The return to work – business news 22 March 2021.

James Salmon, Operations Director.

The return to work, staff and owners apart on expectations, half traveled last week, tech shift here to stay, work patterns re-think, concern over IT skills, March PMIs and much more.

Staff and owners apart on return expectations

Research regarding the return to work shows that a third of SME owners expect staff to come back full time when lockdown ends in June, with this double the figure for employees, where 16% expect to return to work as soon as restrictions are lifted. In a survey conducted for Cignpost ExpressTest, it was found that 38% of 1,100 employees polled do not expect to return to the office for the foreseeable future, with a further 20% not expecting to return until the entire workforce has been vaccinated. By contrast, 51% of employers said they expect those who have been vaccinated to return to the office immediately.

More than half of staff traveled to work last week

As the return to work continued, more than half of Briton’s workers returned to the office last week, according to Office for National Statistics analysis. In the week ending March 14, 53% of workers traveled to the office, with the move away from remote working coinciding with the reopening of schools in England and a decline in coronavirus cases. The report shows that the proportion of people who worked exclusively from home decreased six percentage points from the previous week, to 30%.

Tech shift set to stay

The Sunday Times reflected on the impact of the coronavirus crisis, noting changes to working life. KPMG economist Yael Selfin expects some technology that has been utilised amid the pandemic to have a lasting change, saying she expects long-haul flights and business trips to be less common. She adds: “We’re going to come out of the pandemic much more environmentally and socially conscious, and more aware of our work-life balance”.

Pandemic set to deliver rethink on work patterns

Nicholas Bloom, professor of economics at Stanford University, commenting on the return to work, says a large number of workers will not fully return to work once lockdown restrictions are eased, with research pointing to a “widespread appetite for a new paradigm.” He says the shift toward working from home amid the pandemic is likely to see new patterns where work is split between the office and remote working, with several large firms already announcing plans for a 3-2 system where staff spend three days in the office and two working from home. Prof Bloom says a recent poll of 5,000 UK employees found that three days in the office was the preferred pattern, with staff saying the perk was worth about 6% of wages. He also points to research he undertook in 2010 which found home-based employees were 13% more efficient. Prof Bloom warns of the implications for inequality in a shift to remote working, saying only half of all employees can work from home, with these typically university-educated people in management, professionals or business services.

Skills concern over IT uptake

A report from the Learning and Work Institute (LWI) suggests that a digital skills crisis could be on the horizon, with analysis revealing a fall in the number of young people taking IT courses as employer demand for expertise increases. The study says just 48% of UK employers believe new entrants to the workforce have the necessary digital skillset. Data shows that the number of people taking IT subjects at GCSE has fallen by 40% since 2015, with the proportion taking related A Levels, further education courses and apprenticeships also declining. The LWI also warns of a gender gap in digital skills, with women accounting for just 22% of GCSE entrants in IT subjects, 17% of A Level entrants, 23% of apprenticeship starts and 16% of undergraduate starts. While the number of people opting for IT-focused courses has fallen, research shows that 60% of businesses believe their reliance on advanced digital skills is set to increase over the next five years

March PMI expectations drive GDP hope

Economists believe GDP could beat growth forecasts for the year as the economy weathers the latest lockdown better than had been expected and the nations workers return to work. Initial readings from the Markit/CIPS purchasing managers’ indices (PMI), due to published on Wednesday, are expected to show that the service sector has edged back into growth while manufacturing continues to show expansion. On an index where a score above 50 indicates growth, the service sector is expected to post a 51 reading for March, up from 49.5 on February, while manufacturing is likely to repeat the 55 score seen the month before. Howard Archer, chief economic adviser to the EY ITEM Club, believes Britain’s 2021 growth forecast could be upgraded, saying: “Our forecast currently is for 5% GDP growth this year but that might go up by a reasonable amount. That is because we thought that GDP would contract by 4% in the first quarter, but we now think it will be lower than that.”

Lockdown costs economy £520m a day

Highlighting the cost of any delay in the return to work, Centre for Economics and Business Research (CEBR) analysis suggests that each day of lockdown is costing the economy more than £500m, with output down £521m a day compared to its pre-pandemic level. The report says a quarter of businesses remain closed and 6m workers are on furlough, while the Government is borrowing almost £1bn a day to pay for support measures including tax breaks for struggling firms. The total bill for dealing with the pandemic is expected to hit £407bn, while state borrowing is set to hit £355bn in 2020/21 and another £235bn in 2021/22 to cover the cost of higher spending and lower taxes.

