An unprecedented growth spurt -business news 24 May 2021.

James Salmon, Operations Director.

An unprecedented growth spurt, retail sales leap, fewer small firms expected to default, SMEs cold be forced into court to restructure, exports key to success, builders hits by materials shortage and lots more news.

UK enjoying an unprecedented growth spurt

UK Business Activity expanded at its fastest rate since 1998 in May as the economy raced out of lockdown, new data showed.

The IHS Markit/CIPS flash composite Purchasing Managers’ Index (PMI) for May has shown an unprecedented growth spurt, coming in at 62.0, up from 60.7 in April (anything above the 50 mark indicates expansion). The figure was the highest since the survey began in January 1998 and reflected “strong contributions” from both the manufacturing and services sectors.

“The UK is enjoying an unprecedented growth spurt as the economy reopens,” said Chris Williamson, chief business economist at IHS Markit. “Factory orders are surging at a record pace as global demand for goods continues to revive, and the service sector is reporting near-record growth as the opening up of the economy allows more businesses to trade.”

However, the survey also found that cost pressures were at a 13-year high, hinting strongly that consumer price inflation has much further to rise after lifting to 1.5% in April.

Retail sales leap 9.2% in April

Figures from the Office for National Statistics (ONS) show retail sales jumped 9.2% in April with sales of clothing soaring by nearly 70% compared with March. Sales overall were more than 10% higher than pre-pandemic levels, although online sales dipped. Capital Economics chief UK economist Paul Dales said the April data “showed that households were particularly keen to update their wardrobes”. Silvia Rindone, EY UK & Ireland retail leader, said April had seen “significant pent-up consumer demand. With consumers keen to return to the in-store shopping experience and indulge in retail therapy, we saw a sales boost across most categories.”

Fewer small firms expected to default on emergency loans

A Barclaycard survey reveals 22% of small firms plan to pay off Government COVID-19 loans within a year. However, the poll indicated as many as 16,000 firms (1%) may default. The National Audit Office estimated last year that between 35 and 60% of borrowers might default on their loans. More than 1.6m small businesses borrowed around £70bn from emergency loan schemes and the first payments are due this month. A separate survey by Liberis shows 46% of small business owners asked family for financial support during the pandemic and more than a third asked parents for help. Some 40% turned to banks, 37% took a second job to keep their companies afloat and a further 28% considered doing so.

SMEs cold be forced into court to restructure

Insolvency experts have warned that many struggling small businesses will be forced to go to court to restructure their finances due to flaws in a government-proposed alternative rescue process. The small company administrative rescue process (Scarp) unveiled last week aims to provide a low-cost alternative to examinership for businesses threatened with insolvency after pandemic supports are withdrawn. However, Tom O’Brien, a partner at Mazars, says Scarp may be unsuitable for writing down companies’ largest liabilities such as Revenue debt and unaffordable leases with above-market rents.

CBI: Exports key to successful post-pandemic future

A report from the Confederation of British Industry published today aims to provide a roadmap to a more successful post-pandemic future for the UK. The business lobby group identifies exports as a key area of weakness, however, with its Seize the Moment report outlining how only 14% of UK exporters fall into the category of “superstar” companies which sell at least ten different product lines to ten different markets. In Germany, 40% of exporters fall into this category. The CBI says many SMEs choose not to export despite the opportunities in areas such as finance, information and communication, and education where the UK has world-beating capability. CBI vice-president John Allan said: “If we’re to compete and win globally, the UK must build on its strengths.”

Builders hits by materials shortage

Shortages of materials has pushed inflation in the construction industry to its highest level since records began 25 years ago. Brian Berry, chief executive at the Federation of Master Builders, warned that the price increases risked hampering the sector’s post-pandemic recovery. Meanwhile, the Sunday Express reflects on how rising inflation will affect savers, whose cash is severely eroded sitting in easy access accounts, while Jamie Durham, economist at PwC, warns that if inflation takes hold it may force up mortgage rates, ultimately hitting house price growth.


The IMF has proposed a $50bn plan to end the covid 19 pandemic with a target of vaccinating at least 40% of the world’s population by the end of 2021 and 60% by the end of 2022.

Hospitality leaders call for ‘coronavirus recovery visa’

Hospitality leaders have urged the Government to introduce a “coronavirus recovery visa” to plug worker shortages and keep food chains and hotels open, after a mass reopening of the sector exposed a dearth of immigrant workers, many of whom returned home at the start of the pandemic. Kate Nicholls, chief executive of trade association UKHospitality, said: “The government urgently needs to review the ‘shortage occupations’ list. We’ve also suggested an Australian-style coronavirus recovery visa for lower-skilled workers who don’t meet the point-based system [but] who are crucial to the recovery.” James Reed, chairman of recruitment firm Reed, claimed a “jobs boom” has swung the balance of power back in favour of workers. There are shortages across the board, with companies from manufacturers to hauliers struggling to hire staff.

