Scientific superpower – business news 16 March 2021.
James Salmon, Operations Director.
The government launches a review to make us a scientific superpower, Tech startups record investment, business optimism increases, manufacturing, shake up of the bus sector, dominance of big firms, Andrew Bailey on the economy, inflation and employment, Brexit and more.
Scientific superpower
Today the government will publish it’s most comprehensive overhaul of its foreign, security, defence and aid policy since the end of the cold war. The 100-page review, entitled “Global Britain in a Competitive Age”, will set out an ambition for Britain to be recognised as a science superpower by the end of the decade, leading the world in green technology.
A more detailed defence paper next week will spell out the armed forces’ plans to invest heavily in technology, including a new offensive cyber-force and drones, and to play a more active role in peacetime through military exercises and deployments. Despite continuing spats over Brexit, the security of Europe will remain Britain’s priority. But in the face of a growing challenge from China, there will also be deeper engagement with the rising powers of Asia with Britain’s new aircraft-carrier being sent to the region later this year.
UK start-ups attract record $8bn in dash for growth
Tech Nation data shows UK tech sector attracted record investment of close to $8bn in Q1, with investment in fast-growing companies more than twice that seen in Q1 2020.
Business optimism increases
A new Accenture/IHS Markit survey has shown that business optimism in the UK is at a six-year high. The poll of 12,000 manufacturing and service companies saw 68% say they expect activity to increase in 2021, while only 11% foresee a decline. The net balance of +57% represents a steep increase on the +34% reading recorded in October. Rachel Barton, strategy and consulting lead at Accenture, said that it was “encouraging” to see businesses confident about bouncing back, commenting: “Although we are not out of the woods yet, it is important for UK business to take advantage of this confidence in order to build a sustainable recovery”.
Boost for manufacturing growth forecast
A survey by Make UK and BDO has shown strong growth plans among Britain’s manufacturers, with the sector expected to see growth of 3.9% in 2021. This marks an increase on a previous estimate of 2.7%. The survey also shows that the industry faced a 10% drop in output in 2020. ?
On the Buses
Boris Johnson has unveiled an ambitious shake-up for the bus sector, aimed at investing £3bn improving bus infrastructure to encourage bus rather than car transport. The UK government plans hundreds of miles of new bus lanes to make journeys more reliable and faster. Bus operators generally welcomed the initiative, Stagecoach said “if all parties use the new framework and their joint resources to work together to deliver practical improvements and are not side tracked by structures, there is a major opportunity to reverse the cycle of declining bus use”.
IMF: Pandemic increases dominance of big firms
The International Monetary Fund says large companies have increased their dominance over the world’s advanced economies, with their concentration of revenues climbing during the pandemic. It attributed this in part to a rise in bankruptcies, which hit smaller companies hardest, and warned that the increase in dominance by larger firms could stifle growth. The report said: “We know from experience and IMF research that excessive market power in the hands of a few firms can be a drag on medium-term growth, stifling innovation and holding back investment.” It added that such an outcome “could undermine the recovery” and “block the rise of many emerging firms at a time when their dynamism is desperately needed.”
Bailey: recovery may be quicker than forecast
Andrew Bailey, governor of the Bank of England, says the vaccine programme could see the economy outdo expectations in the coming months. However, he added that while he now saw “upside risks” to the Bank’s growth forecasts, new COVID-19 variants may still derail the recovery. Asked what sort of recovery the UK could expect, he told BBC Radio 4’s Today programme: “I’m now more positive, but with a large dose of caution.” His comments came as a monthly Ipsos Mori poll suggested public optimism over the UK’s economic outlook is at its highest since 2015. The survey saw 43% of respondents say they thought the economy would improve over the next 12 months, compared with 41% who thought the opposite. This lifted the economic optimism index to +2, up from -31 in February.
Inflation
The Bank of England governor Andrew Bailey said that inflation will get back towards the 2% target “in the next two or three months” but was cautious about whether the trend was sustainable. He was asked about the inflation trajectory, and if inflation could reach 4% or 5% in 2021, but responded “that is not something we have seen evidence of”. The 10 year gilt fell 1 point to yield 0.98%.
ONS updates inflation shopping basket
The Office for National Statistics’ (ONS) inflation shopping basket has been updated to reflect the impact of the coronavirus pandemic, with the statistics watchdog adding items such as hand sanitiser and home workout equipment to the list. With the pandemic driving an increase in remote working, casual clothing has been added to the basket as demand for formal office wear has declined. While smart watches, internet controlled light bulbs and electric hybrid cars are to join the price index, ground coffee and white chocolate are among items being removed from the list. Overall, the ONS has added 17 items in 2021, removing 10 and leaving 729 unchanged.
Bailey expects lower jobless peak
Bank of England governor Andrew Bailey has said unemployment is likely to peak at a lower level than previous estimates, with the Chancellor’s decision to extend furlough until September likely to limit the effect of the pandemic on jobs. Mr Bailey told BBC Radio 4’s Today programme: “I think it’s very helpful that the furlough scheme is now projected to extend beyond the end of the restrictions by a month or two, which should help to smooth that transition.” He warned, however, that “expecting a transition without some rise in unemployment I’m afraid is, is probably unlikely.” While the Bank’s most recent forecasts, which were made before the furlough scheme was extended, put the peak in unemployment at 7.5%, Mr Bailey said: “I would expect the next forecast to show the peak in unemployment will be lower.”
R35 change to affect 170k contractors
The IR35 reform set to be rolled out next month could see around 170,000 self-employed workers forced to pay more tax. The Government says that the change will only apply to medium and large-sized businesses, meaning genuine freelancers and self-employed workers will not be affected by a shift that sees business take responsibility for deciding on a person’s tax status. The Express highlights research by the Association of Independent Professionals and the Self-Employed which shows that half of freelancers are planning to stop contracting in the UK after IR35 changes come into effect. The proportion is up from nearly a third the same time last year, when the legislation was originally due to come into force.
Brexit
The European Union has begun legal action against the UK over its alleged breach of the NI Protocol. It could lead to the UK having to defend its actions at the European Court of Justice. The European Commission’s vice president said he hopes the issue can be resolved without further legal action. This month Britain extended grace periods on Irish Sea border checks from the end of March to October.
Khan calls for financial services clarity
Mayor of London Sadiq Khan has called for the Government to provide greater clarity for the City of London post-Brexit, urging Chancellor Rishi Sunak to “address the concerns of London’s financial and professional services sector”. Mr Khan has called on ministers to secure equivalence for the financial services sector, saying this will “ensure a fair and level playing field.” He cited research from the Centre for Economics and Business Research which suggests the UK could lose £2bn of GDP each year from a smaller financial services sector post-Brexit. Mr Khan also warned that it is “essential that the Government’s immigration policy maintains and broadens the pool of international talent that industry can access.”
House Prices
UK House Prices climbed again in March, property listing site Rightmove said on Monday, as buyer demand reached record levels. The average price of new property coming to the market was almost one percent higher monthly in March at £321,064.
Screwfix
Screwfix, owned by Kingfisher, is planning to open an extra 50 stores this year, creating around 600 new jobs, in response to the boom in demand for home improvements during the pandemic. The retailer will open 40 new branches in the UK, creating 500 jobs, and a further 10 in the Republic of Ireland with 100 new employees.
Greggs
Greggs reported its first loss as public company as the lock-down hit sales, but the bakery chain touted optimism ahead, saying it had made a better-than-expected start to 2021. Like-for-like sales in company-managed shops were down 36.2% on 2019 level.
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