Plan B – Business news 9 December 2021
James Salmon, Operations Director.
Plan B another blow to small firms. Hospitality devastated as Christmas profits slip away. Demand for staff remains robust as wages rise . Small businesses to earn more than £8bn this Christmas. And more business news.
Plan B another blow to small firms
Prime Minister Boris Johnson introduced plan B, tightening pandemic rules to curb the spread of the omicron variant, advising people to work from home and mandating the increased use of masks in crowded indoor venues and the use of vaccine passports.
The Federation of Small Businesses (FSB) has warned that the reintroduction of strict Covid measures during the crucial festive period will impact small businesses already beset by supply chain disruption, inflation and shortages. FSB national chair Mike Cherry said: “We urgently need clarity around Plan B. Equally, the Government should explain what conditions would move us back to Plan A, whilst also outlining what Plan C would involve and the support measures that will be launched should more stringent restrictions take effect.” He added: “Plans to control the virus need to be matched by plans to protect the economy and livelihoods.”
The emergence of the new omicron variant of Covid-19 has also added extreme uncertainty to the Bank of England plans. It’s now quite possible that they will delay changes to policy and the forecast interest rate rises are at risk. No one can be sure how the move to Plan B will impact the U.K economy. As U.K. business groups call for government aid following new virus curbs, which are estimated could cost the economy as much as £2 billion a month.
Early data suggest cases of the Omicron variant could be doubling every two to three days in England.According to a study from Japan, Omicron is 4.2 times more transmissible than Delta.
Hospitality devastated as Christmas profits slip away
The Night Time Industries Association (NTIA) warned that Plan B restrictions, including vaccine passports for large events and work from home guidance, would have a “devastating impact” on businesses. The trade body’s chief executive Michael Kill pointed out that the Government’s own report on the subject concluded that vaccine passports wouldn’t even have a significant impact on virus transmission. “You do, therefore, have to question the timing and rationale for this announcement.” Elsewhere, Jace Tyrrell, chief executive of New West End Company in London, said a return to work-from-home orders “during the most important trading period of the year would be a hammer blow for our retail and leisure tenants.” Major events have been cancelled and restaurants and hotels have seen thousands of bookings cancelled. Kate Nicholls, the chief executive of UK Hospitality, predicted that revenue from hospitality would fall by 15 to 20% as people working from home were likely to limit their socialising.
One in 10 chain shops in Scotland still closed six months after first lockdown
Research by PwC and Local Data Company shows that over 11% of chain shops in Scotland failed to reopen after the lockdown in the first months of this year. There were 99 units, 4.7% of the total, that closed permanently while a further 143, or 6.8%, did not immediately start trading again after the restrictions on non-essential retail were lifted.
Demand for staff remains robust as wages rise
Research by the Recruitment & Employment Confederation and KPMG reveals that job vacancies have continued to rise as workers eye higher salaries. Neil Carberry, chief executive of the confederation, said: “This is always the busiest part of the year for recruiters, but demand for new staff across the autumn has been exceptional. Because of this high demand, starting salaries and temp rates continue to rise, making it even more attractive to be looking for a new opportunity in 2022.” Claire Warnes of KPMG added: “The confidence of businesses to hire remains reassuringly robust.” However: “The pace of demand for workers is running far faster than supply can keep up with, which is draining an already diminished pool of available talent and feeding into inflationary pressures.”
Small businesses to earn more than £8bn this Christmas
A study commissioned by Funding Circle found 64% of adults who celebrate the festive season plan to do some of their shopping via small enterprises this year, each spending an average of £280.53. This would amount to more than £8bn. Consumers estimate almost a third of their festive shopping will be done via small businesses while a third also plan to spend more money with small businesses this year compared to last Christmas. Reasons for doing so included wanting to support a local company (54%), find unique products (44%) and help the economy (36%). More than three quarters are most likely to shop small in-store, while 47% will opt for websites and 40% will seek out gifts at market stalls.
Covid forces 2.8m savers out of workplace pensions
Now Pensions has estimated that around 2.8m people from under-pensioned groups are missing out on workplace pension saving, up from 2.5m in 2020. The report, Pandemics and Pension Inequality, which was written using data from the Pensions Policy Institute (PPI), suggested that the impact of repeated lockdowns, home schooling and increased domestic responsibilities had pushed 300,000 women out of workplace pension saving in the last year. The study also found that the gender pay gap has also increased over the past year, partly due to the “disproportionately high” number of furloughed women, pointing out that women are 50% more likely than men to reach retirement with no private pension savings at all as a result. However, the report also revealed that, since the start of the pandemic, the proportion of women working full-time has increased to 64%.
Get prepared for tax return deadline
HMRC has offered guidance on how to avoid late penalties as the deadline for payments quickly approaches. Self Assessment online tax returns and payments must be settled by midnight January 31, 2022 and according to HMRC data, more than 2,700 customers filed their Self Assessment tax return on Christmas Day last year. Commenting on the issue, Trusha Shah, Tax Manager at HW Fisher, said: “There is still sufficient time, but we would urge anyone who is yet to file their tax return to make sure they are prepared ahead of the January 31 deadline. Organisation is key. All too often clients leave it too late and make simple mistakes in the rush to complete on time.”
