News Roundup Friday 19th October 2018

NEWS ROUNDUP

TAX NEWS

Businesses are being persuaded to follow the “spirit” of tax law

Paul Monaghan explains in the i how companies such as Facebook, Apple, Amazon, Netflix and Google use complex financial arrangements to reduce their tax liabilities and how these measures have contributed to their success. But, says Monaghan, there is a growing sense in business that the “spirit” of tax law should be adhered to and more are “going above and beyond the legal minimum requirements” because they believe “paying the right amount of tax is part of the social contract that helps build a great community.” Monaghan urges people to lobby and campaign to speed up this change and get more companies to sign up as Fair Tax Mark organisations.

The I

Golden passport schemes a tax and security risk

The EU justice commissioner has warned that so-called “golden passport” schemes are putting Europe’s security at risk. Vera Jourová said the programmes, which allow states to sell citizenship or residency, were a gateway for dangerous individuals to have access to the whole of the EU. Her comments came as Malta and Cyprus were named on an OECD blacklist of 21 nations operating passport schemes deemed to pose a high risk of tax evasion.

The Guardian, Page: 1, 4

Royal Mail assures MPs new boss will pay UK tax

The Royal Mail was criticised yesterday for its “complacency” over “excessive executive pay” with MPs hitting out at the company after remuneration committee chair Orna Ni-Chionna admitted a £5.8m payout to Royal Mail’s new Swiss-based boss, Rico Back, did not incur UK tax liability because he was based at Royal Mail’s European parcels business General Logistics Systems in the Netherlands. Royal Mail said the Switzerland-domiciled Mr Back would pay UK tax on his salary.

Daily Mail, Page: 68 i, Page: 10 The Times, Page: 43 The Daily Telegraph, Business, Page: 3 The Times, Page: 41 Daily Mirror, Page: 38

Fox – Trade dividend will remove need to raise taxes

The international trade secretary has claimed a post-Brexit trade boost will bring in £50bn, removing the need to raise taxes or cut spending in order to invest more in the NHS. Liam Fox told the inaugural international trade banquet at Mansion House last night: “As a government, we have been elected to be fiscally responsible whilst, of course, continuing to fund public services. This can only be achieved through a strong economy that generates extra revenue without increasing the individual tax burden. But fiscal balance is not solely about whether to raise taxes or cut spending – it is also about how to generate more revenue by growing the economy domestically and selling more of our goods and services abroad.”

The Times, Page: 36

Fix rates and corporation tax first – Asos boss

Nick Beighton, the chief executive of online fashion retailer Asos has said rather than introducing a new digital sales tax, the Government should concentrate on reforming business rates and preventing corporation tax “leakage”.

The Guardian, Page: 33 Daily Mirror, Page: 48

REPORTING NEWS

Fox – Trade dividend will remove need to raise taxes

The international trade secretary has claimed a post-Brexit trade boost will bring in £50bn, removing the need to raise taxes or cut spending in order to invest more in the NHS. Liam Fox told the inaugural international trade banquet at Mansion House last night: “As a government, we have been elected to be fiscally responsible whilst, of course, continuing to fund public services. This can only be achieved through a strong economy that generates extra revenue without increasing the individual tax burden. But fiscal balance is not solely about whether to raise taxes or cut spending – it is also about how to generate more revenue by growing the economy domestically and selling more of our goods and services abroad.”

The Times, Page: 36

Fix rates and corporation tax first – Asos boss

Nick Beighton, the chief executive of online fashion retailer Asos has said rather than introducing a new digital sales tax, the Government should concentrate on reforming business rates and preventing corporation tax “leakage”.

The Guardian, Page: 33 Daily Mirror, Page: 48

Better cyber security reporting will help build a more secure digital society

Writing in City AM, Richard Horne, a cyber security partner at PwC, says although it is understandable that companies do not want to advertise their preparedness for cyber attacks, it is important for them to show “they really understand the risks they’re exposed to and that they have the right structure and people in place to tackle them.” Investors, regulators, and the public are demanding more transparency, adds Horne, who outlines seven ways organisations can start improving cyber reporting in a new paper out today.

City AM, Page: 24

MPs set to call in Johnson, Grant Thornton over cake chain failures

Patisserie Valerie boss Luke Johnson and auditor Grant Thornton face being summoned by MPs to explain how a black hole in its accounts was missed. Labour MP Peter Kyle, a member of the business select committee, said: “Patisserie Valerie’s situation only exemplifies the need for a wholesale look at how we ensure our companies get the right governance and the right external scrutiny, so that shareholders, customers and our broader economy can be reassured that best practice is being followed.” Committee chair Rachel Reeves said Grant Thornton had questions to answer, stating: “The rising number of accounting failures undermines trust in business and it’s vital that Government and regulators take action to ensure that audits provide a true picture of the financial position of the firms they audit, not works of fiction.” She added: “The audit industry is simply not fit for purpose. The government needs to quickly get a grip of the audit industry if we are to get audits that business, investors, and employees can believe in.”

