Furlough extension and rise in corporation tax among measures announced in Budget

Chancellor Rishi Sunak has set out new measures to support the UK’s recovery from Covid-19, including an extension to the furlough scheme and a future increase in corporation tax.

The Coronavirus Job Retention Scheme will be extended until the end of September and the Self-Employment Income Support Scheme (SEISS) will?continue with additional grants. Around 600,000 more self-employed people will be eligible for financial help as access to grants is widened.

Meanwhile, there will be a freeze on the income tax personal allowance and higher rate threshold from next year until 2026.

The rate of corporation tax will go up to 25%, but this will not take effect until 2023 in order to support the recovery. The new rate will still be the lowest in the G7, Sunak noted.

There will also be protections for smaller businesses. Firms with profits of £50,000 or less, which represents around 70% of actively trading companies, will continue to be taxed at 19% and a tapered rate will be introduced for profits above £50,000, so that only businesses with profits of £250,000 or greater will be taxed at the full 25% rate.

The Chancellor also unveiled a two-year “super deduction” scheme, allowing companies to reduce their tax bill by 130% of the cost of new investments.

According to new estimates from the Office for Budget Responsibility, the UK economy will grow by 4% this year and return to its pre-pandemic size six months sooner than previously expected.

The pace of growth is forecast to strengthen to 7.3% in 2022, followed by growth of 1.7%, 1.6% and 1.7% in subsequent years.

Unemployment is now expected to peak at a lower rate of 6.5%.

Sunak said that Covid-19 had caused “acute” damage to the UK economy and it would take the country, and the whole world, “a long time to recover from this extraordinary economic situation”.

But he added: “We will recover.”

Brexit-related exodus of financial services jobs and assets slows down

UK financial services firms are continuing to move jobs and assets to the European Union but at a slower rate, the EY Financial Services Brexit Tracker shows.

According to the latest data, 95 of the 222 financial services firms monitored by the tracker (43%) have publicly stated they have moved or plan to move some UK operations and/or staff from the UK to Europe. This takes the total number of job relocations since the EU referendum to almost 7,600, up from 7,500 in October 2020.

An estimated total of almost £1.3trn of UK assets will be transferred to the EU by financial services firms as a result of Brexit.

“After the major hurdle of standing up new EU hubs, the days of significant swathes of asset and job relocation announcements appear to have passed and will likely be replaced by the slower yet ongoing movement of people and assets to Europe for compliance purposes,” said Omar Ali, EMEIA Financial Services managing partner for client services at EY.

Dublin and Luxembourg remain the most popular EU destinations for staff relocations, new European hubs or office relocations.

Meanwhile, over a quarter (26% and 57 out of 222) of firms have publicly stated that Brexit is impacting or will negatively impact their business, up from 49 firms in January 2020.

With the negative financial impact of leaving the EU still being felt in the financial services sector, firms have called on the government to ensure the UK maintains a cooperative trading relationship with the bloc.

Since late December 2020, four global wealth and asset managers with combined assets under management of over $10trn have called for greater clarification over the UK’s future regulatory regime, arguing for greater alignment rather than divergence from Europe, focused on establishing a flexible, cooperative relationship with the EU.

“Specific policy work to align the UK and its closest trading partner remains crucial and will be mutually beneficial – uncertainty has been a thorn in the sector’s side for nearly five years,” Ali added.

Now is ‘not the time’ for tax rises, MPs say

Tax increases in the upcoming Budget could undermine the UK’s economic recovery from Covid-19, the Treasury Committee has warned.

In a cross-party report published as part of its Tax After Coronavirus inquiry, the committee said that “now is not the time for tax rises or fiscal consolidation”.

It added, however, that “significant fiscal measures, including revenue raising, will probably be needed in future”.

The Government’s ‘tax lock’ manifesto commitment on income tax, national insurance and VAT is expected to come under pressure, and a “moderate” increase in corporation tax could raise revenue without damaging growth, the committee argued.

The report also called for reform of stamp duty land tax (SDLT) and said that the Government should support businesses by introducing a temporary three-year loss carry-back for trading losses.

Mel Stride MP, chair of the Treasury Committee, told the BBC it was “almost inevitable” that some taxes would be increased.

Speaking to BBC Radio 4’s Today programme, he said: “Putting up taxes is in general not a great thing to do but we are where we are and I think the committee view is that looking at income tax and looking at corporation tax is… the right way to go.”

Stride added: “Each 1% increase in corporation tax raises about £3bn so I think… [it] is almost inevitable that some level of rise in going to occur.”

Chancellor Rishi Sunak will unveil the Budget on Wednesday.

Women now hold more than a third of UK board positions

The number of women on the boards of the UK’s 350 largest companies has increased by 50% over the last five years, a new report reveals.

