NEWS – TUESDAY 1ST DECEMBER 2020
National Living Wage and national Minimum Wage Increases
The Government has confirmed that the National Living Wage (NLW) will rise by 2.2% in April 2021 to £8.91 per hour, and will, for the first time, apply to 23 and 24 year olds.
In full, the increases from April 2021 are:
- National Living Wage (23+) to increase 2.2%, from £8.72 to £8.91;
- National Minimum Wage (21-22) to increase 2%, from £8.20 to £8.36;
- National Minimum Wage (18-20) to increase 1.7% from £6.45 to £6.56;
- National Minimum Wage (under 18) to increase 1.5% from £4.55 to £4.62; and
- Apprenticeship Wage to increase 3.6% from £4.15 to £4.30.
The 23-24 age category for the National Minimum Wage has been abolished, following the lowering of the age of the eligibility for the NLW to 23 years old.
Further information can be found at:
TAX NEWS – TUESDAY 1ST DECEMBER 2020
FTSE 100 tax burden hits decade high
Analysis by PwC shows that FTSE 100 firms have been hit by their highest tax burden for a decade. The report shows that, with profitability down amid a slowing global economy, total tax rates imposed on blue-chip companies as a percentage of profit hit 47.9% in the year to March 31. This is the highest level since 2010 and is up from 41% over the previous 12 month period. PwC estimates that total taxes paid by FTSE 100 firms stands at £84.1bn, a total that represents 11.3% of Government receipts. While £26.9bn was a direct cost to the companies involved, the rest was collected by the businesses and passed on to the exchequer on behalf of others, with this including income tax and national insurance contributions owed by staff. Much of the data in the PwC report covers the period before the coronavirus crisis, with the firm saying it expects the pandemic to deliver a further dip in profitability a nd tax contributions next year. Andy Agg, chairman of the 100 Group’s tax committee, comments: “This study shows that despite challenging economic conditions, the total tax contribution from large companies remains significant.”
The Times, Page: 42 The Daily Telegraph, Business, Page: 3
CGT take climbs as Sunak mulls reform
Government figures show that HMRC pulled in £72m in capital gains tax in October, marking a steep increase on the £4m recorded in October 2019. With analysts suggesting that the levy could be set for reform as Chancellor Rishi Sunak looks to help foot the nation’s coronavirus bill, it has been suggested that the take from the tax may have spiked due to people selling assets out of concern rates could rise in 2021. It has been suggested that CGT rates could be increased to align more closely with income tax, with the Chancellor considering the outcome of an Office for Tax Simplification (OTS) report on CGT he commissioned. The OTS suggests a rethink of CGT could raise £14bn for the Treasury.
CORPORATE NEWS – TUESDAY 1ST DECEMBER 2020
Arcadia collapses into administration
Arcadia has gone into administration, putting 13,000 jobs at risk. The retail group, which owns Topshop, Topman, Miss Selfridge, Dorothy Perkins, Evans and Burton, has hired administrators from Deloitte to handle the process. No redundancies were announced as an immediate result of the collapse of Sir Philip Green’s retail empire and Arcadia’s stores and websites will continue to trade as Deloitte considers all options available to the group. Arcadia CEO Ian Grabiner, who said the collapse into administration marked an “incredibly sad” day for the group, said that while Arcadia had hoped to “ride out the pandemic and come out fighting on the other side”, trading conditions were the worst the group has ever seen and “the obstacles we encountered were far too severe.” Matt Smith of Deloitte said coronavirus lockdowns, combined with “broader challenges” for high street retailers, had resulted in a “critical funding requirement” for Arcadia, forcing it into administration. Meanwhile, Sir Philip has been urged to protect the pensions of Arcadia’s workforce amid reports of an estimated £350m deficit in its pension fund. Separately, HMRC missed out on becoming a key creditor in the collapse of Arcadia by a matter of hours, with the partial return of crown preference, a rule which moves the Revenue up the repayment queue in insolvencies, coming in to force today.