Daily Mail, Page: 70, 71

Refining the definition of a good auditor

Rodger Hughes says the problem with the audit market is not competition, rather it is audit quality, which is being compromised by “individual behaviour influenced by culture.”

Financial Times, Page: 12

SMEs NEWS

Small businesses gain access to Financial Ombudsman Service

The Financial Conduct Authority has announced that that small businesses, with annual turnovers of below £6.5m, can now utilise the Financial Ombudsman Service to complain about banks. This means an additional 210,000 SMEs will have access to redress via the free-to-access ombudsman rather than taking a complaint through courts. Although small company representatives welcomed the move, they said there remained questions over the ombudsman’s ability to take on the extra workload and the fairness of the claims process, which Nick Stoop of Warwick Risk Management says is weighed in favour of banks.

Financial Times The Sun, Page: 45 The Times, Page: 51 Daily Mail, Page: 68 The Daily Telegraph, Business, Page: 7 Yorkshire Post, Page: 17

Half of SMEs cite Brexit as biggest concern

A survey by Western Union Business Solutions reveals one in three professionals managing international payments at SMEs say uncertainty around Brexit has made forward planning “not easy” or “not easy at all” while over one in four say economic uncertainty is their biggest barrier to trade. Almost half identify it as their biggest concern for their future international trade and payments needs. Additionally, one in four say that they could only tolerate a 5% negative FX move before facing financial difficulty, with this figure jumping to one in three in the event of a 10% unfavourable FX swing. Consumers have borne the brunt of currency volatility with up to a third of firms passing on costs to clients.

Business Matters

SMEs should get Brexit contingency planning vouchers, says IoD

The Institute of Directors has suggested that SMEs be given vouchers that can be exchanged for advice on how to prepare for Brexit. The employers’ group urged Philip Hammond to use his budget this month to help companies buy legal and other professional advice in order to better make contingency plans.

The Times, Page: 51

Big groups should lose contracts for frequent late payments to suppliers, body warns

The Federation of Small Businesses has urged the government to legislate to protect suppliers from large companies who regularly pay late, and to strip them of government contracts if necessary.

Financial Times, Page: 3

Midsized UK businesses turn sour on Brexit

A quarterly Brexit Monitor from RSM has found that more companies now believe Brexit will damage their business than help them. Sentiment on the impact of Brexit on business, measured by YouGov, dropped from 113 in the second quarter of 2018 to 99 in the third quarter. Meanwhile, research by Atomik on behalf of Citibase has found that 59% of 1,046 SMEs want to see a snap general election as soon as Britain leaves the EU next March. Confidence in the Government to deliver a good deal for SMEs has fallen to 52%, down from 58% the previous quarter, while the number believing the Government will finalise negotiations by March has fallen from 62 to 54%.

Financial Times Daily Express

Firms struggling to fill roles

As many as 80% of SMEs say that they are struggling to attract staff with the relevant skills, according to recruitment consultancy Robert Half, with employers forced to offer increased salaries in an attempt to attract talented candidates. Matt Weston, UK managing director at Robert Half, said: “Technology and digitalisation is rapidly changing the UK business landscape. This, coupled with Brexit uncertainty, means businesses must adapt their recruitment strategies to ensure they are equipped with the right talent to keep up. However, the skills desired within certain roles remain specialist and unobtainable without presenting a competitive offer. The skills required are changing at a faster pace than their adoption among the mainstream UK workforce.”

The Times, Page: 43

Northern start-ups attracting plenty of VC cash

More than $49m was pumped into Northern start-up businesses by venture capital investors between July and September, up by nearly $10m on the same quarter last year, according a quarterly report from KPMG. Graham Pearce, KPMG’s head of technology in the North, said: “The third quarter of the year is traditionally a slower period for investment. Add to this the shadow of Brexit uncertainty, and it’s great to see the amount of VC investment in the North’s thriving start-up and scale-up sector up on the same period a year ago.”

Yorkshire Post, Business, Page: 5

REGULATORY NEWS

Former OFT boss warns over ‘radical’ M&A regime changes

John Fingleton, former head of the Office of Fair Trading (OFT), has spoken out about the government’s “radical” M&A proposals, warning that they could create regulatory bureaucracy and hit foreign investment. Fingleton told the Radio 4 Today Programme: “The scale of it is almost industrial. We’ve had nine national security cases in the last 15 years, they’re proposing 100 cases a year under the new system.”

