Service sector confidence surges – business news 10 May 2021.

James Salmon, Operations Director.

Service sector confidence surges, third lockdown predicted to hurt less than feared,  Haldane plays down risk of bankruptcies, Britain’s investment deficit is bigger problem than debt, optimism increases for SMEs, Banks to lend less than predicted, UK remains top European destination for VC and lots more of the stories we saw.

Service sector confidence surges

The UK’s dominant service sector confidence has soared to a 14-month high, according to BDO’s latest monthly business trends survey, driven by the successful vaccination programme and the easing of lockdown restrictions. BDO also found growing optimism in the manufacturing sector, despite caution “around the continued impact on supply chains caused by Brexit”. Kaley Crossthwaite, a BDO partner, said the figures showed that most businesses expect unlocking to proceed as planned, but added that “it’s important to remember that we are still recovering from an incredibly low base”.

Third lockdown predicted to hurt less than feared

Economists expect data published on Wednesday by the Office for National Statistics to show that the UK’s third lockdown inflicted far less economic damage than first feared. Forecasters expect a 1.7% drop in GDP in the first quarter, but monthly figures are expected to show an accelerating bounce back with GDP rising 1.3% in March with a further surge in April when non-essential shops and parts of hospitality reopened.

Haldane plays down risk of bankruptcies when support is withdrawn

Bank of England chief economist Andy Haldane has said he does not expect a wave of bankruptcies when the Government withdraws emergency Covid support measures later this year because most debt held by companies is spread over the long-term. He admitted that there were risks, however, and those would need to be tracked by the Bank. Haldane made the comments in a presentation to businesses, a day after the BoE sharply raised its forecasts for British economic growth in 2021. They contrast with the expectations of Begbies Traynor boss Ric Traynor who predicts a spike in insolvencies from September as companies that already had issues have protection taken away.

Britain’s investment deficit is bigger problem than debt

Roger Bootle opines on Britain’s massive national debt in the Telegraph, which is now just over 100% of GDP. But perhaps just as importantly, the continued erosion of the UK’s net overseas assets has eventually left the country with an investment income deficit of about 2% of GDP – the essential downside of which is that living standards are being eroded. The solution, suggests Bootle, is to increase investment in the UK while also improving our net trade position. With the latest trade data due on Wednesday, Bootle hopes that, aside from the obvious exceptional one-offs, “it nonetheless contains hints at an improvement in our trade position that we need to register over coming years.”

Optimism increases for SMEs

Research from MBH Corporation shows 28% of SMEs believe they will make a loss this year, while a third believe they will make a profit. Callum Laing, chief executive of MBH, said that confidence among SMEs is improving as last year only 19% expected to be profitable, while 39% expected to be in the red. He said: “The imminent easing of lockdown restrictions and the success of the vaccination programme point to better times ahead for the SME sector which has been through a torrid time.”

Banks to lend £7bn less than predicted as economy rebounds

Figures from EY show UK companies are expected to borrow a net £19bn this year, far less than the £26bn initially forecast by experts in February. Anna Anthony, EY’s managing partner for financial services, said the huge rise in borrowing from cash-strapped businesses in 2020 combined with the millions of consumers who were able to repay record levels of personal debt are trends that are likely to prove short-lived as lockdowns come to an end and consumer confidence grows

UK remains top European destination for VC

KPMG’s Global Venture Pulse Survey reveals that businesses in the North attracted £315m in Venture Capital investment in the first quarter of 2021. The money was raised across 37 deals in the region, representing 9% of all UK deals by volume during the quarter, and 10% of all UK deals value. The report found that more than £5.1bn was invested in UK scale-ups in the first three months of 2021, up 21% on the previous quarter. Bina Mehta, chair of KPMG UK and head of the KPMG’s Emerging Giants practice, said: “The UK continues to be the powerhouse of Europe when it comes to attracting investment in fast growth innovative companies. While the number of deals taking place in the first quarter of the year was down by 23% on Q4 ‘20, it was our ability to grow and nurture large innovative businesses that attracted VC investors from across the globe.”


IHS Markit-CIPS UK construction PMI rose to 61.6 from 61.7 in March well above the 50 level that signals expansion


Copper prices hit a record high rising by 1.4% to $10,361 a tonne, beating the previous record from 2011.  Demand comes the global recovery and the green revolution for use in electric vehicles, wind turbines and solar panels.

