NEWS – WEDNESDAY 8TH JULY 2020

NEWS ROUNDUP

ECONOMIC STATEMENT 8TH JULY 2020

The Chancellor Rishi Sunak will deliver the economic statement to parliament this afternoon, outlining plans to kick-start the economy as lockdown eases.  Full details of the proposals will be posted to our website news pages.

TAX NEWS – WEDNESDAY 8TH JULY 2020

Plans to force workers to pay for COVID-19 tests scrapped

The Chancellor has dropped plans to force workers to pay income tax on coronavirus tests if their employers order them. HMRC guidance published this week had made clear that employees will face a taxable benefit in kind for private tests carried out in the workplace. Mel Stride, chair of Westminster’s Treasury Select Committee, said: “This new guidance is unclear and will worry a large number of workers. If these tests are to be treated as a taxable benefit in kind, the tax bill for workers could soon mount up.” The Government last night removed all references to the tax on tests from its website. A Treasury spokesman said: “Given the importance of widespread testing, we want to ensure that all employers who wish to provide third-party testing to their employees can do so without increasing their tax liability. So, we will introduce a new income tax exemption for COVID-19 antigen tests provided by employers. HMRC will amend its guidance a s soon as possible to reflect this change.”

The Daily Telegraph, Page: 4 Daily Express, Page: 5 Daily Mail, Page: 13 The Times, Page: 11

Crisis creates platform for radical tax changes

The Telegraph’s Jeremy Warner says the coronavirus crisis provides the Government with an opportunity to push through radical tax reforms. He goes on to consider three proposals: wealth taxes, a point-of-sales tax partially or wholly to replace the increasingly broken business rates system, and the transformation of national insurance into a fully hypothecated system of social insurance to fund health and social care.

The Daily Telegraph, Business, Page: 2

EMPLOYMENT NEWS – WEDNESDAY 8TH JULY 2020

Sunak to unveil ‘kickstart jobs scheme’ for young people

Rishi Sunak will today announce a new scheme to stave off youth unemployment as part of attempts to revitalise the economy following the COVID lockdown. A new £2bn “kickstart scheme” will subsidise six-month work placements for people on Universal Credit aged between 16 and 24, who are at risk of long-term unemployment. The Government said it would lead to “hundreds of thousands of new, high-quality government-subsidised jobs”. The Chancellor is expected to make his summer statement at 12:30 BST after PMQs, with changes to stamp duty and VAT also expected, alongside a £3bn programme to make homes and public buildings more environmentally friendly.

Financial Times BBC News The Guardian Daily Mail, Page: 10 Daily Express, Page: 4 Reuters

Unemployment could reach 15% if second wave strikes

The Organisation for Economic Co-operation and Development (OECD) says joblessness in the UK could hit 15% by the end of the year if there is a second wave of COVID-19. The OECD says the UK is in any case headed for an unemployment rate of 11.7% by the end of this year due to the pandemic and lockdown. Self-employed people, younger workers, women and those on low pay will be the worst affected, the OECD said. The OECD also urged governments to start scaling back emergency wage subsidy schemes to encourage workers to move out of shrinking sectors as it predicted steep rises in unemployment.

The Daily Telegraph, Business, Page: 1 Financial Times The Times

Furlough scheme inflicts massive damage on productivity

Latest official data for the first quarter of the year show that productivity measured by output per worker plunged 3.1% compared to a year earlier – the biggest decline over a single quarter since 2009. The headline measure of output per hour fell 0.6% in January to March from a year earlier, the ONS said, and unit labour costs grew 6.2%, the biggest increase since 2006. The Government’s furlough scheme has led to a disparity between the otherwise closely aligned output per hour and output per worker measures by causing employment to stay in line with pre-pandemic levels, whereas hours worked have declined.

Bloomberg The Daily Telegraph

SMEs NEWS – WEDNESDAY 8TH JULY 2020

One in ten small firms making redundancies

A new study by the Federation of Small Businesses (FSB) of more than 1,000 firms has found that small businesses are having to make redundancies, cancel training programmes and scale-back investment following weeks of COVID-19-linked disruption. The research finds that 67% of UK small firms have furloughed staff as a result of the pandemic, while others have been trimming back capital investment (37%), reducing working hours (25%) and cutting training initiatives (14%). One in ten have had to make staff redundant. Ahead of the Chancellor’s intervention, the FSB is urging the Government to take broad measures to aid job retention and creation, including cutting Employer’s National Insurance Contributions (NICs), or uprating the targeted Employment Allowance, while extending NICs holidays.