The Daily Telegraph, Business, Page: 1 The Times, Business, Page: 1 The Times The Independent, Page: 49 The Guardian, Page: 1 Financial Times, Page: 1 The I, Page: 8 Daily Mail, Page: 21 Daily Express, Page: 11 Daily Star, Page: 7 The Scotsman, Page: 4 BBC News
Issa brothers in Caffè Nero bid
Mohsin and Zuber Issa, the brothers who last month agreed a £7bn deal to buy Asda, have offered to buy Caffè Nero and pay off its debts to landlords in full, proposing a deal just hours before creditors were due to vote on proposals that would see Caffè Nero’s rent bill slashed. However, following discussions with lenders, the café chain’s bosses dismissed the bid and have vowed to continue with the proposed CVA. Under the CVA proposals, Caffè Nero’s landlords are set to get 30p for every £1 worth of rent they are owed, with KPMG appointed in September to help the business negotiate reduced rents.
INDUSTRY NEWS – TUESDAY 1ST DECEMBER 2020
Auditors move to ditch risky clients
Hannah Godfrey looks at auditors terminating contracts with clients in compromising circumstances, pointing to recent examples and saying that while the reputational risk of being associated with such businesses has been given as a possible explanation, some experts believe such moves are more to do with conflicts of interest. She goes on to explore how qualifying an audit could harm client relations and bring litigation risks, “so it is safer to ditch clients instead”. Ms Godfrey says auditors “have not enjoyed positive press in recent years”, having been linked to a number of corporate failures – and notes that Financial Reporting Council scrutiny found that the UK’s seven leading accounting firms failed a third of quality tests this year. Jonathan Fisher QC, a barrister at Bright Line Law, says: “I think there is a greater degree of caution being taken as regarding existing clients and in terms of making new relationships, and I think it’s being driven by a risk of litigation and regulation”.
CMA report points to diminished competition
Research published by the Competition and Markets Authority suggests the level of competition in most sectors has fallen in the last 20 years. The Times notes that the relationship between a dip competition and price rises has been evident in the audit industry, with a Financial Reporting Council report showing that total fees across the Big Four’s audit divisions increased by 7% to almost £2.3bn last year
EMPLOYMENT NEWS – TUESDAY 1ST DECEMBER 2020
Older workers delay retirement due to pandemic
Research from pensions firm Smart shows that more than a million older workers have delayed their retirement due to the blow the coronavirus crisis has dealt their finances. The report says that around one in seven people aged 55 and above will continue working longer than they had planned due to the pandemic, with this equivalent to around 1.06m workers. A report from the Financial Conduct Authority shows that over-55s have been just as likely to lose their job as the under 40s and have seen larger pay cuts on average, with the typical worker over the age of 55 having seen their income fall by 23%.
PROPERTY NEWS – TUESDAY 1ST DECEMBER 2020
Mortgage approvals at highest level in 13 years
With Bank of England figures showing that 97,500 home loans were approved by lenders in October, UK mortgage approvals are now at the highest level since 2007. The Bank said approvals for home loans were more than 5,000 higher than in September and a third higher than in February, the month before the UK entered its initial coronavirus lockdown. October’s total marks a steep increase on the low of 9,400 recorded in May. The figures also show that mortgage borrowing hit £4.3bn last month, pointing to a recovery from the pandemic-driven downturn that saw borrowing slip to £200m in April. Pantheon economist Sam Tombs said the Chancellor’s decision to suspend stamp duty on properties worth up to £500,000 until March had “turbo-charged” the market. He added, however, that the housing market “remains set to weaken sharply” after the stamp duty holiday comes to an end.
The Guardian, Page: 35 The Times, Page: 42 The Independent Daily Express
ECONOMY NEWS – TUESDAY 1ST DECEMBER 2020
£600m of debt repaid in October
Bank of England (BoE) data on lending shows that households repaid £600m of debt in October, the same as in September. This means the total repaid since the end of March now stands at £15.6bn. Credit card debt has fallen by 13% over the past year, with consumers having reined in borrowing amid ongoing uncertainty around the impact of COVID-19. The BoE report also reveals that borrowing using credit cards, overdrafts and personal loans fell by 5.6% annually in October. Thomas Pugh, a UK economist at Capital Economics, said that while consumers and businesses were paying back credit, “the good news on vaccines means that businesses and consumers’ purses could be pretty full when regulations are loosened early next year, leading to a sharp rebound in consumption and growth.”
The Independent The Guardian
Contact Paul Southward