Easing lockdown

Prime Minister Boris Johnson is expected to confirm the next stage of lockdown easing in England will go ahead as planned. People will be allowed to stay overnight with friends or relations, and indoor hospitality will be reopened along with an opening of international travel to a select group of nations. Step three of the road map out of lockdown is expected to begin from next Monday 17th May. More than a third of the adult population is now fully vaccinated against Covid-19, and two-thirds of adults have received a first shot with more than 53 million doses given in the UK .

Chinese trade

Chinese imports rose at their fastest rate of growth in 10 years as imports rose 43% over April 2020. Chinese exports also jumped by 32% in April with the economic recovery in US, combined with shuttered manufacturing elsewhere in the world, frove demands for goods made in China.

SMEs suffering the brunt of computer chip shortage

The global shortage of computer chips is hitting the UK’s SMEs hard with companies struggling with steep price rises and difficulties fulfilling orders. Nudge, a health device start-up, says the shortage threatens the firm’s viability with prices for five key elements of its smart wristbands increasing five-fold while lead times have increased to 30 or 40 weeks.


Greggs announced this morning that profit for the year is expected to beat expectations and return to pre-pandemic levels, as long as no further Covid restrictions are implemented. The company said sales had recovered well in recent weeks as the “stay at home” order was eased, buoyed by a lack of competition from cafes with indoor seating.

Redundancy concerns remain as economic steam builds

On Saturday The Express reported on concerns over furlough fraud as analysts look ahead to the scheme winding down. Some think with businesses starting to reopen worries over fraud will ease, but conversely there will be rising anxiety about an increase in redundancies as employers trim staff numbers as support falls away or they fold altogether. The number of people on furlough fell to 4.2m in March, from 4.9m in January. Sarah Coles, a personal finance analyst at Hargreaves Lansdown, said if someone is still on furlough they could take comfort from knowing a resurgent economy could shore up their job before the scheme ends. Also important is the news that job adverts finally rose above their pre-pandemic level in the third week of April.

First quarter sees strong start for dealmaking

A report from Experian Market IQ points to a strong start to the UK deals market this year with a total of 1,712 deals involving a UK business recorded in the first quarter. Although this represents a small decline on Q1 2020, it is a 52% increase on the middle part of last year. The busiest sector was infocomms, followed by professional services. BDO provided advice on 70 deals in the first quarter to take first position in the ranking of financial advisers by volume, while Goldman Sachs topped the value side with £30.6bn worth of deals.

Top five IR35 pitfalls to avoid

Caroline Harwood, an employment tax partner at BDO, explains in the Mail on Sunday the mistakes businesses need to avoid regarding IR35. Top of the list of pitfalls is failing to identify all relevant contractors. Secondly, companies should have a clearly documented policy on how your business will deal with contractors, so the intention to use reasonable care can be proven to HMRC. Thirdly, people across the whole business need to be aware of the rules. Fourthly, expert advice should be sought if there is a complicated case and it is difficult to decide whether or not a contractor should be treated as a de facto employee for tax purposes. Finally, there should be a consistent process for paying contractors who are deemed to be employees or there will inevitably be mistakes and possibly incorrect tax and NIC payments.

Hybrid working embraced by most of the Square Mile’s largest employers

City AM reports that a majority of the City of London’s largest employers will continue with some sort of hybrid approach to working after pandemic restrictions ease. Employees appear largely in agreement that, even though the flexibility of working from home is enjoyable, collaboration is more challenging remotely. The Square Mile’s ten largest employers by office size were surveyed by City AM and the Bank of England, Nomura, Big Four firms Deloitte, PwC and KPMG along with Deutsche Bank all say they will be moving to a hybrid model. But Goldman Sachs is rejecting flexible or hybrid working while UBS is understood to be offering “case-by-case” flexibility to employees. Separately, the Observer reports that KPMG has told its 16,000 UK staff that from June they will only have to work two days in the office per week, on average, as the firm revealed its plan for a post-pandemic model. The company has called the initiative a “four-day fortnight” under which staff will spend the remaining days working either from home or at clients’ sites.

A new culture of work awaits

The Times considers some of the anxieties people have ahead of a return to the office next month as businesses set up their hybrid working models. The paper’s Damian Whitworth reminds readers of the importance of the office, quoting PwC’s chairman Kevin Ellis who says employees would jeopardise their careers were they to work remotely indefinitely. That said, talent won’t commute into the office to do work they can do at home. “People want somewhere where they can congregate and socialise in a work sense and collaborate. You’re not going to come into the office to work behind your desk in an office with the door shut.” Psychology professor Cary Cooper adds that not all companies permitting home working are motivated by altruism – they know staff are working longer hours and they can reduce their office space saving a fortune.

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