NEWS – FRIDAY 3RD JULY 2020
NEWS – FRIDAY 3RD JULY 2020
TAX NEWS – FRIDAY 3RD JULY 2020
O’Donnell foresees tax reform
Former civil service head Gus O’Donnell believes the coronavirus crisis has created “a clear burning platform” for tax reform, arguing that a wealth tax is now more likely than ever. Speaking at an online event organised by the Institute for Fiscal Studies, the former cabinet secretary said that while people may once have favoured spending reductions over tax increases, “people now mostly say they prefer tax increases to spending reductions.” Meanwhile, Martin Sandbu in the FT suggests wealth taxes could provide a new way of raising government revenue as ministers seek to address the financial effects of the pandemic.
Digital tax call from internet advocacy
The Internet Association has published a six-point plan for a future UK-US trade deal which urges policymakers to guarantee against unilaterally imposing taxes on digital services companies. It argues that any potential new taxation on digital services should be set up in “an internationally coordinated manner”. Internet Association director of trade policy Jordan Haas commented: “The US and the UK lead the world in digital technology and this agreement should include policies that will bolster that success. The provisions in our white paper would strengthen both countries’ digital trade leadership – at a time when other nations are pushing very different, closed visions of the internet.”
Sunak damps hopes of big UK tax cuts
Looking ahead to Rishi Sunak’s economic statement next week, the FT notes that the Chancellor has told MPs not to expect big tax cuts to boost the economy.
CORPORATE NEWS – FRIDAY 3RD JULY 2020
Corporate debt levels unsustainable?
David McIlroy in an opinion piece for City AM warns of growing concern that levels of corporate debt are unsustainable. He says companies have been loaded up with levels of debt via Bounce Bank Loans and the Coronavirus Business Interruption Loan Scheme which would be unthinkable were interest rates not close to zero. He points to a report from TheCityUK’s Recapitalisation Group, which last month predicted that UK businesses would have £100bn of unsustainable debt by March 2021, with around half of this owed by SMEs. This, he suggests, “will be a significant barrier to economic recovery.” On taxation, Mr McIlroy notes that companies receive tax relief on the interest payments on their debt, whereas money paid to shareholders as dividends is taxed, arguing that there is no economic rationale for this “tax bias”.
Restaurant owner falls into administration
Casual Dining Group, the owner of restaurant chains Café Rouge and Bella Italia, has gone into administration. More than 90 outlets will close immediately, with 1,900 of the firm’s 6,000 staff losing their jobs. Some 159 of the group’s 250 outlets will remain open. Administrators Alix Partners are seeking offers for all, or parts, of the remaining business. The firm says it has already received “multiple offers” for the business. Turnaround fund Aurelius Equity Opportunities has reportedly made an offer to take over Cafe Rouge and Bella Italia, while Endless is said to be competing with private equity investor Trispan for control of the Las Iguanas brand. Considering the hit COVID-19 has dealt the sector, Julie Palmer at Begbies Traynor comments: “The casual dining sector was in distress before this crisis, but this is what will tip many over the edge and towards collapse.”
Prezzo considering sale after appointing advisers
Italian restaurant firm Prezzo is seeking new funding to survive the coronavirus pandemic, appointing FRP Advisory to lead an auction of the business. Leadership at the company, which is part-owned by US buyout firm TPG, is believed to favour simplifying its ownership structure.
The Times, Page: 45 Daily Mail, Page: 77 City AM
Wage concern for Wigan
The administrator for Wigan Athletic has admitted there is no guarantee that the club’s players and staff will be paid. Gerald Krasner of Begbies Traynor also said that there was only a 75% chance that the club would be able to fulfil its remaining six fixtures as it struggles to meet running costs. Begbies Traynor says it will probe the circumstances of the administration and the club’s ownership.
The Guardian, Page: 39 The Independent, Page: 62 The Daily Telegraph, Sport, Page: 5 The Times, Page: 69 Daily Express, Page: 54 Daily Mirror, Page: 53 Daily Star, Page: 53 The Scotsman, Page: 59
Car sales driven online?
