News in brief
27 September 2021: government looks at SAWS changes to fix worker shortage; fund managers say UK equities are undervalued; UKEF to go carbon neutral by 2050.
The UK government is considering changes to the Seasonal Agricultural Workers' Scheme (SAWS) in an attempt to fix labour shortages in the food sector. SAWS is a quota-based scheme that allows farmers to recruit overseas. It admitted 30,000 temporary workers to the UK this year to fill vacancies in agriculture, such as produce picking and packing. The announcement comes after the National Farmers' Union called for another emergency visa to allow firms to recruit from outside the UK, the BBC reported.
Nearly nine in 10 professional investors from the UK, US and Germany believe UK equities are undervalued and many are looking to increase their allocation in the area. A MBH survey found 47% of investors will increase their allocation to UK equities over the next 12 months, compared to just 5% who expect to reduce it. The corresponding figures for three years are 56 per cent and 11 per cent, respectively. Around 20% expect to increase their allocation to UK microcaps between now and 2023, while 8% will reduce their exposure, City A.M reported.
UK Export Finance (UKEF) has made a commitment to going carbon neutral by 2050. This means it will decarbonise its financial portfolio and increase its support for clean growth, renewables and climate adaptation exports. UKEF currently has a capacity of £50bn to support UK exports through loans, insurance and guarantees. It issued £12.3bn of financial support to businesses last year.
24 September 2021: PAC announces second Achieving Net Zero review; UK’s first Green Gilt raises £10bn; FRC publishes going concern disclosures report.
The Public Accounts Committee is launching a follow up inquiry to its Achieving Net Zero report. Ahead of the UK-hosted, international COP 26 climate conference, it will question senior officials at the Department for Business, Energy and Industrial Strategy and the Treasury on how the UK is now going to map out and lead the way on the path to Net Zero by 2050. The committee has asked for any evidence on the issues, with a deadline of Thursday 14 October.
The Government has announced the UK’s first Green Gilt, with £10bn raised from its sale. This makes it the largest inaugural green issuance by any sovereign, with the largest-ever order book for a sovereign green transaction. It will be followed by a second issuance later in the year. The government aims for Green Gilts to raise a minimum of £15bn for green government projects in this financial year.
The Financial Reporting Council (FRC) has published its review of companies’ viability and going concern disclosures. It found there are two main areas requiring improvement. Firstly, the disclosure of inputs and assumptions used in forecast scenarios to support viability and going concern assessments “often lacked sufficient qualitative and quantitative detail”. Secondly, significant judgements made to determine whether a company was a going concern or whether this was subject to material uncertainty were not identified or explained. The FRC also asked companies to extend their viability assessment periods and provide longer-term information and more concise and informative company-specific disclosures.
23 September 2021: fraudsters steal £4m a day as crime surges; HMRC disbands FIC-focussed unit; UK pensioners underpaid more than £1bn.
More than £4m on average was stolen by fraudsters every day in the UK during the first half of 2021. Fraud committed when individuals are tricked into handing over money and personal details surged by 71% compared with the first six months of last year. In total, £754m was stolen through fraud in the first half of the year, an increase of 30% compared with the same period last year. Less than half of the money lost in these cases was refunded by banks, the BBC reported.
HMRC has disbanded a specialist unit that focused on family investment companies (FICs). The three-person team was set up in 2019 to investigate risks associated with FICs and tax avoidance risks, following an increase in FIC creation. At the time many voiced concerns they could allow for a greater level of non-compliance. However, HMRC has found no evidence of a correlation between FICs and illegal activities or non-compliant acts, City A.M reported.
More than £1bn-worth of UK state pensions has been underpaid due to human errors made amid complex rules and outdated IT systems. The Department for Work and Pensions estimates it underpaid 134,000 pensioners. Those it can trace will be paid an average of £8,900, the Guardian reported. An estimated £339m will go to pensioners who should have benefited from their spouse or civil partner’s national insurance (NI) record; £568m to widows and widowers who should have inherited more state pension entitlement from their deceased partner; and £146m to pensioners who should have had an increase in their pension on their 80th birthday.
