Business News Round Up (20/09/2022)
Low UK corporation tax has failed to boost investment – report
Britain’s low headline rate of corporation tax has failed to boost business investment, which lags behind that of all its major peers, according to a report on Tuesday which comes as the government prepares to reverse a planned rise. Britain’s 19% corporation tax rate – the lowest in the Group of Seven (G7) large, rich nations – had been due to rise to 25% in 2023 under plans announced last year by former finance minister Rishi Sunak. However, opposing the rise formed a major part of Liz Truss’s successful campaign to defeat Sunak in the contest to succeed Boris Johnson as Conservative Party leader and Britain’s prime minister. New finance minister Kwasi Kwarteng is expected to confirm this in an emergency fiscal statement on Friday, where he gives more details about Truss’s plan to support the economy in the face of surging energy bills. Truss said during her campaign that keeping corporation tax low was vital to attract investment, but a report from the Institute for Public Policy Research (IPPR) showed past reductions in the tax rate had not led to more investment.
Rise in business insolvencies ‘reflects challenges ahead’
A rise in the number of business insolvencies reflects the continued toll that economic turbulence is taking on businesses, according to insolvency and restructuring trade body R3. The latest insolvency statistics show there were 1,933 corporate insolvencies in August – 43 per cent higher than in August last year and 42 per cent more than in August 2019. The figure was also 5.5 per cent up from July this year. Allan Cadman, who is North West chair of the insolvency and restructuring trade body R3, said the increase had mainly been caused by an rise in the number of Creditors’ Voluntary Liquidations, a process in which directors close their company voluntarily. “The figures suggest that directors remain concerned about their ability to continue to trade in the current climate and are choosing to close their businesses before that choice is taken away from them,” he said. “These figures will be a sobering reminder to government of the scale of the challenge facing the UK economy as we head into the winter months and reflect the continued toll the sustained economic turbulence is taking on businesses.”
https://www.insidermedia.com/news/north-west/rise-in-business-insolvencies-reflects-challenges-ahead
UK’s ‘economic credibility now being questioned’ after sterling’s fall
The sharp fall in sterling against the dollar and the euro has put the credibility of the new government led by Liz Truss under the spotlight and the Bank of England may respond by pushing British interest rates sharply higher to get to grips with inflation, the chief economist at broker Davy has said. Conall Mac Coille said in a research note that sterling remains under pressure as the new chancellor of the exchequer Kwasi Kwarteng prepares to provide more details on Friday of the mooted large increase in spending. “Worryingly, this will not be accompanied by new forecasts from the Office for Budget Responsibility, or official costings of policy measures, on top of expected borrowing of 4% of GDP this budget year,” said Mr Mac Coille. “The Institute of Fiscal Studies has estimated that freezing energy bills could cost £100bn, 4% of GDP, in the first 12 months. Reversing the 1.5% increase in national insurance contributions and the planned rise in the corporation tax rate to 25% could cost up to £30bn, 1.2% of GDP,” he said. Last week, sterling fell sharply after a sharp drop in UK retail sales figures suggested that Britain was heading for a recession as consumers rein in spending in response to the cost-of-living crisis.
https://www.irishexaminer.com/business/economy/arid-40964837.html
As consumer confidence falls, online merchants need to stay sharp
As Brits brace themselves for economic downturn amid rising cost of living concerns, their purchasing behaviours will undoubtedly shift to being more selective than in recent years. In fact, a recent survey of 3,000 ecommerce shoppers across Europe found that more than half (51%) of UK consumers believe that the economic situation will worsen in the next 12 months, and 23% believe it will worsen significantly. As a result, a whopping 85% plan to cut their online spending. With such potential for volatility, ecommerce merchants must prepare to meet these shifting consumer expectations if they’re to thrive in the face of tough trading conditions. SME retailers are likely to be hit particularly hard. Though the UK saw a COVID-driven ecommerce boom from Q1 2020, growth is slowing – though that doesn’t mean shoppers will be rushing out to the high street again. Actually, 35% of UK consumers shop online more now than they did pre-pandemic. This shift in shopping behaviour, combined with consumer hesitancy around spending, means that online retailers need to make sure they’re offering the most seamless, friction-free experience possible to attract and retain their customers.