Business News Round Up (20/05/2022)
Sector growth slows as rising inflation weighs on demand
Output growth in most UK sectors slowed in April as rising inflation weighed on demand for goods and services. While the overall UK economy continued to grow, eight out of the 14 sectors monitored by the Bank of Scotland’s tracker experienced a slower rate of output growth month-on-month – four more than in March. However, the number of sectors recording an overall increase in output remained resilient, dropping by only one month-on-month. The slowdown in output growth was driven by consumers and businesses reining in spending amid concerns over levels of inflation, with 11 out of 14 sectors recording weaker demand for new orders in April – the highest number since July 2021. The economic headwinds have led to expectations that businesses are likely to respond by focusing on building in financial and operational resilience, including through strong working capital management and optimising inventory levels. The UK Sector Tracker is an evolution of the Bank of Scotland UK Recovery Tracker, using PMI data from S&P Global. Businesses in the service sector continued to see overall order volumes grow month-on-month, despite the sector recording the sharpest slowdown in order growth. Between March and April, service sector new orders index fell by five and a half points to 54.9, compared to a decline of 0.1 points in the equivalent manufacturing sector index (51.7). A reading above 50 on the tracker indicates a rise, while a reading below 50 indicates contraction.
https://www.insider.co.uk/news/sector-growth-slows-rising-inflation-27008972
Research shows the North East has the most innovative businesses in the UK
The North East has the most innovative businesses in the UK, the latest HMRC data shows. More businesses are claiming R&D tax relief in the North East than anywhere else in the UK, according to analysis by innovation funding specialists Catax. Almost 17 claims for R&D tax credits were made per 1,000 businesses in the region in the latest year — 17.4 per cent higher than the UK average1. On average, 14.4 claims are made per 1,000 businesses in the UK. In contrast, the South West — the region with the lowest proportion of businesses claiming for innovation — businesses made 11.5 claims per 1,000 companies. This means businesses in the North East are 47.4 per cent more likely to claim R&D tax credits compared with the South West. R&D projects play an important role in economic growth, as they attract inward investment, boost exports and lead to the creation of more skilled jobs locally.
NICs increases has immediate impact on business
Research carried out by the British Chambers of Commerce, of more than 1,100 UK employers, has uncovered a series of negative impacts from the increase in National Insurance contributions. Firms said the rise in employer contributions to National Insurance from 13.8% to 15.05% had increased staffing costs, forced some to put up their prices, and meant they would be limiting their investment. As part of its call for an Emergency Budget, the BCC is calling for the rise to be immediately reversed for at least a year, as firms battle surging costs on multiple fronts. The BCC is calling for action to give businesses a chance to keep a lid on rising prices, boost productivity and ease cost pressures. “Businesses are telling us that the rise in National Insurance contributions has been a body blow as they try to get back on their feet. When firms are already facing a toxic mix of surging inflation, rising energy costs and supply chain disruption, this increase is very hard to swallow. The tight labour market is already pushing up staff costs and the NI rise has only served to exacerbate that pressure, without having a positive impact on recruitment. With firms’ profits also taking a further hit, after two years of the pandemic, it is no surprise that their investment intentions are also weakening. But it is not too late to change tack and push the increase back until firms are in a better place to take on the extra burden. The costs crises facing firms and people in the street are two sides of the same coin. If we can ease the pressure on businesses, then they can keep a lid on the price rises. Acting now will also put businesses in a better position to create the future profits needed to fill tax coffers.”
UK consumer confidence falls to its lowest level since 1970s
UK consumer confidence fell to its lowest level in at least 48 years after a surge in the cost-of-living left people more gloomy than at the depths of the 1970s energy crisis and during the recession more than a decade ago. The market researcher GfK said its closely-watched measure of sentiment fell 2 points to minus 40 this month, the least since records began in 1974. It’s another sign that the worst inflation in four decades is threatening the recovery from the pandemic. The figures add to pressure on Chancellor of the Exchequer Rishi Sunak to help those suffering the most. It also may give the Bank of England reason to move carefully in raising interest rates further. “As prices and rates rise, the ability of consumers to spend is falling,” said Linda Ellett, head of consumer markets, retail, and leisure at the consulting firm KPMG. “Outgoings are being scrutinized.” Sunak said this week that extra government spending to help consumers handle higher bills risks further stoking inflation, warning that hard times are coming for the UK economy. Official figures Friday showed retail sales unexpectedly rose in April, a month that saw energy bills soar by more than half and the government put up payroll taxes. However, spending on alcohol and tobacco at supermarkets played an outsized role and the underlying picture is weak, with sales falling in the three months through April.