22 September 2021: OECD: UK muscles out G7 to top economic growth rankings; CO2 shortage: Poultry, pork and bakery products could disappear from supermarkets 'within days', industry chief warns; National Express in talks to buy transport rival Stagecoach.
The UK economy will grow the fastest among the group of the world’s richest countries, according to the Organisation for Economic Co-operation and Development (OECD), City A.M reported. The OECD thinks the UK economy will expand 6.7 per cent in 2021, the highest rate of growth among the G7. The UK’s leading growth rate has been driven by ultra accommodative support from the Bank of England and the successful rollout of COVID-19 vaccines. Britain’s vaccination programme flew out of the gates at the beginning of 2021, allowing restrictions on consumer-facing businesses to end relatively earlier compared to other rich nations.
Shoppers could start noticing food shortages within days due to the crisis in carbon dioxide (CO2) supply, a food industry chief has warned. CO2 is used in food packaging, as well as being a way to stun animals prior to slaughter, but now supplies are running low. Surging energy costs have resulted in the suspension of operations at fertiliser plants - which produce CO2 as a by-product - having a knock-on effect on the food industry. Consumers could start noticing shortages in poultry, pork and bakery products within days, according to Ian Wright, the chief executive of the Food and Drink Federation, Sky News reported
National Express has confirmed it is in talks to buy rival transport firm Stagecoach. Under the terms of the potential deal, National Express would own about 75% of the combined group and Stagecoach 25%. National Express said it would be able to slash costs as a result of the merger, and expected the newly formed group to find savings of at least £35m. Travel restrictions and fewer commuters travelling to work have dented passenger numbers during the pandemic, the BBC reported.
21 September 2021: Rescue loans for gas firms urged over energy price crisis; City minister pledges 'competitive tax rates' for UK financial services sector ahead of Budget; Shares in China’s Evergrande plunge again as fears of contagion grow.
The UK government is considering offering emergency state-backed loans to energy companies as firms battle to stay afloat amid surging gas prices. Business Secretary Kwasi Kwarteng will hold crisis talks with industry bosses including Centrica and E.On on Monday. High demand for gas and reduced supply are behind a surge in wholesale prices. Consumers are protected from sudden hikes through the government's energy price cap, a maximum price they can be charged on a default tariff, the BBC reported.
John Glen has promised that the UK’s financial services sector will benefit from “competitive tax rates,” ahead of the next Budget on 27 October, City A.M reported. The sector is currently subject to an 8 per cent surcharge, first introduced in 2015, which Chancellor Rishi Sunak has previously said he would review in order to maintain London’s position in the global market post-Brexit. Glen, who is City minister, also said that the cap on bankers’ bonuses, introduced by the EU after the financial crash, will also be kept “under review”.
Hong Kong stock fell almost 17% amid default fears that are beginning to have a knock-on effect on other markets. Shares in the embattled Chinese property company Evergrande have plunged again as investors weigh up whether the group’s massive debt problems could trigger a broader sell off across all financial markets. Evergrande shares were down 12% in afternoon trade in Hong Kong on Monday, a slight recovery after being down 17% in the morning. The company, China’s second-biggest developer which owes $300bn to contractors, investors and homebuyers, dragged the Hang Seng index down to its lowest point for nearly a year, The Guardian reported.
20 September 2021: City should brace itself for €900bn Brexit hit if Brussels plays clearing politics; Ministers to give workers immediate right to request flexible working; Shop sales fall for fourth month as more dine out.
The City and several financial services groups in Brussels are lobbying for an extension to clearing house access beyond June of next year. A trio of major lobby groups for Europe’s finserv sector called on Brussels to extend the EU’s access to London clearing houses amid warnings of financial instability. If there is no extension, the City runs the risk that the euro-denominated derivatives from large netting sets will be removed from London. This currently clears around €900bn euros per day, City A.M reported.