The final report from the Hampton-Alexander Review showed that more than a third (34.3%) of FTSE 350 board positions are now held by women. As of January 2021 there are 1,026 female directors – up from 682 in 2015.

Welcoming the report, Business Secretary Kwasi Kwarteng said that the UK Government’s voluntary, business-led approach to increasing women’s boardroom representation had been “hugely successful” and should serve as a blueprint for other countries looking to make business more reflective of society.

While men still dominate in the upper ranks of the UK’s top firms, the authors of the report hailed the “remarkable progress” made in FTSE companies in recent years. There are no longer any all-male boards in the FTSE 350, and 220 of the 350 companies now meet the Hampton-Alexander target of having at least 33% of their board positions held by women.

What’s more, far fewer companies have a single woman on the board: the number of so-called ‘One & Done’ boards has fallen from 116 in 2015 to just 16.

The figures also show an increase in the number of women in wider senior leadership roles. However, significant progress remains to be made on the highest executive roles, such as CEO.

“The progress has been strongest with non-executive positions on boards, but the coming years should see many more women taking top executive roles,” said Sir Philip Hampton, chair of the Hampton-Alexander Review. “That’s what is needed to sustain the changes made.”

Pubs ask for reopening plan after £7.8bn drop in beer sales

The beer and pub sector has urged the UK government to give a clear timeline and date for when pubs can reopen.

It comes after trading restrictions and lockdowns led to a drop of 56% (£7.8bn) in sales of beer last year.

What’s more, up to 87 million pints of beer are thought to have been wasted since the coronavirus pandemic started. At an average cost per pint of £3.81 in a pub, it means that pubs have lost £331m in revenue on beer that they have been forced to destroy because of the three lockdowns and tier restrictions.

Setting out a recovery roadmap to reopen pubs after the current lockdown, the British Beer & Pub Association argued that once the most vulnerable have been vaccinated, “pubs must reopen when non-essential retail and other parts of the hospitality sector reopen”.

The trade association added that mandatory trading restrictions — such as alcoholic drinks served only with a substantial meal, no mixed households and the 10pm curfew — must be removed when pubs reopen. And it said that further financial support will be needed to help businesses stay afloat.

The government has said that it has a plan for reopening the economy which it will reveal after 22 February, BBC News reported.

IMF anticipates ‘vaccine-powered’ rise in economic activity

With vaccines against Covid-19 expected to be widely available by the summer, the International Monetary Fund (IMF) is anticipating a pick-up in global economic activity later this year.

Its latest growth forecast projects that the global economy will grow by 5.5% in 2021 and 4.2% in 2022.

This year’s forecast has been lifted by 0.3 percentage points, reflecting expectations of a “vaccine-powered” pick-up in global economic activity and additional policy support in certain large economies including the United States and Japan.

The projected recovery in growth follows a “severe collapse” triggered by the spread of coronavirus in 2020. The global growth contraction for 2020 is estimated at -3.5%.

Activity levels in the US and Japan are expected to return to end-2019 levels in the second half of 2021, while in the UK and the euro area activity is expected to remain below end-2019 levels into 2022.

“The wide divergence reflects to an important extent differences across countries in behavioural and public health responses to infections, flexibility and adaptability of economic activity to low mobility, pre-existing trends, and structural rigidities entering the crisis,” the IMF explained.

The UK economy is expected to grow by 4.5% this year, followed by growth of 5.0% in 2022. The UK’s estimated 10% contraction in 2020 was the largest of the G7 group of advanced economies.

UK unemployment climbs to 5%

Unemployment in the UK has continued to rise, driven by a big increase in redundancies, according to the latest monthly report from the Office for National Statistics (ONS).

In the three months to November 2020 an estimated 1.72 million people were out of work and the unemployment rate rose to 5.0%. This is 1.2 percentage points higher than a year earlier and 0.6 percentage points higher than in the previous quarter.

During the second English lockdown and as tougher restrictions were imposed in Scotland, Wales and Northern Ireland to limit the spread of Covid-19, redundancies rose by a record 280,000 on the year, and 168,000 on the quarter, to a record high of 395,000.

The redundancy rate reached a record high of 14.2 per thousand.

However, there were signs of the jobs market stabilising. Weekly figures show that the number of people being made redundant remained high in November but had dropped from the peak in September.

“This crisis has gone on far longer than any of us hoped — and every job lost as a result is a tragedy,” said Chancellor Rishi Sunak.

“While the NHS is working hard to protect people with the vaccine we’re throwing everything we’ve got at supporting businesses, individuals and families.”

Economists have said that the unemployment rate is likely to rise further when the UK Government ends the furlough scheme and other business support measures.

Bank of England’s corporate finance ‘should align with climate goals’

MPs have criticised the Bank of England for providing finance to large businesses without imposing environmental conditions.