Tim Kiek looks at car sales, noting that some analysts predict an increase in online activity. Andrew Burn, head of automotive at KPMG, expects a “step change” to online sales, saying: “A number of dealership groups have been trying to transition to internet sales models.”
The Daily Telegraph, Business, Page: 4
EMPLOYMENT NEWS – FRIDAY 3RD JULY 2020
IPPR: Youth unemployment set to exceed 1m
Analysis by the Institute for Public Policy Research (IPPR) think-tank has warned that youth unemployment is set to hit a record high of more than 1m this year. It says 410,000 18 to 24-year-olds are already jobless and expects 620,000 to be added to the total by the end of 2020. Harry Quilter-Pinner, senior research fellow at the IPPR, warned that this would be “a huge waste of talent and potential”. The IPPR has urged the Government to set up a £3bn job guarantee scheme to get every under 25 in work, on an apprenticeship or in training, while also suggesting a £1.5bn apprenticeships fund and reform of unemployment benefits should be rolled out.
The Times, Page: 40 The Sun, Page: 10
INDUSTRY NEWS – FRIDAY 3RD JULY 2020
Pandemic forces audit firms to tighten viability checks
The Financial Reporting Council (FRC) says the UK’s audit firms have strengthened their tests of the financial viability of companies as a result of the coronavirus outbreak, with a review by the watchdog gauging emergency measures that have been rolled out. These, the review found, include significantly increasing the number of consultations on going concern assessments. The FRC said one firm has required audit teams to give an explanation if going concern is not a significant risk, while another has identified sectors facing the steepest challenge from the pandemic to assess whether extra support would be needed. The watchdog’s review covered the procedures of the seven largest audit firms, which include the Big Four. The FRC says it will consider the challenges of the present environment when it carries out its audit quality review for the period.
PROPERTY NEWS – FRIDAY 3RD JULY 2020
Housing bosses call for stamp duty cut
Business leaders from the housing sector have written to Rishi Sunak calling for a new Help to Downsize scheme they believe will boost the property market, driving its recovery by freeing up larger homes. In a letter to the Chancellor, the signatories argue that waiving stamp duty for older homeowners moving to smaller, more suitable homes will help open up space on the property ladder for families seeking larger homes and first-time buyers. The letter says that a quarter of people will be 65 or over by 2040, with this equating to 18m people – up 5m on the current number. However, it adds, the UK’s housing stock “is not adequate to meet this change.”
ECONOMY NEWS – FRIDAY 3RD JULY 2020
Executives expect unemployment to rise and sales to dip
A Bank of England poll of British business executives suggest that unemployment will rise to 3.5m this year. Across the 2,776 people surveyed, the average expectation was that the jobless rate would hit 11% by year end, far exceeding the official unemployment rate of 3.9% recorded in April. Firms taking part in the survey also said that, on average, 30% of employees had been furloughed in June, down from 36% in May, with this expected to fall to 18% in Q3 and 5% in the final three months of the year. The poll also found that executives expect sales to be 38% lower than they would have been had there been no coronavirus outbreak, foreseeing a 26% dip in Q3 followed by a 16% hit in Q4 and a 10% slide in Q1 2021. The firms quizzed also said they expect costs to be 7% higher in the next quarter than they would have been had the pandemic not occurred.
Sales down in June despite online surge
BDO ’s high street sales tracker shows that total like-for-like sales were down 14.4% year-on-year in June, despite online sales rising by 102.6%. The 14.4% fall marks an increase on the 18.3% dip seen in May but still represents the fifth consecutive month of negative like-for-like sales. Sophie Michael, head of retail and wholesale at BDO, said: “Despite the opening of non-essential retail and a strong performance of non-store sales in June, retailers have a long way to go to claw their way back following three months of closure.”
The Times, Page: 39 The I, Page: 50 Daily Express, Page: 48 The Sun, Page: 47
Contact Paul Southward