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What's happening in the world of accountancy today

News in brief

Author: ICAEW Insights

Published: 13 Mar 2023

29 March 2023: food inflation hits record 15%; Royal Mint NFT plans dropped; William Hill fined record £19.2m for AML failures.

The British Retail Consortium has warned that shop price inflation is yet to reach its peak. This is due to the rising cost of sugar and high manufacturing costs, which will likely take a toll on the crucial Easter trade. Annual inflation accelerated to 8.9% in March, up from 8.4% in February. Food inflation also rose to 15% from 14.5% over the same period – the highest rate on record, City A.M reported

Plans for a government backed non-fungible token (NFT) produced by the Royal Mint have been dropped. Rishi Sunak ordered the creation of an "NFT for Britain" that could be traded online, while he was chancellor in April 2022. The Treasury announced it was "not proceeding with the launch" following a consultation with the Royal Mint, the BBC reported. However, economic secretary Andrew Griffith said the department would keep the proposal under review.

William Hill and Mr Green have been fined a record £19.2m for social responsibility and anti-money-laundering failures. The 888 Group-owned brands admitted a string of errors, including allowing customers to lose tens of thousands of pounds within minutes of opening an account. This is the largest penalty in the commission’s history but equates to less than four days of revenue for the 888 Group. It comes just days before long-awaited reforms of Britain’s gambling laws are finalised, the Guardian reported

28 March 2023: Binance accused of breaking US financial laws; 94,000 prepayment meters forcibly installed last year; household debt passes £2trn for first time.

US regulators have accused the cryptocurrency exchange Binance of violating "numerous" US financial laws. The Commodity Futures Trading Commission said the firm had failed to properly register in the US. The lawsuit also accused the company of failing to follow "know your customer" rules intended to thwart money laundering, the BBC reported. The world's largest centralised exchange for digital assets is led by billionaire Changpeng Zhao, who was also charged.

UK energy companies forcibly installed 94,000 prepayment meters using warrants in 2022. Scottish Power, Ovo and British Gas were responsible for 70% of them, according to government data. The practice is generally used by energy companies for customers who have missed payments in the past, the Guardian reported. The government in February agreed with suppliers to ban forced installations, amid concerns that rules to protect vulnerable households were being ignored.

Family debt has swelled past £2trn for the first time ever. A PwC report on Office for National Statistics data revealed Brits are frequently using credit cards to fund spending amid the cost of living crunch. Around £8 in every £10 of outstanding debt is tied to home purchases at more than £1.6trn, up more than 4% over the last year. Unsecured lending has climbed more than 7% over the last year to around £400bn, City A.M reported.

27 March 2023: construction firms fined millions for ‘illegally colluding’ on contract bids; JD Wetherspoons’ profits nosedive; shoppers turn to second-hand and discount stores.

The competition regulator has fined 10 construction companies a total of £60m for ‘illegally colluding’ to rig bids for private and public sector contracts. The companies acted as a cartel for contracts worth a total of £150m, including those for Bow Street magistrates court and Selfridges department store, according to findings by the Competition and Markets Authority. Contracts were rigged between 2013 and 2018 using a tactic known as ‘cover bidding’, in which companies conspire to assist each other in winning contracts by submitting substandard or overpriced tender, giving a false impression of competition while ensuring the rival bid succeeds, The Guardian reported.

Tim Martin, founder and chairman of JD Wetherspoons, has blamed ‘ferocious’ inflation on the pub chain’s profits plummeting by 91%. In the wake of COVID-19 and post-Brexit supply chain issues, pre-tax profits were down £4.6m compared with pre-pandemic levels of £50.3m. City A.M. reported that Martin said: “Inflationary pressures in the pub industry, as many companies have said, have been ferocious, particularly in respect of energy, food and labour. The Bank of England, and other authorities, believe that inflation is on the wane, which will certainly be of great benefit, if correct.”

UK retail sales have been boosted by shoppers turning to second-hand and discount stores as a reaction to the cost-of-living crisis. Official figures showed that sales volumes rose by 1.2% in February, the biggest monthly gain since last October, while food sales also rose. The Office for National Statistics said the latter was a sign that financial pressures had led to a cut in spending in restaurants and on takeaway meals. Figures out earlier this week showed that prices are rising faster than expected, the BBC reported.

24 March 2023: Over a million people have their benefit payments cut because they were overpaid tax credits; rail strikes planned for March and April have been called off; US dominates with five of the top 10 financial centres.

More than a million universal credit payments have been cut over the past year because of previous overpaid tax, Sky News reports. Some of these debts are decades-old and in many cases the claimant was not at fault for the overpayment or aware that the debt existed. Some are even being threatened with debt collectors by government. Campaigners and MPs called on government to pause the deductions immediately as people are already struggling with the cost of living crisis. 

Train strikes set for March and April have been suspendedreports the BBC. RMT union members have called off plans to walk out on 30 March and April 1 after members at Network Rail voted to accept a pay deal. The RMT, the country’s largest rail union, said the proposal tabled by the Rail Delivery Group – which represents train companies - could lead to a resolution to the national rail dispute.

Half of the top 10 financial centres are located in the US, according to the latest Global Financial Centres Index, which measures the competitiveness of the world’s financial centres. New York held onto the top position and has been in first place since September 2018. London retains its second place position in the index, despite some predictions of a downturn, suggesting that London’s reputation in financial services remains competitive. Singapore, and Hong Kong remain in third, and fourth position, with San Francisco close behind.