A third of firms not ready for IR35 changes

With IR35 changes coming into effect from April 6, new research suggests that many organisations are not ready for the rollout of new tax legislation that will make businesses responsible for setting the tax statuses of contractors they hire. A Grant Thornton survey of 605 senior decision makers from mid-market businesses conducted in late January shows that 38% are not fully prepared for the transition. It was found that 13% had done only “minimum preparation” or were in the early stages of planning, while 25% had preparations underway but said they were not ready for the deadline.

Shopping habits shift since lockdown

Helen Dickinson, chief executive of British Retail Consortium, says shopping has “changed dramatically” in the year since the first coronavirus lockdown was put in place, saying the retail environment feels “a world apart” from a year ago and noting the “degree of uncertainty” felt in March 2020. With the lockdown seeing increased demand for online retailers while high street competitors have been hit by enforced closures and lower footfall, BDO’s Sophie Michael says that while online has seen “five years’ growth in one”, it has not offset lost in-store sales.

Lib Dems call for tax break for small businesses

Liberal Democrat leader Sir Ed Davey has urged the Government to put small firms at the heart of a post-pandemic recovery, calling for a £5.5bn-a-year tax break for smaller businesses. He will today urge Chancellor Rishi Sunak to cut national insurance contributions for small firms by quadrupling the employment allowance from £4,000 to £16,000. Sir Ed will tell an online Lib Dem conference: “The UK’s economic recovery starts with small business. Small businesses are at the heart of every local community, and every local economy”. He will call on the party to “challenge the Chancellor to give small businesses a bold new tax cut to support thousands of new jobs” as we return to work.

Treasury plans pay-as-you-go tax

The Treasury is planning a pay-as-you-go tax model in a bid to tackle evasion by freelance workers, landlords and investors, reports the Times. The measures, which will make it harder for people to hide their earnings, are based on a system used in New Zealand. The move will see annual or twice-yearly manual tax returns replaced with a system that sees tax paid throughout the year. Taxpayers would be given a digital tax account that is automatically updated by banks, investment managers, workplaces and pension providers, with information about earnings, investments and pensions logged. The reforms will be at the centre of HMRC’s ten-year tax strategy and will play a part in efforts to recoup the £31bn the Revenue believes people are not paying in tax each year. Chancellor Rishi Sunak believes the pay-as-you-go tax model could prevent people from failing to declare major earnings, including interest on in vestments and offshore bank accounts.

Spending could drive demand on recovery path

Roger Bootle, chairman of Capital Economics, looks at the UK’s path toward economic recovery after the pandemic, saying the Government’s borrowing requirement will be about 18% of GDP in 2021, while plans for future tax rises set out in the Budget will tighten fiscal policy by 1.5% of GDP. Mr Bootle notes that the Office for Budget Responsibility has suggested COVID-19 will have a “scarring” effect on the UK economy, delivering a permanent reduction in GDP of 3% relative to what it would have been without the pandemic. He also suggests that the UK could see growth in aggregate demand “spurred by private spending rather than government largesse”.

British housing is expensive and its supply must increase

Research from Schroders shows that the ratio of average house prices to earnings was 8:1 in Q4, the highest level since the 1880s bar the year before the financial crisis.

Post-Brexit deal for the City nears

Britain and the EU are said to be close to striking a limited deal on post-Brexit financial services co-operation following months of negotiations, with partial regulatory equivalence on some financial products and a memorandum of understanding on regulation reportedly on the horizon.

Brewers serve up a pandemic success story

The Sunday Times looked at how craft brewers have navigated the challenges brought about by the coronavirus pandemic, highlighting  estimates that there are now more than 3,000 breweries in the UK, an increase of 200 over the past year.

International Monetary Fund

The G7 wants the International Monetary Fund to expand its reserves. The bank’s holdings have not been increased since 2009, in the wake of the global financial crisis. Britain, which is chairing the G7 this year, said the increase would help the world’s poorest countries recover from the pandemic.

Customers face £90m Football Index losses

Customers of Football Index, which billed itself as the “football stock market”, are facing losses of almost £90m in the wake of its collapse. Legal firm Leigh Day is investigating a potential claim on behalf of punters, with Begbies Traynor expected to be appointed to handle the administration.

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