Employees of all companies will be able to request flexible working arrangements when they start new jobs under proposals to be published by ministers, Sky News reported. The Department for Business, Energy and Industrial Strategy plans to allow millions of workers to request flexible working from their first day at a new employer, replacing the current 26-week period. The move, which could be announced in the coming days, has been planned since before the 2019 general election but has been thrown into sharp relief by the pandemic's profound effect on working patterns, Sky News said.
Retail sales in the UK fell for the fourth month in a row in August, but people spent more time eating and drinking in bars and restaurants. Sales fell by 0.9% in August, the Office for National Statistics (ONS) said, following a 2.8% fall in July. Food store sales fell by 1.2%, but the ONS said this was linked to the removal of restrictions on hospitality leading to more people eating out. Analysts said labour shortages and supply chain disruption had hurt sales, the BBC reported.
17 September 2021: DP World invests £300m in London Gateway port; survey finds most office staff won’t return full-time; Google staff demand it back pay TVCs.
DP World has announced it will expand a London port to increase supply chain resilience. The Dubai-based supply chain logistics company has already poured £2bn into Britain over the past decade. This latest payment will add a fourth berth to the company’s London Gateway port, increasing its capacity by a third. Chancellor of the Exchequer Rishi Sunak says the investment will create new opportunities, boost growth and support local jobs, City A.M reported.
Around 70% of Britons do not expect to return to full-time office working after the pandemic, a YouGov/BBC poll of 1,684 office staff and 530 senior business leaders has found. The majority of those favour either working from home full-time or via a hybrid arrangement and believe their productivity will not suffer if they do so. Furthermore, 75% of people think their manager will allow them to continue working away from the office. However, 50% of senior leaders have shown concern that creativity and collaboration could suffer if employees stay at home.
Google employees are demanding it pay back wages to temporary workers, vendors and contractors (TVCs). A report last week revealed Google had knowingly and illegally underpaid around 130,000 TVCs by 12%- 50% for years. In doing so it violated pay parity laws in the UK, continental Europe and Asia that require temporary workers be paid rates equal to those of full-time employees performing similar work. While most of Google’s TVCs are considered vendors, thousands in dozens of countries are protected by local laws requiring pay parity. The company was aware of the situation since at least May 2019 but delayed correcting the pay rates, the Guardian reported. More than 140 workers have now signed a petition calling on the company to “immediately pay back all TVCs…create an immediate path to permanent employment for temporary workers and end its two-tiered perma-temp system”.
16 September 2021: new legislation to help lockdown-affected SMEs; HMRC publishes two updates for IPs; new pennies minted as cash is hoarded during COVID-19.
The Corporate Insolvency and Governance Act 2020 has introduced new temporary measures for companies affected by the lockdown restrictions during the pandemic. The new legislation will protect businesses from creditors insisting on repayment of relatively small debts by temporarily raising the current debt threshold for a winding up petition to £10,000 or more. It will also require creditors to seek proposals for payment from a debtor business, giving them 21 days for a response before they can proceed with winding up action. These measures will be in force until 31 March 2022.
HMRC has published two updates for insolvency practitioners (IPs). Firstly, it provided new guidance on the payment of Corporation Tax for unincorporated associations and clubs and on funded pension schemes. Secondly it issued updated guidance on IP appointments. The latter explains that any IP seeking HMRC support for their appointment will need to demonstrate that it will lead to an increased return to HMRC as a creditor after all fees and expenses have been considered.
One penny coins were back in production last year after none were minted for general circulation in the previous two years, Royal Mint figures show. COVID-19 lockdowns meant many coins were hoarded, requiring some to be produced for use in the economy. Some 88 million new 1p coins were minted in 2020 while 330 million coins were released into circulation, far lower production levels than seen in previous years, the BBC reported.
15 September 2021: August job vacancies pass one million; UK’s coal stations paid huge sums to keep lights on; partial rollback of Trump tax cuts proposed.