Rolls-Royce
Rolls-Royce upgraded its outlook on cash flow following improved trading performance and cost cuts. Free cash outflow in fiscal 2021 was expected to be better than previous guidance of £2.0 billion. By the end of 2021, the company said it expects to have removed more than 8,500 roles, with the pace of restructuring running ahead of its original plan and footprint rationalisation continuing through the second half of the year.
ITV
ITV have outlined ambitions this morning ahead of its upcoming investor seminar this afternoon, where it will lay out its targets over the next five years for ITV Studios. The broadcaster expects total revenues to recover to 2019 levels in 2022, predicting total organic revenues to grow by at least 5 per cent on average per annum, which is ahead of the forecasted growth for the global content market.
DS Smith
DS Smith reported a jump in profit as revenue was bolstered by higher volumes and an increase in selling prices. For the first 6 months through October, pre-tax profit rose 80% to £175 million year-on-year as revenue grew 22% to £3.36 billion.
Frasers
Frasers Group, formerly Sports Direct, reported sharp rise in first-half profit as the strong reopening of stores following the easing of pandemic restrictions led to sharp rise in sports retail revenue. For the 26 weeks to 24 October 2021, pre-tax profit rose 75.3% to £186.0 million year-on-year as revenue climbed 23.6% to £2.34 billion.
Firstgroup
Firstgroup reported wider losses in the first half of the year, as higher financing costs offset a rise in revenue amid improving passenger numbers. For the half year to 25 September, pre-tax losses widened to £64.5 million from £33.5 million year-on-year, while revenue climbed to £2.14 billion from £2.05 billion.
Sunak’s tax cut won’t take away the pain
The Daily Express reflects on a proposal floated by the Chancellor to cut income tax by 2p but the paper’s Harvey Jones says Rishi Sunak is fooling no one after unleashing a string of tax hikes. For example, in his Budget in March, Mr Sunak announced that he was freezing income tax allowances for five years resulting in significant losses for workers. Nimesh Shah, chief executive at tax and advisory firm Blick Rothenberg, dismissed plans to cut the basic rate of income tax by 1p in 2023/24 and a further 1p in 2024/25 as “just smoke and mirrors”. Jones says although each 1% cut reduces income tax bills by £6bn, this needs to be compared to the £70bn Sunak will raise by freezing personal tax allowances until 2025/26 and introducing the NI social care levy.
Left-wing think tank wants property gains taxed
The Resolution Foundation has called for a rethink on property taxes arguing that capital gains on home owners’ main residences have primarily been driven by the historically low interest rates that have been in place since the financial crisis of 2008 and “likely represent a one-off windfall”. The value of homes has risen by 86% above the rate of inflation over the past two decades, generating capital gains on home owners’ main residences worth £3trn. The report says a 28% rate on all housing capital gains built up over the past 20 years could raise around £ 11bn a year. Owners, however, would only have to pay after they had exited homeownership or passed away, although downsizing your home could also trigger a payment. Adam Corlett, principal economist at the Resolution Foundation, said: “Choosing not to tax this huge housing wealth windfall because of the political and administrative challenges involved has real consequences, including higher taxes for workers and businesses.” But Danielle Boxall, of the TaxPayers’ Alliance, hit back at the idea, saying: “Another tax on moving is the last thing the country needs. It would stop young people buying a home and starting a family, discourage elderly people from downsizing, and make it harder to move to a new place. Instead, the Government should be easing the 70-year high tax burden to help people to buy their own homes and get on in life.”
‘Freelancers forced into tax avoidance by umbrella companies’
Phil Pluck, chief executive of the Freelancer and Contractor Services Association, has said IR35 reforms have “forced” workers unwittingly into tax avoidance schemes as they’re not familiar with umbrella companies.
ESG fakery to be a major area of legal and reputational risk
The Times reports on the recognition within the legal industry that the growth in environment, social and governance (ESG) interest will bring greater scrutiny of businesses’ ESG activities. “The gap between what corporates say and what corporates do on ESG is likely to be a major area of legal and reputational risk,” says Heather Gagen, a litigation partner at the City firm Travers Smith. Doug Bryden, another partner at the firm points to proposals in the UK and the EU for greater disclosure regulations and says that “dealing with ESG risks arising in a company’s value chain feels very much like a paradigm shift as opposed to a passing fad”. Gagen foresees a “fascinating few years” ahead as “businesses, regulators and the courts work out what a reasonable balance of risk and reward should be in relation to ESG, and how positive ESG impacts can effectively be achieved, demonstrated and sustained”.
Companies named and shamed for minimum wage breaches
Retailers including Matalan, Waterstones and House of Fraser are among 200 companies named and shamed for failing to pay some employees the minimum wage. House of Fraser failed to pay £16,235 to 354 staff before its acquisition by Sports Direct, while Waterstones underpaid 58 workers by £8,660. The Department for Business said the companies had been ordered to repay workers and faced penalties of nearly £2m after breaches left about 12,000 staff paid less than the minimum wage. Business minister Paul Scully said: “We want workers to know that we’re on their side and they must be treated fairly by their employers, which is why paying the legal minimum wage should be non-negotiable for businesses. Today’s 208 businesses, whatever their size, should know better than to short-change hard-working employees, regardless of whether it was intentional or not. With Christmas fast approaching, it’s more important than ever that cash is not withheld from the pockets of workers.” The investigations by HMRC took place between 2014 and 2019.
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