Press Release

Banks lend £31bn in Bounce Back Loans

New government data indicate that UK firms have received £30.9bn worth of Bounce Back Loans to help support them following the impact of COVID-19. The figures from the Treasury show that 1.01m such loans have been made. The Treasury also said that more than 53,500 Coronavirus Business Interruption Loans have now been approved, providing £11.5bn worth of funding, and 783 applications worth more than £2.5bn have now been approved for larger firms using the Coronavirus Large Business Interruption Loan Scheme (CLBILS). Meanwhile, the Times reports that fintech firm Tide has been forced to stop lending under the Bounce Back Loan Scheme because third-party funders were not willing to provide the capital. Finally, HSBC has left small businesses waiting a month or more for their loans, according to a report in the Mail.

Daily Mail, Page: 37 Daily Express, Page: 5 The Times, Page: 35 Evening Standard

INDUSTRY NEWS – WEDNESDAY 8TH JULY 2020

Bookkeeping: auditors in the crossfire

The FT’s Due Diligence briefing reports on the renewed calls for accountability for auditors after the Wirecard scandal and the Financial Reporting Council’s demand that the Big Four separate their audit practices by 2024. Separately, a letter to the FT suggests Wirecard’s supervisory board should take more of the heat for the company’s fraud.

Financial Times Financial Times, Page: 22

CORPORATE NEWS – WEDNESDAY 8TH JULY 2020

Chain restaurants forced to revise business model

The coronavirus pandemic is accelerating an inevitable decline in the casual dining sector, experts say, with figures from UHY Hacker Young showing over 1,400 restaurants collapsed into insolvency in the 2018-19 financial year, a quarter more than the previous 12 months. Although insolvencies have slowed in recent months due to the Government’s moratorium on winding-up petitions and a temporary ban on business evictions, UHY Hacker Young expects this number to increase as government support begins to taper off. Christian Mole, EY‘s head of hospitality for the UK and Ireland, adds: “The thing to say about the casual dining sector is that unlike a lot of hospitality, it was a sector that was struggling way before Covid anyway. In a similar way that you could argue that the pandemic has accelerated a move within retail from bricks and mortar to the internet – it’s accelerating the fallout that was always likely to happen in the casual dining sector.”

The Daily Telegraph, Business, Page: 8

PROPERTY NEWS – WEDNESDAY 8TH JULY 2020

Chancellor to announce immediate stamp duty cut

Rishi Sunak is expected to announce an immediate cut to stamp duty to boost the housing market. However, it is not yet known whether the temporary tax break will apply just to first-time buyers or all house purchases. The Chancellor is expected to raise the threshold from £125,000 to £500,000 – properties costing £500k accounted for nine in 10 of all transactions last year.

The Daily Telegraph, Page: 1, 2

WEALTH MANAGEMENT NEWS – WEDNESDAY 8TH JULY 2020

SJP clients have questions about potential wealth tax

St. James’s Place says it has been getting “lots of questions” from clients about the possibility of a wealth tax being introduced to pay for the coronavirus crisis. SJP’s private client director Alex Loydon said that the prospect of a wealth tax is a “hot topic” for clients. She added that business in the private client space for the wealth manager is “ahead of where it was this time last year” and the firm has seen an “awful lot of activity” in the area. Ms Loydon continued: “What we are saying to clients is don’t make any rash decisions. And this is where the value of advice comes in and having a financial adviser there to sort of hold your hand, for want of a better phrase, in times of uncertainty.”

Money Marketing

ECONOMY NEWS – WEDNESDAY 8TH JULY 2020

GDP to fall 11% this year, providing there’s no second wave

A report by BDO and the Centre for Economics and Business Research forecasts GDP will fall 11% this year – but only if there is no large-scale second wave of coronavirus or another national lockdown. It warns that another peak in the pandemic and lockdown would send Britain’s GDP tumbling 19% and see exports fall by 23%. Peter Hemington, head of M&A at BDO, said: “We should assume that the full extent of economic damage will not be revealed until the Government’s job retention scheme comes to an end in October.”

Yorkshire Post, Page: 5

OTHER NEWS – WEDNESDAY 8TH JULY 2020

Italian mafia bonds sold to global investors

Documents seen by the FT show how international investors bought bonds backed by the crime proceeds of Italy’s most powerful mafia. In one case, consulting services were provided by EY.

Financial Times, Page: 1

Contact Paul Southward

Paul Southward