City AM Financial Times, Page: 3

CORPORATE NEWS

Jamie Oliver Group finance executive quits

James Gregory has left Jamie Oliver Group, becoming the third finance executive to leave the TV chef’s business in just over a year. He has been replaced as CFO by Pamela Lovelock.

City AM

New JD Sports CFO named

JD Sports has said finance director Neil Greenhalgh will become CFO after Brian Small retires at the end of the month.

Daily Mail, Page: 69

Crest Nicholson CFO stepping down

Crest Nicholson has posted its third profit warning in two years, along with confirmation that its chief financial officer Robert Allen is stepping down. The housebuilder blamed the uncertain political environment and a tough housing market.

The Daily Telegraph City AM The Times, Page: 41 Daily Mail, Page: 72

Morrisons’ finance boss rewarded

Morrisons’ finance chief Trevor Strain is taking on extra duties as commercial director in a promotion that sees him strengthen his position underneath boss David Potts. He has steered the battle-worn supermarket to steady growth, having led Morrisons’ turnaround plan for the last four years.

City AM Yorkshire Post, Business, Page: 1

Hamleys FD Jablonowski on way out

Hamleys is replacing its finance chief Alex Jablonowski with Yong Shen, the former financial officer of House of Fraser, later this month.

Daily Mail, Page: 73

PROPERTY NEWS

London weighing on UK house price growth

House prices rose 3.2% in the year to August, the slowest pace of growth since August 2013, according to the ONS, taking the average UK house price to £232,797. Howard Archer, chief economic adviser at EY ITEM club, said: “Additionally, housing market activity remains hampered by relatively fragile consumer confidence and limited willingness to engage in major transactions.”

Financial Times City AM The Guardian, Page: 62 The Times, Page: 41 Daily Mail, Page: 14

ECONOMY NEWS

Confidence drops amid concern over debt and income

Consumer confidence has taken a dive for the first time in more than a year despite firmer UK activity and falls in unemployment. A poll by Deloitte found concerns over disposable income and debt levels had led to a “softening in consumer confidence”. Deloitte’s chief economist, Ian Stewart, said the fact that the positive backdrop had failed to boost confidence was a testament to the “headwinds from inflation, interest rate rises and Brexit.” Employees’ average weekly earnings received a rise of 3.1% excluding bonuses in the three months to the end of August, according to data from the ONS, and 2.7% including bonuses. However, inflation ate into the gains – cutting wage growth in real terms back to 0.4% including bonuses.

The Times, Page: 44 City AM, Page: 2 Financial Times

Exporters shrug off Brexit woes

A study by Santander reveals that 70% of trading firms expect to expand their international activity over the next 12 months, shrugging off any disruption that may be triggered by Brexit. However, 43% of respondents said that Brexit would negatively affect their operations. Baroness Fairhead, the exports minister, said that the report “highlights the growing sense of ambition and drive to export among UK businesses.” John Carroll, head of Santander UK’s international division, said: “Brexit is not deterring many from pursuing growth opportunities in the European Union and farther afield.”

The Times

Scottish retailers enjoy growth

A new report from the Scottish Licensed Trade Association, sponsored by KPMG, showed 49% of hospitality and leisure businesses are currently experiencing growth, compared with 39% half a year ago. However, the pub sector remains under pressure and fears a tax hike on beer could lead to job losses and closures.

The Scotsman, Page: 37 Aberdeen Press and Journal, Page: 13, 33

Falling inflation lowers rate rise potential

The consumer price index (CPI) fell to 2.4% in September, from 2.7% the previous month, the Office for National Statistics has said, data which is likely to dissuade the Bank of England from raising interest rates before Brexit in March 2019. The falling price of meat and chocolate helped reduce some of the pressure on cash-strapped consumers.

The Guardian, Page: 31 The Daily Telegraph, Business, Page: 8

BoE highlights corporate debt surge risks

The Bank of England’s Financial Policy Committee is concerned at rising levels of corporate debt, with Sir Jon Cunliffe, deputy governor at the Bank, warning that 20% of corporate borrowing in the UK is now through leveraged loans. Highly indebted companies are increasingly following this borrowing route risking new vulnerabilities in the financial system.

The Daily Telegraph The Guardian, Page: 32 Financial Times, Page: 2

OTHER NEWS

ICAEW champions improved defence spending

In a new paper, published as part of the annual flagship IFS Green Budget, the ICAEW asserts that funding for UK defence spending should improve amid growing international tensions. Overruns are expected in the 2017 to 2027 Equipment Plan to upgrade kit, the body notes, and the challenges in filling technical roles in the Armed Forces and Ministry of Defence may push up recruitment costs.

Press Release

Contact Paul Southward if you have any queries.

Paul Southward