The Environmental Audit Committee (EAC) has written a letter to the Governor of the Bank of England, Andrew Bailey, urging the central bank to align its corporate bond purchasing programme with the goals of the Paris Agreement.

Failure to do so could undermine the UK’s diplomatic leadership on climate change ahead of hosting UN climate change conference COP26 in November, the committee argued.

In future the Bank should also require large companies receiving millions of pounds of taxpayer support via its Covid Corporate Financing Facility (CCFF) to publish climate-related financial disclosures, the letter said.

Such disclosures should be in line with the recommendations of the international Taskforce on Climate-related Disclosures (TCFD) and the UK Government’s own Green Finance Strategy.

“We are at a crunch point not only to mitigate the effects of climate change, but to rescue vast swathes of the economy from the impacts of successive lockdowns due to coronavirus,” commented Conservative MP and EAC chairman Philip Dunne.

“It makes sense to tackle both together, offering a ‘reset button’ to design an economy fit for net zero Britain.”

He added: “The Bank’s corporate bond purchases are currently aligned with a catastrophic 3.5 degree temperature rise by 2100 — far exceeding the Paris Agreement goal of limiting global warming to 1.5 degrees celsius.

“We are calling on the Bank to show leadership, once again on climate change, in the year the UK hosts COP26, by ensuring its actions to promote recovery also reduce the UK’s exposure to climate change risk.”

In response, the Bank stressed its commitment to reducing its impact on the climate and said it would reply to the MPs in due course.

Working During a Pandemic

When there is a pandemic going on, you may want to take extra steps to keep yourself and others safe, while still allowing yourself to continue working. Whether this involves still travelling to your place of work, or working from home, will be down to the discretion of your employer, as well as the needs of the company.

Even with the pandemic, people still need a means of earning money and paying their bills. To make things easier, both companies and individuals can work together to improve the cleanliness of offices and try to make working conditions as sanitary as possible. This may be even more vital should your role also involve physically dealing with members of the public.

Staying Safe

When a pandemic like covid-19 occurs, there may be additional safety measures that you should put in place. Some of these may be mandated, while others will be advised. Regardless of your thoughts on the severity of the situation, it is best to err on the side of caution. Even the most fashion-conscious individual can use branded covid protective masks to help keep themselves and others safe. This can help to prevent the spread of germs through coughing and sneezing. Companies themselves may also wish to consider purchasing masks which hold their logo, as part of their measures to keep employees safe and also advertise who they are.

Washing Hands

While keeping your hands clean and practising good hygiene is important on any average day, it is far more imperative when there is a pandemic going on. Considering the number of surfaces and items that you and your colleagues may touch during the average eight hour working day, there is a clear risk of germ transference. By washing your hands at regular intervals, as opposed to only when you have used the toilet, ensuring that the scrubbing process is achieved for a minimum of twenty seconds, you may be able to help prevent the spread of covid, as well as other viruses and bacteria that may be present, such as the common cold.

Remote Working

One option made available to some employees throughout the pandemic is remote working. So long as it is feasible to do so, you may be allowed to work from the comfort and safety of your own home. This may require you to take company property, such as laptops, home with you.

To make remote working as easy as possible, and to avoid disruption, it can be beneficial to set up your workspace in a seldom-used room in the house. If you have a spare room or home office, this may be ideal. Getting into a good routine, much as you would when physically present at work, can also help you to stay on track with your work.

Just because the world has changed around you, that does not mean that you cannot continue with some of your usual tasks, including those related to your employment. By following the health and safety guidelines set out by both the government and your employer, you may be able to increase your safety.

UK retail sales ‘worst on record’

Retail sales growth in the UK reached a record low in 2020, new figures show.

In a year dominated by the Covid-19 pandemic, food sales grew by 5.4% year-on-year while non-food sales declined by 5.0%, according to the latest Retail Sales Monitor from the British Retail Consortium (BRC) and consultancy KPMG.

This resulted in an overall fall of 0.3% — the worst annual change since the BRC began collating the figures in 1995.

In December, total retail sales increased by 1.8% as consumers spent more in the run-up to Christmas. With more people staying at home, online non-food sales jumped by 44.8% compared with a rise of 6.7% in December 2019.

Across the whole of 2020, online non-food sales were up 36.2% year-on-year.

“Physical non-food stores – including all of ‘non-essential’ retail – saw sales drop by a quarter compared with 2019,” said BRC chief executive Helen Dickinson. “Christmas offered little respite for these retailers, as many shops were forced to shut during the peak trading period. Though this led to a rise in food-based gifts as many shoppers bought what they could from the shops that were still open.

“With shops still closed for the foreseeable future, costing stores billions in lost sales, many retailers are struggling to survive. To avoid the unnecessary loss of shops and jobs Government should announce an extension to business rates relief for the worst-affected businesses as soon as possible. With many retailers making decisions over their future, the Government must act decisively.”