SMEs plan to increase investment – business news 30 March 2021.
James Salmon, Operations Director.
SMEs plan to increase investment, Bank lending leapt, SMEs need help with productivity, household finance optimism rises, retail and more business news.
SMEs plan to increase investment in the year ahead
A report from Virgin Money reveals the annual growth rate in the number of registered companies in the UK surged to a record 8.3% in Q4 2020.
More than a quarter of SMEs plan to invest more in their businesses in the year ahead than during a typical pre-pandemic year – with 35% intending to invest £10,000 to £10m this year, a rise on 32% from 2020.
However, only one in five SMEs expect to be able to keep all furloughed employees after the end of the Coronavirus Job Retention Scheme, with over 50% of small firms currently employing staff on furlough.
Group business director at Virgin Money, Gavin Opperman, commented: “While there are undoubtedly significant challenges ahead, many businesses remain optimistic and intend to invest for the future as the economy recovers.”
UK bank lending leapt by £29.3bn since March
A new study by UHY Hacker Young shows UK banks have lent around £29.3bn more to businesses over the past year – a rise of 8% since the start of the pandemic.
This compares with a 5.3% jump in lending in the EU on average. UK bank lending also surpassed Germany (7%) and Spain (3%).
“We may have under-performed in some areas in our response to Covid but in terms of getting finance to businesses, this is an area where the UK has been a leader,” managing director of UHY Hacker Young Corporate Finance, Robert Kidson, said. “The economic impact of the pandemic and the disruption to businesses cash flows has lasted longer than anyone expected…there is little certainty on when businesses can return to ‘normal’ operating levels, the UK needs to provide as much support as possible to ensure businesses stay afloat until then.”
SMEs need help to drive productivity up
Researchers at NatWest have determined that boosting productivity among SMEs could add £140bn to the economy by 2030 – the equivalent of an extra 3.2m jobs. Figures show SME productivity in Britain lags the US by 17% and Germany by 12%. Andrew Harrison, NatWest head of business banking, said: “Support needs to be more closely tailored to their specific needs.”
Optimism about household finances rises
The Scottish Widows Household Finance Index rose from 41.1 to 42 in the first three months of the year, encouraged by the success of the vaccination programme and the “road map” out of lockdown. The survey, conducted with IHS Markit, found people are feeling the most secure in their jobs since the start of the pandemic and have paid off debts at the fastest rate in more than a decade.
Retail
Reports from the Office for National Statistics and the British Retail Consortium due out today will give an update on the state of Britain’s retailers. Retail has adapted to lock-downs, however the damage to the high street will be watched as online sales have soared. Retailers fear that much of the shift will prove permanent and have begun to trim their high street presence.
US trade tariffs
The United States has threatened the UK with tariffs of up to 25% on a slew of goods in retaliation for the digital services tax. Brought in last April it levies at 2% the revenues of search engines, social media services and online marketplaces which derive value from UK users. Ceramics, make-up, overcoats, games consoles and furniture could all be hit, according to a list published by the Biden administration. The duties are designed to raise $325m, the amount the US believes the UK tax will raise from US tech companies.
A UK Government spokesperson said: “Like many countries around the world, we want to make sure tech firms pay their fair share of tax. Our digital services tax is reasonable, proportionate and non-discriminatory. It’s also temporary.” The FT reports that the UK international trade secretary, Liz Truss, has told the Biden administration to “desist” from its threat and instead engage in international efforts to agree a “fair” way to tax multinational tech companies.
Further tax changes expected
Industry experts speculate on the possible tax changes that Chancellor Rishi Sunak could announce in the Autumn Budget.
Eddie Grant, a Director at St. James’s Place, comments: “The Government has over the year commissioned a series of consultations so there was an expectation they would be the focus of the Tax Day announcements, in particular Inheritance Tax and Capital Gains Tax, but there was only minor changes.
There were no announcements about pension tax relief despite it being widely speculated and no changes to Capital Gains Tax. Could these be planned for the Autumn Budget when we get the detail?”
Stamp duty holiday drives mortgage lending to five-year high
New Bank of England data show that the stamp duty holiday extension spurred home buyers to borrow £6.2bn last month – a five-year high for mortgage lending. Some 87,700 mortgages were approved in February, down from more than 100,000 in November and December, but still one of the highest numbers since 2007. “We suspect that mortgage lending will remain high this year given the extension to the stamp duty holiday and the strength of the survey data,” said Andrew Wishart at Capital Economics. “As a result, mortgage approvals for house purchase are likely to reach their highest level since 2007 this year.”
Wetherspoon
Wetherspoon is set to invest £145 million opening new pubs and upgrading existing ones, creating 2,000 new jobs, the pub chain announced this morning. The ambitious plans will start within weeks of its pubs reopening fully as the lockdown eases. A total of 18 new pubs will open and “significant extensions and upgrades” will be made to scores of current pubs.
Suez
By yesterday evening, salvage crews managed to tow the Ever Given container ship to a lake halfway through the Suez Canal, making it possible for the massive queue of ships that had built up to start passing through. While the traffic jam may disappear within two and a half days, global trade is bracing for more disruption after the incident threw a complex network of tightly scheduled supply chains into disarray. Ports are bracing to be inundated with goods held up at the Canal for almost a week.
Uber
Uber users in central London can now request an all-electric car, after “Uber Green” was launched on Monday. The ride-hailing platform intends to roll out the program in Europe and America through the year, part of a commitment to become “fully zero-emission” by 2040. However, with only 1,600 of London’s 45,000 Uber drivers having electric vehicles, fulfillment maybe easier said than done.
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