EU players welcome US move to lower minimum global corporate tax rate

A new U.S. proposal for global minimum corporate tax rate of at least 15% has been deemed a good basis for sealing an international deal by July. Finance ministers in France, Germany and Italy said reducing the proposed rate from 21% to 15% was a good compromise. Previous OECD discussions on the subject had centered around 12.5%, the same rate charged by Ireland. Meanwhile, Robert Palmer says in City AM that Rishi Sunak should not waste the opportunity to adopt a global minimum corporate tax rate. The UK Chancellor has previously said he would block the move unless there was an assurance from the US that there was also a deal on the table for taxing tech multinationals – an international mechanism to replace the UK’s Digital Services Tax (DST). ” It’s time for the government to back these plans,” Palmer says. “There’s a deal waiting to be done.”

Disputes loom over contractors’ status after IR35 reforms

Some 50% of contractors plan to challenge their classification under IR35 reforms, according to survey, with nearly two-thirds classified as “employed for tax purposes” since the rules changed in April.

Soaring wealth of pandemic winners hastens call for wealth tax

The Sunday Times’ annual Rich List reveals it has been a record year for Britain’s billionaires with their combined wealth growing to £597.3bn, up 21.7% in the past year. The wealth of each of the UK’s 250 richest people grew at an average rate of more than £1m a during the pandemic, while nearly 130,000 people died and millions lost their jobs or have been furloughed. The sharp increase in the fortunes of the rich has led to calls for a windfall tax on the corporate winners of the past year. Billionaire mobile phones magnate John Caudwell says the Chancellor should put a 90% tax on the excess profits made during lockdowns – particularly those of online retailers – a move that would leave them just as well off as they would have been without the lockdowns. Caudwell describes tax avoidance as a “disease” and that “we cannot have the world’s rich just getting richer and the poor getting poorer.” George Dibb, head of the IPPR Centre for Economic Justice, adds that the Rich List “only bolsters our view that the UK tax system simply isn’t fair.” He adds: “Too many billionaires pay tax at a lower rate than their staff. Levies on dividends and capital gains should be the same as income tax rates. Inheritance tax also needs to change.” Analysis published alongside today’s Rich List models how much money a one-off wealth tax could raise. A one-off flat tax of 5% on all wealth over £1bn would raise £19bn. But a more progressive approach with three elements: a 5% tax on all wealth over £100m, a 10% tax on wealth over £500m and a 20% tax on wealth over £1bn could raise as much as £97bn.

Report finds pandemic has made social mobility more difficult

New research by PwC indicates that  the pandemic has made social mobility more difficult with women more likely to feel this compared with men. More than half (55%) of people surveyed in the West Midlands also agree that those from lower socio-economic backgrounds have been further disadvantaged. Nick Hatton, West Midlands place and purpose leader at PwC, said: “This research is a stark warning that the pandemic risks putting social mobility into reverse. While older people have been the principal health victims of Covid, without action the younger generation will be the biggest economic and social losers from it.”

HMRC customer service worsens

The past year has seen service levels at HMRC hit “rock bottom” with call waiting times in February three times longer than a year ago. In February 2020, the average wait was six minutes; this year it’s 15 minutes. Accountants complain that even routine requests such as registering for self-assessment are taking weeks and with new forms issued by HMRC this week they are predicting even more delays. the Institute of Chartered Accountants in England and Wales said that its members have experienced poor performance “across all HMRC services”. The industry body goes on to warn that HMRC’s failures could damage Britain’s post-pandemic recovery “due to inhibiting new businesses and stifling the growth of existing ones.”

HMRC staff can work flexibly as part of reforms

Some 64,000 staff at HMRC will be able to work from home at least two days a week permanently from next month, the tax authority has confirmed. The new flexible working policy will come into effect on June 1st and is being instituted despite Government aims to get workers back into offices. The changes are being made as part of a wider overhaul to address what CEO Jim Harra described as a “crisis” of pay and working conditions. As well as offering permanent flexible working, HMRC is hiking pay and standardising contracts, while it is slashing its network of around 170 offices to 13 regional centres, five specialist sites and a head office in London.

BoE in denial over inflation risks, says Halligan

Liam Halligan says in his column for the Telegraph that damaging inflation is on the way and accuses the Bank of England of complacency with its insistence that the issue is transitory. He says it is wrong to assume the BoE can follow in the footsteps of the US Federal Reserve – printing money ad infinitum while hoping that inflation can be kept at bay and QE can go on forever. Halligan doesn’t support Governor Andrew Bailey’s argument that there is little sign of higher producer costs feeding into consumer prices preferring the view of the Bank’s chief economist Andy Haldane, who warns the “inflation genie” is escaping the bottle. Unfortunately, Halligan laments, Haldane is leaving the BoE soon after casting a lone vote to scale back the Bank’s QE scheme. Halligan concludes that it’s “time to get real” and that Bailey and his cohort are denying “centuries of economic evidence” when they claim vast monetary expansion has no impact on long-term inflation

Millennial tech workers join ranks of high earners

Analysis by Salisbury House Wealth has found that the number of UK millennials earning £150,000 or more has risen by 22% in the past year, with over 71,000 top earners in the country now under the age of 40. The sharp rise in wealth is largely due to soaring remuneration for workers in the tech sector, especially for those with shares or options, and a broader boom in millennial entrepreneurship.


Cineworld today hailed a strong opening weekend in the UK as Brits returned to the big screen following the easing of lockdown measures. Cineworld, which also owns the upmarket Picturehouse chain, said the weekend’s trading “went beyond our expectations”, adding that punters also splashed out on concession goods.

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