Business News Round Up (21/02/2022)
New super deduction could spark £40bn investment
Business leaders say extending the Government’s super deduction could boost UK business investment by up to £40billion a year by 2026. The CBI is urging the Chancellor to create a permanent 100% tax deduction for capital spending in this year’s Spring Statement to succeed the allowance that is due to expire in March 2023. Companies can claim 130% capital allowances on plant and machinery investments that would usually qualify for 18% tax relief. The CBI warns that if the super deduction expires without a successor, the UK will remain the lowest in the G7 for business investment by 2026. Data compiled from 325 firms suggests the super deduction has spurred investment and that a permanent incentive could trigger an annual 17% uplift in capital spending. This could turbo-charge growth ambitions, helping raise productivity and improve living standards across all UK nations and regions, says the CBI. Its survey reveals that more than half of respondents took advantage of the super deduction – or plan to do so – to increase or accelerate capital investment plans.
Store closures accelerate across Scotland, with 1,400 shutting last year
More than four shops a day disappeared from Scotland’s main retail locations in 2021, with shopping centres being proportionally hardest hit. New research from PwC and the Local Data Company suggests that the rate of closures accelerated as government support through the pandemic was wound down. Over the course of 2021, a total of 1,424 chain shops were closed in Scotland, with 673 opening, giving a net loss of 751. This compares with a net loss of 652 in 2020. The rate of closures in Scotland was third fastest in the 11 nations and regions in Great Britain examined in the study. The net losses increased by 99 compared with 2020, with only East of England (-150) and West Midlands (-167) seeing a sharper increase. The number of shops across Scotland’s high streets, shopping centres and retail parks has steadily declined in recent years, with net losses being recorded in each year since at least 2016. The last two years have seen the demise of some large fashion and department store chains which were on the brink of collapse. However, with these stores now closed, future closures should begin to level off and the number of closures is therefore expected to slow through 2022.
https://www.insider.co.uk/news/store-closures-accelerate-across-scotland-26285715
More than 1,900 stores disappeared from the region’s high streets
The pandemic has continued to batter the retail sector as more than 1,900 shops shutdown, new figures have revealed. According to PwC research compiled by the Local Data Company (LDC), shop closures in the region decreased year on year by 7% in 2021. 1,916 shops closed their doors in the region last year, but when compared to Greater London and the South East which had 2,812 and 2,459 store closures respectively, the region appears to have weathered the storm of the pandemic slightly better. While closures have declined, store openings have also seen a drop of 12%, with 932 opening in 2020, but only 811 in 2021. Adam Waller, PwC’s Market Senior Partner for Manchester said: “With more people moving away from city centres such as Liverpool and Manchester in favour of smaller towns, and less people spending time in the city throughout the pandemic, retail businesses have had to respond, and we can see that happening through this research. With the rate of store closures slowing down in the North West, and consumer behaviour moving towards pre-pandemic patterns, we can expect the data to look more positive in the next few years.” Nationally more than 10,000 chain outlets, including retail, hospitality, banks, and gym firms, disappeared from Great Britain’s retail locations in 2021, with 7,160 shops opening compared to 17,219 closures, a net decline of 10,059.
UK PMIs signal Omicron rebound and stubborn inflation
Signs of a growth rebound and ongoing inflationary pressures from the latest purchasing manager indices will act as another green light for Bank of England policymakers, who look poised to hike interest rates again in March and May. The latest UK purchasing manager indices will tick a lot of boxes for Bank of England policymakers. Firstly – and perhaps unsurprisingly – the services index jumped by almost seven points to 60.8, the highest reading since the re-openings last spring. Admittedly we should probably avoid reading too much into the size of that increase, given it’s consistent with what we’ve seen just after other bouts of Covid turbulence. Ultimately, these indices are simply telling us that a greater proportion of firms are seeing increases in output as government restrictions and Covid caution eases, and the read-across to GDP hasn’t always been great. Nevertheless, it’s yet another hint that Omicron has done very little lasting damage to the UK economy, and the data is consistent with what we’ve seen with just about every other high-frequency indicator. The chart below shows that mobility and card spending (at least related to socialising and workplaces) is virtually back to pre-Omicron levels. The most recent edition of the ONS business survey also pointed to reduced staff illness now Covid-19 case rates have subsided.
https://think.ing.com/articles/uk-pmis-signal-omicron-rebound-and-stubborn-inflation