Job vacancy figures in the three months to August rose above one million for the first time since records began in 2001. Employee numbers were back at pre-COVID levels in August, the Office for National Statistics found. August payrolls showed another monthly increase of 241,000 to 29.1 million. The food and accommodation sectors saw the biggest jump in the number of jobs available in August, increasing by 57,600, Sky News reported.
Owners of the UK’s last remaining coal power stations are in line to be paid record sums to keep the lights on as energy prices reach fresh highs. The UK’s electricity system operator (ESO) spent more than £86m last week alone to keep the lights on. This involved making payments of up to £4,000 per megawatt-hour for fossil fuel power stations to generate electricity at short notice. The price of electricity on the UK’s main power auction rose above £400 per unit for the first time on Monday, while the price of gas surged to a record of 150p per therm, The Guardian reported.
Leading Democrats have released plans for a partial rollback of former US president Donald Trump's tax cuts. Members of the ways and means committee, which sets tax policy, propose raising the top rate of corporation tax to 26.5% from 21%. Their proposals would bring in a graduated rate of 18% on annual income below $400,000, 21% on income up to $5m and 26.5% on income above $5m. The benefit of the graduated rate would phase out for firms making more than $10m. As such, wealthy individuals would see a jump in their income taxes, as well as higher capital gains and inheritance taxes. The plans, to be debated this week, would help fund the Democrats' $3.5trn domestic investment plan, the BBC reported.
14 September 2021: CBI and TUC warn UK of more economic shocks; UK firms expect London to remain top financial centre; impersonation scams see £130m stolen in first half of 2021.
The UK needs to be better prepared for future economic shocks, the Trades Union Congress (TUC) and CBI warn. TUC general secretary Frances O'Grady urged the government to acknowledge the danger to workers from further pandemics, climate change and technological disruption, the BBC reported. "Let's make [the tech] industry deliver decent conditions, direct employment and a proper pay rise,” she said. CBI director general Tony Danker has called for a series of measures including smarter taxation rewarding firms that invest in the future; new individual training accounts simplifying support access; speeding up major infrastructure projects with "catalytic" public investment; and replicating the success of offshore wind in emerging industries while rebalancing economic regulation.
More than two-thirds of the UK’s financial firms believe that London will retain its status as one of the world’s leading financial centres after Brexit. Lloyds Bank’s annual sentiment survey also found 32% believe the competitiveness of their own sector will improve over the next year – almost double the 17% who think it will worsen. Of the UK financial services sector, 55% expect growth to improve over the next year, up from 13% last year. This confidence spread to individual business outlook, as 65% expect their revenues to rise compared to 31% in 2020, City A.M reported.
Impersonation scam cases have more than doubled in the first half of 2021, with fraudsters stealing £129.4m. UK Finance says there were 33,115 cases, up from 14,947 in the same period last year when £57.9m was stolen. Impersonation scammers commonly claim they need to protect an account from fraud, that a fine or tax needs to be paid, or that a refund sent by mistake must be returned. The public is being urged to challenge requests for information and report the scams to their bank and police, Sky News reported.
13 September 2021: NAO report slams NLEDS programme; first UK LGBT business champion appointed; Estonia sees 60% tax revenue rise from Brexit.
The National Audit Office (NAO) has released its report on the Home Office’s programme to develop the National Law Enforcement Data Service (NLEDS). The report assesses the Home Office’s progress in delivering the programme by 2020, the need for its reset in 2020 and the way forward. It concluded that between 2016 and 2020 the department did not achieve value for money against its plans to deliver NLEDS and failed to deliver it by the deadline. The delay generated higher costs for users and forced them to continue using outdated systems. It is also still unknown if the programme could effectively replace the Police National Computer by December 2024. As such, the Home Office “faces significant risks in delivering the reduced scope, particularly around police engagement, and many practical challenges remain”, the NAO found.
