Business News Round Up (19/12/2022)
What will UK growth data reveal about consumer spending power?
The UK is expected to confirm that the economy contracted by 0.2 per cent between the second and the third quarter, marking the start of what many economists expect to be a prolonged recession. The figures, published on Thursday by the Office for National Statistics, will contain further details on the economy as well as the current account. Ellie Henderson, an economist at Investec, expects the data to show further falls in real household disposable income as wage increases fail to match inflation, “a matter which has prompted much of the industrial action across the country as of late”. She also expects a further fall in the household saving ratio from 7.6 per cent in the second quarter. That is because “household budgets are becoming increasingly squeezed and considering the cost of living crisis, a greater proportion of household income is being diverted to cover essential consumption”, she explained. The UK current account deficit is expected to have narrowed, with economists polled by Reuters forecasting a gap of £20.1 bn in the third quarter, down from £33.8bn, or 5.5 per cent of gross domestic product, in the second quarter. This would be a further narrowing from the £43.9bn deficit in the first quarter when it was the largest since records began in 1955. The current account balance is the difference between how much the UK exports and imports, plus its net investment and remissions.
https://www.ft.com/content/04354035-1df7-4dff-abfe-1660c0e65e0e
Scotland in recession – and Fiscal Commission warns household incomes set to see biggest decline since records began
The Scottish economy entered recession this year – and experts are warning that real household income is set for its sharpest decline since records began in 1998. The Scottish Fiscal Commission published its latest forecast alongside John Swinney’s budget. The commission warned the Scottish Government would have to deal with higher prices alongside increased pay demands in the public sector. It said: “Rising prices run through all of our forecasts. Higher energy prices and their consequences for inflation more generally mean that we now think the Scottish economy has entered recession this year, and Scottish households are expected to see the biggest real terms fall in their disposable income since Scottish records began in 1998.” It added: “Even once inflation returns to lower levels, and real household incomes start to grow again in 2024-25, living standards will take time to recover to the pre-crisis 2021-22 level. Our forecast suggests that, by 2025-26, real disposable income per person will be no higher than its level a decade earlier.” The commission said the economy was undergoing “profound shifts” whose impact would be particularly strongly felt by those on low incomes. Its modelling shows that Scotland will see a 1.8% drop in GDP as a result of the current recession, recovering to pre-recession levels in the first quarter of 2025 – one quarter later than the rest of the UK. The Scottish Government’s income tax receipts are also set to grow, according to forecasts from the commission, as a result of inflation driving up nominal earnings growth – and also due to the decision of the Scottish Government to raise taxes in this year’s budget, which is expected to raise about £129m.
https://www.insider.co.uk/news/scotland-recession-fiscal-commission-warns-28748316
Manchester BID secures new five-year term
Businesses across Manchester city centre have voted in support of continuing the city’s Business Improvement District (BID) for another five-year term. Manchester BID’s new term, alongside the recently announced Manchester Accommodation BID, will mean an additional £6m a year invested into the city centre from 2023. Some 42 per cent of the total electorate voted with a majority of the existing membership voting positively Voting was also expanded this year to incorporate 200 offices, growing the BID’s footprint in the city, and evolving its cross-sector membership. In recent years Manchester BID has played an instrumental role in the city’s recovery post-Covid. It brings city centre businesses together with key authorities including Manchester City Council, Marketing Manchester, Transport for Greater Manchester, and Greater Manchester Police – alongside many delivery, creative and media partners. In its next term, which will commence in April 2023, the BID will continue to support businesses through its operational and lobbying services. It will also attract visitors, shoppers, and workers into the city centre through its annual events calendar, and continue to deliver regional, national, and international promotional campaigns.
https://www.insidermedia.com/news/north-west/manchester-bid-secures-new-five-year-term
Firms to get more help with soaring energy bills
Businesses will benefit from a year-long extension of financial support with energy bills, according to Whitehall sources. Prime minister Rishi Sunak is expected to prolong the energy bill relief scheme, which was set up in October to ease businesses through the cost crisis. All firms are likely to be included in the scheme, rather than limit it to vulnerable sectors, as originally planned. Downing Street is said to have surrendered to intense pressure from industry groups, some warning of thousands of company failures, and Conservative MPs in “Red Wall” seats fearful of a backlash if support is withdrawn. However, the condition for making the scheme universal will be that payments will be lower – possibly half – compared to the current package, which ends on 31 March. Federation of Small Businesses, national chair Martin McTague said: “Energy costs are by far the biggest driver of the inflation that businesses and consumers are experiencing, and interest rate increases are doing little to rein in energy bills, while making it harder for small firms to keep the lights on. SMEs are collectively carrying £33 billion extra in debt, much of it index-linked, compared to January 2020, before Covid hit. Every basis point increase means extra pressure for those on floating rates, and a disincentive to apply for finance for firms looking to grow and invest. Our Small Business Index found that in Q3, nearly two in five small firms applying for finance were offered a rate of 8% or higher, compared to a quarter of small firms in the same period in 2021.”