NEWS – TUESDAY 7TH JULY 2020
NEWS – TUESDAY 7TH JULY 2020
CHANCELLOR’S SUMMER STATEMENT
On Wednesday 8th July Rishi Sunak will deliver a Summer Economic Update to Parliament. As the UK is slowly emerging from the lockdown, what can Rishi deliver to turn the country’s economy around. There is no shortage of advice being offered to Rishi. Think-tanks, industry bodies, parliamentarians and other commentators having put forward suggestions including; extension of the furlough scheme; a cut to the main rate of VAT; National Insurance cuts for employers; infrastructure spending, wages subsidies and many more.
We will be reporting in full on The Chancellor’s statement and explaining what the measures introduced will mean for you and your business.
TAX NEWS – TUESDAY 7TH JULY 2020
A wealth tax is now the only answer to save the country
The Guardian’s Polly Toynbee says a wealth tax is now the only solution to save the arts and all the other things “we regard as essential for civilisation.” Ms Toynbee cites a claim by Professor Arun Advani, one of a team of people working on an Institute for Fiscal Studies, who says a one-off windfall tax of 10% on all wealth would yield £1trn – enough to save every sector stricken by the coronavirus. She also points to Gus O’Donnell, the former head of the civil service and a long-time Treasury official, who said recently that the Conservatives have been presented with an opportunity to prove their promise for one nation Conservatism – only the Tories with a huge majority can push through reforms that would see earnings from wealth and work more evenly taxed.
The Guardian, Journal, Page: 1, 2
CORPORATE NEWS – TUESDAY 7TH JULY 2020
Wirecard executive arrested in Munich on suspicion of fraud
Wirecard executive Oliver Bellenhaus, who ran the company’s CardSystems unit in the Middle East, has been arrested by prosecutors in Munich. Meanwhile, the Times reports that Mastercard was warned about Wirecard’s links to an alleged laundering network in 2016. Evidence was passed to Paul Paolucci, a vice-president at Mastercard, and Howard Fields, head of anti-money laundering, alleging that fake ecommerce sites with a series of supposed connections to Wirecard were being used as a front for channelling online gambling proceeds through Mastercard’s system.
Eddie Stobart reports jump in losses, due to accounting error
Annual losses at logistics group Eddie Stobart have jumped significantly, following a £169m charge in December as a result of an accounting blunder. The company sacked its chief executive and suspended trading in its shares in August last year, after an accounting investigation found its 2018 profit had been overstated by £2m. Losses before tax rose to £238.9m for the 12 months to the end of November 2019, up from £22.3m a year earlier. Exceptional costs were reported of £200.2m, up from £5.1m, to factor in the £169.2m impairment charge.
Companies pause frantic fundraising to assess pandemic damage
Companies are pausing for breath after racing to secure cash, the FT reports, drawing down bank credit lines, agreeing government rescue finance and issuing new debt and equity to outlast the coronavirus crisis.
SMEs NEWS – TUESDAY 7TH JULY 2020
UK banks ‘draw up code of conduct’ for coronavirus business loan defaults
UK Finance and the state-owned British Business Bank (BBB) have begun talks with commercial lenders in the hope of setting up industry-wide debt collection standards for government-backed coronavirus interruption loans, amid fears a high proportion of the loans will never be repaid. Loans granted under the flagship coronavirus business interruption loans scheme (CBILS) and bounce back loan scheme for SMEs (BBLS) have a one-year repayment free period, with the first repayments due in spring 2021. However, Bank of England governor Andrew Bailey was warned by an industry group last month that up to £36bn of emergency loans to SMEs risk turning toxic, with banks warning that up to 50% of BBLS were unlikely to be repaid. British banks are keen to avoid being perceived as pursuing SMEs for loan repayments too aggressively after a series of scandals surrounding lenders’ treatment of small firms following the global financial crisis.
PROPERTY NEWS – TUESDAY 7TH JULY 2020
Stamp duty holiday could save average English buyer £7,000
Chancellor Rishi Sunak is expected to announce plans in his Summer Statement for a temporary stamp duty holiday that could save the average English buyer £6,915 – and make 88% of English property transactions exempt from the tax, according to Savills. Mr Sunak is predicted to raise the threshold at which buyers start paying tax on their purchases from £125,000 to as much as £500,000. The holiday would come into effect at the moment analysts are expecting the economic impact of coronavirus to hit the property market hard. Both mortgage holidays and the furlough scheme are due to end in the autumn, meaning there could be a spike in forced sellers, and a fall in the number of people able to purchase.
“Covid refugees” drive up price of prime country homes
Londoners fleeing the capital in search of rural homes more conducive to comfortable lockdowns and home working are driving up prices, particularly in the prime bracket, with some buyers paying as much as 17% over asking price. The flood of interest has led agents to warn of a bubble developing. Fiona Pengelly of Strutt & Parker in Salisbury described most of her buyers as “Covid refugees”. She said: “Since the market reopened, I have sold a third of our stock off market in excess of guide price.”
EMPLOYMENT NEWS – TUESDAY 7TH JULY 2020
Over two-fifths of employers plan redundancies
A survey by the think tank Bright Blue has found that 44% of businesses using the Government’s job retention intend to make redundancies when the support is withdrawn in October. Economists fear that redundancies will start rising from next month, when companies have to start paying national insurance and pension contributions, representing 5% of employment costs. Medium-sized businesses were most concerned about meeting these obligations from August, with 65% saying they would cut jobs when the scheme ends in October. Former Chancellor Norman Lamont says in the Telegraph that the Government should temporarily suspend or reduce Employers’ National Insurance Contributions to prevent a “tsunami of unemployment.”
ECONOMY NEWS – TUESDAY 7TH JULY 2020
Sunak to spend £3bn on green projects
Rishi Sunak will set aside £3bn to create green jobs and improve the energy efficiency of public buildings when he announces plans to kickstart the economy on Wednesday. As much as £2bn will be set aside for a green homes grant which will give households vouchers to spend on energy efficiency schemes such as loft lagging and floor insulation. The Chancellor’s package would include a new £40m fund dedicated to cleaning up nature and planting trees which would back up to 5,000 new jobs, the Treasury said.
Financial services saw volumes slump at fastest pace on record
A survey of the financial services sector by the CBI and PwC reveals that volumes fell at their fastest pace on record during the lockdown while jobs were cut at the fastest pace in a decade. Business volumes fell by 12% on average and profitability slumped at the fastest rate since the financial crash. General insurance companies were the only sub-sector to defy the downturn.
Contact Paul Southward