The UK's first LGBT business champion has been appointed, pledging to build a bridge between the government and the LGBT community. Iain Anderson, Stonewall ambassador and executive chairman of public relations firm Cicero, will focus on improving workplace equality at a small business level. A CIPD report found 40% of LGBT employees have experienced conflict at work, rising to 55% of trans employees. Anderson was appointed to the new unpaid position by equalities minister Liz Truss, the BBC reported. His appointment comes after the government's LGBT advisory panel was disbanded earlier this year when several members quit over the government's handling of LGBT rights.
More than 4,000 British companies have moved to Estonia since Brexit, mostly by registering for the country’s e-residency scheme. Their main reasons were access to the EU, the country’s tax system and Estonia’s flourishing tech scene and digital infrastructure. Despite a population of only 1.3 million, Estonia currently has seven unicorns – a tech firm valued at more than $1bn. Companies pay 0% corporate income tax if they reinvest in their company. Estonia’s prime minister Kaja Kalla said the country is benefitting hugely from Brexit. The arrival of UK companies has partly contributed to a 60% jump (€51m) in tax revenues this year so far, compared to the same period in 2020, City A.M reported.
10 September 2021: KPMG to recruit more working class staff; FCA launches crackdown on inactive firms; numbers on furlough drop to new low.
KPMG is one of the first large UK businesses to set a target for the number of employees from working-class backgrounds. By 2030, it wants 29% of its partners and directors to be from such backgrounds, defined as having parents with "routine and manual" jobs, such as drivers, cleaners and farm workers. That compares with 23% of partners and 20% of directors currently, the BBC reported. The Big Four firm said these employees were paid 8.6% less than those from the other socio-economic groups, as working-class representation in middle management grades was lower than other levels, contributing to the pay gaps.
The Financial Conduct Authority (FCA) has launched new powers allowing it to crackdown on inactive financial services firms faster. A sweeping set of reforms, granted under the Financial Services Act, will help cut the amount of time the watchdog must wait to revoke regulated firms’ permission to carry out regulated activities. The FCA will be able to start the cancellation process as soon as it considers permissions are not being used, by serving 14 days’ notice on a firm. It will then be able to vary or cancel permissions after one month, instead of the previous 12, City A.M reported.
The number of people on furlough has continued to fall, with young people leading the way. At the end of July, 1.6 million people were still on furlough, the lowest level since the start of the pandemic and 340,000 fewer than a month earlier. Older people and those in the travel sector did less well, with half of eligible travel workers still on the scheme, the Resolution Foundation found. Since the start of the pandemic, 11.6 million workers have benefited from the programme, which is due to be wound up at the end of this month, the BBC reported.
9 September 2021: Amazon pays £492m in sales taxes in the UK; UK named world's third best regulatory base; state pension triple-lock suspended one year.
Amazon paid £492m in taxes on sales which rose 50% to £20.63bn, amid a COVID-driven surge in demand. The taxes included business rates, stamp duty, corporation tax and other contributions. The online shopping giant says it is “proud” of the contribution, which comes after it faced scrutiny over the level of its tax bills in the UK. It has invested £32bn in UK infrastructure since 2010 and employs 55,000 people in the UK, the BBC reported.
The UK has been named the world's third best regulatory base, ahead of the US and EU. The Mercator Entity Management Report 2021 ranks global jurisdictions’ appeal for multinational companies to base subsidiaries or ‘entities’ from a governance and regulatory standpoint. Singapore took the top spot, followed by Australia, City A.M reported. Leading countries have “the ideal combination of low cost levels and shorter timeframes for completing a range of regulatory activities” such as board of director or shareholder decisions, officer changes and Power of Attorney activities, the report said.
The government has confirmed a one-year suspension of the triple lock formula for annual state pension increases. Work and Pensions Secretary Therese Coffey is introducing a Social Security Uprating and Benefits Bill for 2022-23 only, the BBC reported. The move follows concerns over a predicted rise in average earnings between May and July which would see pensions increase by 8%. Instead, the rise will be the consumer inflation rate of 2.5%.
