Services sector expanded – business news 7 May 2021.
James Salmon, Operations Director.
The services sector expanded at its fastest pace since 2013 in April, BoE: Economy set to grow at fastest rate in more than 70 years, Recruitment activity recovers at record rate, No full-time return to the office for many and many more business news stories.
Headlines
The Conservatives won an historic victory in the Hartlepool by-election, off the back of local support for Brexit and the successful Covid-19 vaccine rollout to deal a major blow to the Labour party. Hartlepool had voted Labour every time since the seat’s creation in 1974, so the result is a huge boost for PM Boris Johnson and shows support for the Conservative Party remains resilient despite the government coming under fire over its early handling of the pandemic and a recent slew of allegations against its integrity and competence.
The Bank of England Monetary Policy Committee has left its stimulus programme unchanged as it expects a faster economic recovery than previously anticipated. As expected the committee unanimously voted to keep interest rates at 0.10% and by a majority to keep the size of its bond-buying programme unchanged at £895 billion.
The UK Economy will enjoy its fastest growth in more than 70 years in 2021 as restrictions are lifted, according to the Bank of England. The economy is expected to expand by 7.25% this year, with extra government cash for workers and businesses helping to limit job losses.
UK Services sector expanded and rebounded in April with growth climbing to a seven-year high as lockdown restrictions were eased, according to an influential survey. The sector, which accounts for 80% of the UK economy, had the fastest rise in output since October 2013.
Services sector expanded at its fastest pace since 2013 in April
IHS Markit’s purchasing managers’ index for the services sector expanded from 56.3 to 61 in April – the fastest acceleration since October 2013 and above an earlier flash estimate of 60.1. Tim Moore, economics director at IHS Markit, said: “A surge of pent-up demand has started to flow through the UK economy following the loosening of pandemic restrictions.” IHS Markit noted that inflationary pressure was starting to build in the services sector, but Samuel Tombs, economist at Pantheon Macroeconomics, said he thought large price rises will not become the norm.
BoE: Economy set to grow at fastest rate in more than 70 years
The Bank of England has forecast the economy will enjoy its strongest growth in more than 70 years in 2021 as COVID-19 restrictions are lifted. The economy is expected to expand by 7.25% this year, with extra government cash for workers and businesses helping to limit job losses. However, the BoE’s quarterly set of forecasts showed it downgraded its growth outlook for 2022, to 5.75% from 7.25%. The view for the economy this year came as the Bank’s MPC voted unanimously to hold interest rates at 0.1%. The BoE kept its QE programme on hold at £895bn, although one member of the MPC voted to reduce it by £50bn given the brighter recovery prospects. The Bank said the third lockdown is set to see GDP fall by around 1.5% between January and March – far better than the 4.25% drop first feared. It also sharply cut its forecasts for unemployment over the year, now predicting that the jobless rate will peak at 5.5% down from 7.75%.
Recruitment activity recovers at record rate
A monthly report from KPMG and the Recruitment and Employment Confederation shows job hiring bounced back at the fastest rate since records began in 1997 in April. Private sector employers led the increase in activity, with computing seeing the steepest increase in permanent vacancies, followed by accounting, finance and engineering. Retail was the only sector to register lower demand for permanent staff. However, those looking for work or to move jobs fell in April at the sharpest rate since January 2020, partly due to furlough but also because of concerns about job security and a reduction in foreign workers after Brexit.
No full-time return to the office for many
Research by the BBC shows nearly all of the UK’s biggest employers do not plan to bring staff back to the office full-time. Some 43 of the 50 companies questioned said they would embrace a mix of home and office working, with staff encouraged to work from home two to three days a week. Organisations cited “smart working” and “flexibility” as reasons for introducing hybrid working, and many suggested that workers would be able to make their own choices about how often they come in to the office. BDO, Deloitte, Grant Thornton, PKF and RSM were among the firms approached by the broadcaster.