23 March 2023: fixing UK’s sewerage system to cost billions; IMF to fund Ukraine £12.8bn; food prices trigger unexpected inflation increase.

Updating the UK’s outdated water and sewerage systems will likely cost hundreds of billions of pounds over multiple decades. The Industry and Regulators Committee warned funding would have to come from water companies raising household bills, due to insufficient public funds being available. To help ease customer costs, it suggested the government legislate for a single social tariff in time for the next price review in 2024. The House of Lords committee also called for cheaper solutions to reduce water pollution to be considered, City A.M reported

The International Monetary Fund (IMF) has reached an agreement with Ukraine on funding worth $15.6bn (£12.8bn). The organisation's first loan to a country at war is expected to be approved in the coming weeks. It is one of the largest financing packages Ukraine will have received since Russia's invasion. The IMF recently changed a rule to allow loans to countries facing "exceptionally high uncertainty". The invasion caused Ukraine economic activity to contract by 30% in 2022, destroyed a large share of the capital stock, and poverty levels have skyrocketed, the BBC reported

UK inflation has jumped unexpectedly on the back of food prices surging at their highest rate for 45 years. The consumer prices index accelerated to 10.4% last month from 10.1% in January, the Guardian reported. This came as a shock to City analysts, who had predicted a fall to 9.9% in response to reducing gas and oil prices and the lower cost of raw materials on global markets. The rise is credited to an 18% increase in the cost of non-alcoholic drinks, eating out, and fresh food during the year to February – its highest rate since August 1977. 

22 March 2023: UK government borrowing hits record; Tesco to cut the value of Clubcard rewards scheme; Just Eat to axe around 1,700 delivery worker jobs.

UK government borrowing rose last month to £16.7bn, the highest February deficit on record. This is £9.7bn more than a year earlier and comes despite higher tax receipts and lower debt interest payments. It is largely due to spending on support schemes to help households and businesses with spiralling energy bills. Cumulative borrowing for the full year to the end of March is on track to undershoot official forecasts, the Guardian reported.

Tesco is cutting the value of its Clubcard rewards scheme by a third. From 14 June, Clubcard points will be worth twice their value when cashed in, rather than three times as they are now. The scheme enables shoppers to collect points for money spent at Tesco and exchange them for vouchers. Commentators say there has been a shift to instant discounts rather than rewards for points collection across retailers. This allows companies to continue to collect data about spending habits, while keeping their own costs down, the BBC reported.

Just Eat will axe 1,700 jobs as it replaces delivery riders and drivers with gig economy workers. The current staff are hired as part of a hybrid system of employees and self-employed workers. The change comes despite strong comments by the company’s CEO against the gig economy. A further 170 people working in Just Eat's operational department are also impacted. Delivery employees have been given six weeks' notice with pay and it is understood office staff will begin a process of redundancy, Sky News reported.

21 March 2023: new infrastructure levy ensures developers pay fair share; stalled wage growth costs workers £11,000 a year; BoE urged to slash interest rates and stop bond sales

Fifteen years of wage stagnation has left British workers £11,000 worse off a year. The Resolution Foundation calculated what wages would be if growth had not fallen following the 2008 financial crisis, taking price rises into account. It also found typical UK household incomes have fallen further behind those in Germany. In 2008, the gap was over £500 a year, now it is £4,000, the BBC reported. An Ipsos survey suggested two-thirds of adults think the economy is going to get worse in the coming year.

The Bank of England has been urged to slash interest rates and stop selling government bonds. David Blanchflower, a member of the Bank’s monetary policy committee during the global financial crisis of 2008, said official borrowing costs should be cut from 4% to 3% at this week’s meeting. He is urging the BoE to rethink its approach in the wake of the turmoil in the banking sector. It is expected to either raise rates to 4.25% or leave them unchanged, the Guardian reported.

A new levy will see developers pay a fairer share for affordable housing and local infrastructure. It will prevent developers from negotiating down the amount they contribute to the community when they bring forward new projects. Under the proposals, the amount developers will have to pay will be calculated once a project is complete, instead of at the stage the site is given planning permission. Councils will also be given powers to set rates themselves.

20 March 2023: Ofgem fines supplier £2.1m for overcharging; passport workers to strike for five weeks; Aldi staff to get another pay rise. 

Ofgem has fined United Gas & Power (UGP) £2.1m fine for breaching its licence conditions. This included the deliberate overcharging of customers, City A.M reported. The decision follows a near three-year investigation which began in July 2020, with the business energy supplier serving around 2,700 customers. The average customer was overcharged by more than £2,000, with one overcharged by more than £22,000. UGP will now pay out a nominal £1 fine and £2.1m to Ofgem’s voluntary redress fund.

Passport Office workers will strike for five weeks in an escalation of a dispute over jobs, pay and conditions. More than 1,000 members of the Public and Commercial Services union working in passport offices in Great Britain will take part in the action from 3 April to 5 May. The government has agreed to a 2% imposed pay rise but the union is requesting this be raised, and says it also has other concerns that have not been addressed. Currently, 40,000 civil servants use food banks and 45,000 claim benefits, the Guardian reported.

Aldi will give staff another pay rise to £11.40 an hour nationally and to £12.85 in Greater London. Depending on length of service, some staff could earn up to £13.15 an hour. The supermarket chain said 28,000 employees will benefit from the increase. It joins other companies in boosting wages because of a labour shortage. Earlier this month, Pret a Manger gave staff their third pay rise in a year, the BBC reported

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