8 September 2021: HMRC urges young people to check Child Trust Funds; IoD and CBI slam National Insurance increase plans; UK house prices hit record high.
HMRC is urging people born between 1 September 2002 and 2 January 2011 with a live Child Benefit claim to check their Child Trust Fund (CTF). It is one year since the first account holders have been able to access funds and around 55,000 CTFs mature every month. Of the seven million set up, hundreds of thousands of accounts have so far been claimed, but HMRC says many young people may not know they have one.
Plans to raise National Insurance to pay for social care and NHS costs in England have come under fire from business groups. The Institute of Directors (IoD) and the Confederation of British Industry (CBI) have both spoken against the tax rise. National Insurance is paid by both businesses and staff. It is expected to increase by around 1.25%, meaning someone on a £30,000 salary will pay an extra £255 per year, the BBC reported. Raising it "amounts to a tax on jobs which could derail the UK's economic recovery", the CBI said. The IoD found 73% of its members were concerned about having to pay the higher wages.
Average UK house prices hit a record high in August while annual inflation cooled to a five-month low. Prices rose 0.7% (£1,789) to £262,954, while inflation slowed to its lowest since March (7.1%) after the partial end of the stamp duty holiday in England and Northern Ireland. Research by Halifax found that compared with June 2020 prices remain more than 9.9%, higher. They jumped the most in Wales, up 11.6% year on year, City A.M reported.
7 September 2021: CBI warns staff shortages may last two years; UK 2021 online spending to reach £120.5bn; Europe’s top 25 banks failing on green pledges.
The Confederation of British Industry is calling on the government to adopt a more flexible policy on immigration to tackle worker shortages. It warns that the shortages, affecting supply chains across Britain, could last for up to two years and harm the UK's economic recovery, the BBC reported. The CBI wants the list of occupations determining whether overseas workers are granted work visas widened to include HGV drivers, welders, butchers, bricklayers and other roles where it has identified shortages.
Britons are expected to increase their online spending to £120.5bn overall this year. New Centre of Retail Research data found that by the end of 2021, online sales will make up 30.2% of overall retail spending, 11% more than in 2019. The increase follows an online sales increase of 46.5% in 2020 due to COVID-19 and three strict lockdowns, City A.M reported.
Europe’s 25 largest banks are still failing to deliver on their sustainability pledges, research by investment campaign group ShareAction has found. While some of the banks it reviewed are acting on specific issues, none are taking action across all key improvement areas. These are biodiversity, exposure to high-carbon sectors, policies restricting services to sectors such as oil and gas, and linking executive pay to progress on climate issues. Of the 25, only Lloyds Banking Group, NatWest and Nordea have committed to halving their financed emissions by 2030, the Guardian reported.
6 September 2021: HMRC warns of further service delays; food wholesalers warn of price rises; Companies House urges firms to file accounts early.
HMRC has warned insolvency practitioners about service delays caused by issues with its new IT platform and delivering COVID-19 support schemes. Delays may affect those notifying insolvencies, submitting paper returns, requesting repayments and waiting for confirmation that matters are concluded. It has also warned of temporary disruption to the availability of phone lines due to training and support required for additional colleagues.
The UK’s wholesale food industry is warning that it cannot stop rising consumer prices. Increased transportation costs and staff shortages requiring higher financial incentives are driving up product prices. There are currently 500,000 vacancies across the supply chain, including fruit and vegetable pickers, meat processors and HGV drivers. Wholesale businesses say they have been trying to mitigate the costs and cannot continue absorbing them, the Guardian reported.
Companies House is urging companies to file accounts early and online to avoid delays. Those due to file accounts by the end of September are asked to use its online services where possible and allow plenty of time before their deadline. It has warned that it could take longer than usual to process paper documents sent by post as its offices follow COVID-safe working procedures. The government agency also provided guidance on efficient ways of using its services.