FCA chief says UK will not target EU equivalence deal at any cost
The head of the Financial Conduct Authority said in a speech delivered to the Association of Foreign Banks yesterday that the UK will not strive for an EU equivalence deal for the City of London “at any cost”. Nikhil Rathi added that Brexit provided the regulator with more flexibility and this would be used to “regulate for the benefit of UK financial markets and consumers.” However, he admitted that a lack of deal harmed consumer choice in both markets while the EU’s resistance to an equivalence deal has also cost EU banks market share in the trading of interest rate swaps and certain credit derivatives, for example. In his speech on Thursday, Mr Rathi also said the regulator would get tougher on misconduct, saying there will be a “rigorous review of all firms seeking to enter the UK authorisation gateway”
Brexit causes difficulties for more than 60% of UK firms
A new study by the London School of Economics has found that 61% of UK firms are reporting difficulties due to Brexit, resulting in rising costs, higher prices for consumers and reduced competitiveness. The study found that 24% of exporting firms said that Brexit has caused sales to fall, while one-third said that imports from the EU remained down. The LSE said that 37% of UK firms were reporting delays as a result of Brexit, 36% said they had faced additional customs and administrative costs, while 22% said they were experiencing higher levels of regulatory checks. The report’s authors stated: “The evidence in our report shows that Brexit played a role in the sharp drop in UK trade in 2021, with a sizeable share of firms experiencing issues in trading with the EU such as delays at the border and burdensome administrative costs. This has translated into rising costs, higher prices and reduced competitiveness.”
Gen Z unconvinced about honesty of business leaders
Generation Z are not convinced top business leaders are honest, according to new research from the Association of Chartered Certified Accountants (ACCA) and the International Federation of Accountants (IFAC). Fewer than four in 10 believing business leaders have integrity while just a quarter (26%) believe companies are contributing towards the fight against climate change. The ACCA and the IFAC quizzed 310 individuals studying finance or accountancy in the UK, and found 60% of 18 to 25-year-olds thought business had a positive impact on the wider society, despite their scepticism about the honesty of bosses. Jamie Lyon, head of business management at ACCA’s Professional Insights team commented: “There’s advice in our report for all business sectors – not just accountancy – about how to harness the potential of Gen Zs in the workplace, and also about how to gain trust. Business integrity matters to Gen Z, suggesting that in the minds of younger people that the image of businesses – in some aspects – remains to be improved.”
Raise taxes to fund NHS and social care, experts say
Health and political experts have said the Government should put a penny on income tax, national insurance and VAT to secure the future of the NHS and social care. The London School of Economics and Political Science–Lancet Commission on the future of the NHS said UK healthcare spending as a share of GDP is lower than average spend across G7 countries and that long-term solutions to NHS troubles includes “yearly increases in funding of at least 4% in real terms” for health, social care and public health over the next decade. Along with hikes to income tax, corporate and wealth taxes would also need to rise, they said.
Future of Virgin Active hangs in the balance
Sky News reports that Virgin Active is on the brink of administration as the gym chain awaits a court ruling, which could be made this week, on its restructuring plan. Many landlords are opposing the plans which would see property owners forced to write off millions of pounds in rent arrears and agree to future reductions if the restructuring is approved. Sources said that if the so-called Part 26A proposal is blocked, Virgin Active could fall into administration within days.
Calls to HMRC fraud hotline rose during pandemic
HMRC’s fraud hotline received 10,000 calls per month from April to December 2020, an increase of around 1,000 calls per month on the previous years’ 9,000 monthly average. Furlough fraud was likely to be behind many of the calls, as well as some allegations of abuse of the Government’s ‘Eat Out to Help Out’ scheme, according to PfP. The insurer speculated that, as a result of financial pressure from the Covid crisis, HMRC may now look to increase the pressure on those under investigation in order to recoup as much revenue as possible.
State pension cut for Britons who retire to EU
The Telegraph reports that millions of Britons who are planning to retire to the EU could face a hefty cut to their pensions due to post-Brexit rule changes. UK expats who move to the Continent and have previously lived in Australia, Canada or New Zealand will be hit by changes to how the state pension is calculated. This is because any years spent working in those three countries will now no longer be counted towards the state pension. John Westwood of Blacktower Financial Management warned that the change would hurt expats during a turbulent time. “If the Government goes ahead with this change in rule, they need to lay out clear foundations for UK expats on the new state pension breakdown,” he said.
Fishing for trouble
A short protest by 60 French fishing boats off Jersey caused both Britain and France to dispatch patrol vessels, with the European Commission accusing Britain of breaching the Brexit trade deal. Under the agreement French fishermen need new licenses to fish the waters around the Channel Islands, a British crown dependency. The commission said unforeseen “additional conditions” had been attached to the permits.
Boris Johnson may have been hit with £350,000 tax bill
Experts believe Boris Johnson may have been hit with a huge tax bill on entering Downing Street due to the large sums he earned from public speaking and writing his newspaper column leading up to becoming Prime Minister. Mr Johnson made £797,262 in the year after resigning as foreign secretary and tax advisers suggest he could have been billed around £350,000 by HMRC, providing a clue as to why a PM paid £157,000 a year should feel the need to ask donors to pay for his wallpaper.
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