wants to protect tax havens.

Tate & Lyle

Tate & Lyle has reported a 6% rise in its adjusted pre-tax profits for the year ended March 2021, duelled by double-digit growth in food and beverage solutions.The food and beverage division saw a 12% rise in profit during the period to £177 million, and a 6% increase in revenue.


A Hague court has ordered Shell to reduce emissions 45% by 2030 saying its target of 20% within a decade and net neutral by 2050 wasn’t good enough.

Pets At Home

Pets At Home announced a revenue growth of 7.9% and its retail revenue figure hit £1 billion for the first time, with 8.7% growth during the year, despite covid 19 restrictions. The companies emissions were equal to Russia in 2019.

Arron Banks takes donation claim to Court of Appeal

Arron Banks is disputing a claim from HMRC that the millionaire Brexit backer pay £160,000 in tax on £1m of donations to Ukip. Banks claims the charge is discriminatory because Ukip did not have an MP. Donations to political parties which had two MPs elected at the last general election, or one MP elected and a total of 150,000 votes, are exempt from inheritance tax. While Ukip received 919,471 votes across the UK in the 2010 general election, the party did not return a single MP to the House of Commons, prompting HMRC to bill Mr Banks for £162,945.34.

Johnson Matthey

Johnson Matthey reported a fall in annual profit as higher costs offset an increase in revenue. For the year ended 31 March 2021, pre-tax profit fell 22% to £238 million year-on-year and revenue climbed 8% to £15.67 billion. The fall in profit as ‘largely driven by higher administrative expenses, and major impairment and restructuring charges,’ the company said.


Aviva reported flat new business premiums growth in its life insurance business as record quarterly net flows in its savings & retirement business was offset by lower volumes of annuities & equity release in a subdued market.Core Life present value of new business premiums was flat £8.3 billion year-on-year, the company said.

Gym Group

Gym Group reported yesterday that performance since reopening had been than expected, and estimated that trading would return to seasonal norms over the quieter summer months. Since reopening gyms, total membership has increased from 547,000 at the end of February 2021 to 729,000 by 24 May 2021 versus 794,000 in December 2019.

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