News Roundup Friday 16th August 2019
Labour would raise taxes for 12m workers
The Shadow Chancellor has welcomed a report calling for a tax hike for those earning more than the £28,080 public sector average to fund a £32bn spending spree on public services. The move would cost almost 12.5m workers £2,500 extra in tax. John McDonnell called the Time for Demand report, which also calls for the £12,500 income tax free personal allowance to be axed, “an ambitious plan for economic transformation”. Tory party chairman James Cleverly commented: “These proposals would hammer millions of workers with tax hikes, as well as abolishing the tax-free income allowance, leaving people with less money in their pockets. This once again shows why Labour can never be trusted to handle our economy.”
The Sun, Page: 6
Muddy Waters to report Burford to FCA
Hedge fund Muddy Waters is to report litigation funder Burford Capital – the firm and its directors – to the Financial Conduct Authority and ask it to launch a probe. Muddy Waters has produced a 25-page report on Burford, which alleges that the litigation fund uses “particular accounting techniques which manipulate its financials.” The Telegraph’s Tom Rees considers whether Burford has a case against Muddy Waters which it accuses of coaxing algorithmic trading systems into dumping its stock. The Times’ Alistair Osborne questions whether there is any independent oversight of Burford’s financials considering its auditor (EY) and four-strong board is unchanged in the ten years since it was founded. Having the wife of boss Christopher Bogart as CFO is also suspect, says Osborne.
Shareholders bring case against BT over Italy fraud
US law firm Robbins Geller Rudman & Dowd is set to file a case against BT within days over its Italian accounting scandal. Former CEOs Gavin Patterson and Lord Livingston are named alongside the group, which had to write down £530m after the fraud was uncovered, sending shares plummeting by a fifth. A subsequent review of BT by KPMG found finance bosses in Britain failed to challenge Italian accounts. Lawyers are also pointing to claims made by BT Italy chief Luis Alvarez that fraudulent dealings were signed off by former auditors PwC and the parent company in London.
Daily Mail, Page: 66
Living wage increases impact bottom line
A survey from the Federation of Small Businesses (FSB) reveals that four in 10 SMEs are raising their prices as a result of having to pay higher wages. The FSB said business owners were also forced to pay themselves less, hold back investment and reduce staff hours in an attempt to absorb inflation-beating wage rises. “More than half were paying all staff the current national living wage before they were obliged to do so – an even greater proportion were doing so in the smallest firms,” said Mike Cherry, FSB national chairman. He added: “We’re now seeing more small business owners than ever saying that living wage increases are impacting the bottom line. Their first instinct is usually to take the hit personally, paying themselves less rather than cutting staff.”
The Times, Page: 31 City AM, Page: 7
As HMRC moves up the list of creditors, risks increase
Todd Davison, director at Purbeck Insurance Services, warns small businesses that the risks of taking a Personal Guarantee backed finance facility are about to increase following new rules making HMRC a preferred creditor in a business insolvency. Davison explains that the change will mean that, in the event of an insolvency, any available funds left to pay existing Personal Guarantee backed loans will be reduced or even wiped out. Additionally, Davison says, “if you are owed money by a customer who has become insolvent, you too will be much further down the list of creditors to be paid, and this in turn could impact the financial performance of your business.”
Industry groups told to prepare business for no-deal
The Government has told industry associations to bid for cash to fund their ideas on how to help businesses prepare for Brexit on October 31st. The initiative comes amid growing concern that small firms in particular are not ready for a no-deal exit from the EU. One person who has seen documents relating to the plans said: “There’s really not a lot more we can do beyond push out our guidance – it’s very hard to connect with small business members.”
Leeds is the new business hotspot
Leeds has topped the list of the best cities in which to launch a business, beating traditional hotspots London, Manchester and Birmingham. Online local services marketplace Bark.com examined more than 500,000 “data points” and conducted external research to compile its lists of the best and worst locations.
The Scotsman, Page: 33
Dozens of retailers call for business rates overhaul
More than 50 leading retailers have written to the Chancellor urging him to change tax rules to boost the UK High Street. The group is calling on Sajid Javid to fix the “broken business rates system”, which it called outdated. It said the tax had jumped by 50% since the 1990s and had contributed to some retailers going out of business. In the letter to Mr Javid, co-ordinated by the trade body the British Retail Consortium, the group pointed out that retail accounted for 5% of the economy but paid 25% of all business rates. It said this “disparity” was damaging high streets and “harming the communities they support”. It said as a result there were a growing number of empty shops, with vacancy rates at a four-and-a-half year high.
