Business news round up

7 minutes Mark Halstead


Business rates for London firms to rocket  

London’s businesses will hand over an extra £4bn in tax over the next five years, from next April, when business rate bills for thousands of companies across the capital will rocket following last month’s Government revaluation. An analysis for the Standard suggests the extra burden for London could be as much as £885m a year. Jerry Schurder, head of business rates at consultants Gerald Eve, which carried out the analysis, said: "Even prior to the revaluation London paid far more in rates than any other region, but now firms in the capital have to find an extra £4bn between them over the next five years; ultimately, it is likely to be customers that pay through higher prices.” The Department for Communities and Local Government said: "Nearly three quarters of companies will see no change, or even a fall, in bills, including 600,000 who from next April will have their bills cut altogether".

Reported in: Evening Standard London


Treasury accused of scaremongering over “hard Brexit”

Leaked government papers suggest a “hard Brexit” could cost the Treasury up to £66bn a year in lost tax revenues while GDP could fall by as much as 9.5% if Britain leaves the single market and has to rely on WTO rules to trade with the continent. The figures were drawn from Treasury estimates made during the referendum campaign which critics say are unrealistic. Brexit supporters who have seen the paper accuse the Treasury of "trying to make leaving the single market look bad" and of coming up with a "not very realistic" hypothesis to scare ministers.

Reported in: The Times


Brexit fails to dampen SME global growth hopes

A new survey of over 1,000 companies has found that the turmoil caused by the Brexit vote has failed to diminish small businesses’ hunger for global expansion. The study, produced by East & Partners on behalf of Western Union Business Solutions, found that 47.8% believe they will see growth in international trade activity, with only 5.5% thinking it will deteriorate. Just under 40% of firms are expecting growth in domestic trade. Western Union Business Solutions president Kerry Agiasotis said there is a “sense of optimism” in the air, with businesses looking forward to new opportunities in the post-Brexit period; however, Charlotte Chung, a policy adviser at the Federation of Small Businesses, said she is concerned about the 18% of companies that solely export to the EU.

Reported in: The Guardian


Red tape cuts need rethink

A report by the PAC has called on the government to rethink its approach to cutting business regulation costs. The aim of the Business Impact Target is to reduce the cost of regulation by £10bn between 2015 and 2020, but the PAC’s research shows that less than £1bn of savings has been realised. Furthermore, MPs say ministers have only been able to claim progress towards their 2020 goal of reducing red tape by counting the 5p plastic bag charge as a "saving" because of the income it generated for retailers. Mike Cherry, national chairman of the FSB, said: "We support the government's drive to deregulate, but we are not seeing the current full regulatory picture or evidence of changes on the ground. The target fails to capture many of the day-to-day struggles and worries of small businesses, such as taxes."

Reported in:The Times, The Daily Telegraph, Daily Mirror


Businesses may have to report on employees’ race and class

The Cabinet Office is consulting on proposals that could see companies asked to report on the class background and race of their workforce. The Times notes that charity Stonewall already publishes a league table of gay-friendly businesses while the BBC, ITV and Channel 4 are conducting workforce audits. The guidance to companies on how to measure the class background of their recruits is to be outlined in advice from the Cabinet Office later this year. Meanwhile, Amber Rudd’s plans to force businesses to disclose how many foreign workers they employ have been described as "a step too far" by Ukip MEP Roger Helmer.

Reported in:The Sunday Times, The Independent

Living wage distress

Almost 20,000 companies dealing with the impact of the national living wage have been pushed into financial distress since it came into force. Of the companies who set the minimum wage at £7.20 per hour for workers 25 and over, 97,342 are understood to be in a poor financial position. This is an increase of 23% on April 1, the day the living wage was implemented, when analysis by Begbies Traynor found 78,917 to be in such a state.

Reported in: The Times


Banks forced to refer SME loan applications to AltFi firms

The Treasury is planning to implement a scheme forcing high street banks to refer small business loan applications that they reject to alternative finance platforms in the next three months, the Times reports. Nine leading banks will be legally obliged to refer small companies that they turn away to one of three mandated finance portals at the point they turn down a company for a loan, regardless of how advanced the application is. Funding Options, Funding Xchange and Bizfitech are set to run the scheme. Conrad Ford, CEO of Funding Options, said: "The referral scheme has big potential. The major banks would admit they turn down two hundred thousand SME finance applicants each year and the BBA's own surveys suggest that 40% of these firms would accept a referral to government designated finance platforms." Portals will make money by charging a referral fee to lenders that win business through the new system.

Reported in: The Times


Brexit increases China trade interest, says ambassador

China’s ambassador to the UK has said the country wants to do more business with post-Brexit Britain, as he praised the City of London and Britain’s financial prowess. Liu Xiaoming told HSBC’s China and renminbi forum: “Britain is now China’s major trading partner and investment destination in Europe – the Brexit referendum has certainly not dampened the enthusiasm of Chinese businesses about investing in this country.”

Reported in: The Daily Telegraph


SME export investment doubles over past year

Investment in export activity by UK SMEs has almost doubled over the past year, according to Bibby Financial Services. The ‘SME confidence tracker’ reported that one in five manufacturers invested in exporting over the past three months, the highest number of SMEs investing in overseas trade since 2014. Bibby reported that 37% of SMEs claimed that Brexit had not yet impacted their business. However, a further 37% believed it was too soon to tell whether Brexit would affect them, and 11% expect declining sales in Q4 2016.

Reported in: Leasing Life   TRF News



Turner backtracks over P2P lending

Lord Adair Turner, former chairman of the FSA, has reversed his criticism of the P2P lending industry, saying that it is “likely to become a stable, significant and useful part” of the financial system. Lord Turner warned in February that P2P lenders could be the source of losses that would “make the worst bankers look like absolute lending geniuses”. Meanwhile, the Peer-to-Peer Finance Association is calling for tougher regulation of the sector to ensure that consumers understand the risks they are exposed to. The Financial Conduct Authority is teaming up with the University of Cambridge to examine peer-to-peer lending and consider whether tougher rules are needed.

Reported in: Financial Times   The Times 


 UBS launches SmartWealth robo-advice service

UBS will launch SmartWealth, a robo-advice service in the UK next month, recommending a portfolio of investments to clients based on a series of simple questions. The minimum investment has been set at £15,000 (around $18,000), a move designed to expand its wealth management business to a wider circle of investors. Dirk Klee, COO of UBS Wealth Management, said that SmartWealth will be rolled out in markets other than the UK soon.

Reported in: Financial Times   Bloomberg   Business Insider

Robots threaten jobs

A new report from MPs warns that robots are poised to put millions of people out of work. The Science and Technology committee is calling on the government to act on the growth in artificial intelligence and robotics amid concerns that roles such as drivers, medical staff, bank workers and accountants could all be under threat. Acting committee chair Dr Tania Mathias said: "Since we cannot yet foresee exactly how these changes will play out, we must respond with a readiness to reskill and upskill."

Reported in: The Sun


UK industrial output weakens while trade deficit widens

Industrial production fell by 0.4% between July and August, the ONS said, partly due to a drop in oil and gas production. Manufacturing rose 0.2%, although this followed a steep fall in July. Separate ONS figures showed that the UK's trade deficit widened in August. The UK's deficit on trade in goods and services was estimated at £4.7bn, compared with £2.2bn in July. The deficit on trade in goods alone widened by £2.6bn to £12.1bn. Exports rose by just £100m against expectations of a £4bn increase. Imports, however, rose by £2.6bn in August following a slump in July.

 Reported in: BBC News   Financial Times   


 Construction stagnates in August

Figures out this week are expected to show that construction in Britain stagnated in August as big projects were delayed following the Brexit vote. The Times notes that since the EU referendum, construction volumes have dipped slightly compared with a year earlier, although they have so far weathered the fallout better than most economists predicted.

Reported in: The Sunday Times


 Delayed stamp duty hike cost Treasury £300m

The OBR estimates the Treasury lost £300m in tax by revealing a 3% stamp duty rise on second homes in November but waiting until April to introduce it. The OBR said around 40,000 transactions were brought forward to beat the rise, with an average tax saving of £7560. The OBR said that the "forestalling" was "by far the most expensive" of six episodes in the last parliament in which it identified similar behaviour.

Reported in: The Times   The Guardian  


Manchester records huge rise in start-ups

Manchester is experiencing rapid growth in new start-up companies - with nearly 1,800 being set up in the city in the last year. Data from the ONS reveals that 1,795 new businesses were established in just 12 months - a rise of 10%. Manchester's rise outstripped the wider growth in the number of UK businesses, which was 4.3%. Retail and the “professional, scientific and technical” sector are the most significant for the city.

Reported in: Manchester Evening News


BoE official warns sterling could fall lower

Michael Saunders, the newest member of the Bank of England’s MPC, has warned that the pound's dramatic fall may not be over. “Given the scale and persistence of the UK's current account deficit, I would not be surprised if sterling falls further, but I am fairly agnostic as to whether any further depreciation is likely,” Mr Saunders told MPs on the Treasury Select Committee in a written submission. The former Citigroup economist added that the drop was not necessarily bad for the UK economy. “If you didn't have a drop in the pound, the effect may be a markedly weaker export performance and the drop in the pound will probably offset that. Whether or not it will more than offset it is probably too early to say, given we don't yet know the UK's post-Brexit arrangements.”

Reported in: The Daily Telegraph, Daily Mail


Corruption investigation into oil explorer dropped

The Serious Fraud Office has dropped a probe into allegations that oil explorer Soma bribed Somali officials, but has revealed it is investigating other, undisclosed, allegations. Soma, which says it has spent more than £30m exploring Somali fields, had sought a judicial review of the SFO's investigation. In a letter to Soma the day before the High Court hearing, the SFO said there was “insufficient evidence of criminality” in relation to capacity-building payments for there to be any realistic prospect of conviction.

Reported in: The Daily Telegraph

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richard west Mark Halstead Partner

Mark's experience is big data analytics, financial services and building businesses provides Red Flag Alert with strategic direction.