Financial Times, Page: 2 Daily Mail, Page: 4 The Guardian, Page: 37 Daily Mirror, Page: 4 The Daily Telegraph, Page: 27 The Times, Page: 38
PERSONAL FINANCE NEWS
Online shopping anti-fraud scheme delayed
A new system designed to tackle fraud in online shopping has been delayed for 18 months. Banks and retailers had been expected to introduce a new layer of security from mid-September that would normally see a passcode sent to a customer’s mobile phone at the point of checkout for online purchases of £28 or more. However, following pressure from the industry, the Financial Conduct Authority has effectively granted an 18-month delay.
Pension deficits fall among FTSE 350 firms
FTSE 350 companies have seen their defined benefit pension scheme deficits fall by 29% over the last year to £39bn, from £55bn the year before. However, 54% of firms are still operating on a deficit, according to research by Barnett Waddingham. The consultancy’s corporate partner Nick Griggs said: “Defined Benefit scheme liabilities have long weighed on company balance sheets […] As a growing number of companies can see the light at the end of the defined benefit pension scheme tunnel, it is vital they proactively put in place a strategy targeted at reaching the scheme’s endgame.”
Income and wellbeing up, but consumers fear for the economy
Despite household income rising and scores for wellbeing increasing, British consumers fear for the economy in general, with worries over rising unemployment at a six-year high and expectations of the economy’s performance over the next year their most gloomy since 2011. The Office for National Statistics said that “all main measures of economic wellbeing increased” in the first three months of 2019, with household income up by 1.8% while spending per head rose by 1.2%, compared to the same period last year – an all-time high. Per-capita net wealth rose by 3%, driven by an increase in the value of equity and investment fund shares and pension schemes. Howard Archer, chief economic adviser at EY Item Club, points out that consumer confidence has played an important role in countering falling investment over the year so far. Martin Beck at Oxford Economics notes: “Intuitively, personal circumstances are likely to be a more important driver of households’ willingness to spend than the rather nebulous concept of the ‘economy’.”
UK faces long-term risks on all fronts
Kallum Pickering, the senior economist at Berenberg, examines the economic risks facing the UK as it leaves the EU, suggesting Boris Johnson’s spending plans could backfire. But a snap election resulting in a Corbyn-led Labour government would bring higher risks, says Pickering, pointing out that an “economy facing excessive regulation and poor fiscal discipline could not prosper even within the most frictionless trading regime.” With the risks of a no-deal Brexit and a far-Left government, it is no wonder investors are spooked; but for the UK to be taken seriously outside the EU “it has to pursue policies that adhere to sound economic principles,” Pickering concludes.
Wages surge amid rising employment
Pay is rising at the fastest rate in 11 years with a record number of workers in employment, according to the Office for National Statistics. Annual average pay – excluding bonuses – rose by 3.9% in the three months to June, the highest rate since June 2008. The ONS also said total pay, including bonuses, was 3.7% higher in the three months to June than in the same period a year earlier. Unemployment rose slightly from 3.8% to 3.9% but remains at its lowest level since the mid-1970s. “This will continue to support consumer spending, which has been the main thing keeping the UK economy afloat over the past six months in the face of ongoing Brexit-related uncertainty and a slowing global economy,” said John Hawksworth, chief economist at PwC.
Steinhoff to sell assets in push to survive debts and lawsuits
Poundland owner Steinhoff International has said it will slim its business and sell assets to survive heavy debts and shareholder lawsuits in the wake of a $7bn (£5.8bn) accountancy scandal. A probe by PwC found that the company had recorded fictitious or irregular transactions adding up to $7.4bn over a period covering the 2009 and 2017 financial years.
Financial Times, Page: 16 City AM, Page: 7
German financial sector wants EU to take hardline with UK
Findings released on Monday by Frankfurt University’s Centre for Financial Studies indicate a hardening of sentiment among German bankers and financial service providers, who now expect a no-deal Brexit is unavoidable, with 70% saying the EU should not offer the UK any more concessions to avoid no-deal. Some 61% of those surveyed believe the financial markets have not yet effectively factored in the risk of no-deal, however, almost two-thirds said they believed the German financial sector was sufficiently prepared to cope with no-deal. Hubertus Väth, managing director of Frankfurt Main Finance, which funded the study, said it would be important for financial centres in continental Europe “to demonstrate their efficiency” and successful cooperation could see Europe “emerge from the crisis even stronger.”
New Zealand legalises salaries paid in cryptocurrencies
New Zealand will become the first country to allow salaries and wages to be paid in cryptocurrencies from September 1, as long as the payments are in regular, fixed amounts.
Financial Times, Page: 23
Costa agrees €1.7m tax bill
Former Chelsea striker Diego Costa has agreed to pay €1.7m to the Spanish authorities for non-payment of taxes on image rights, the newspaper El Mundo reported yesterday.
The Times, Page: 58
Contact Paul Southward.