Sunak mulls tax breaks for businesses
Edward Malnick in the Sunday Telegraph reports that Chancellor Rishi Sunak is considering tax cuts designed to encourage big companies to invest in machinery and factories in a move the Treasury hopes would boost the economy. The mooted plan would see firms given a full tax break on capital investment, allowing them to deduct the costs from their bills immediately. Currently, companies are given tax relief on the first £200,000 of investment, with a temporary two-year increase to £1m expiring in January. Research in the US shows that full tax breaks can push investment up by 17.5% and increase wages by 2.5%. A Centre for Policy Studies report earlier this year said such an initiative “would mean businesses investing more, leading to higher incomes and more tax revenue”. Mr Malnick says the Chancellor could introduce full expensing for a temporary period as part of measures to jump-start the economy after the coronavirus pandemic hit the nation’s coffers.
Former chancellors warn Sunak against tax increases
Rishi Sunak has been warned by two former Tory chancellors that a tax raid on business would risk wrecking Britain’s recovery. George Osborne and Sajid Javid said the Treasury should instead seek to rein in spending to restore public finances. The advice comes as forecasters warn that the country faces a brutal autumn with growth fizzling out. Speaking at an online conference hosted by the Centre for Policy Studies think tank, Mr Osborne said: “For the UK, an open trading economy, having a competitive business tax environment is really important. For me, Britain jacking up the business tax rate, what message does that send to business around the world?” Mr Javid echoed the warning, adding that ending the furlough scheme in October is a “gamble” and “billions of savings” could be found from government departments instead.
BCC calls for tax cuts to save economy
The British Chambers of Commerce (BCC) has urged the Government to take “bolder and more ambitious” action to help keep business afloat and support jobs amid the coronavirus crisis. Outlining measures the BCC feels are required to boost the economy, president Baroness Ruby McGregor-Smith said more than £20bn of tax cuts are needed to save jobs and boost investment. The BCC has suggested raising the threshold at which employers’ national insurance contributions kick in from £8,788 to £12,500 and increasing the Employment Allowance from £4,000 to £20,000. To boost investment, it suggests extending the Annual Investment Allowance at £1m for another two years and continuing 100% business rates relief for industries hit by the pandemic and restrictions it prompted.
Source The Daily Telegraph (15/09/2020)
CGT rethink could drive M&A activity
With Chancellor Rishi Sunak said to be considering an increase in capital gains tax to rebalance the nation’s books following the COVID-19 crisis, the Sunday Telegraph’s Ben Woods says the reported rethink of the levy has “sent a chill through the private sector.” He says wealthy investors are selling down their portfolios, while private equity firms have warned that higher levies on executive payouts could drive dealmakers out of the UK. Mr Woods goes on to suggest tax reforms may deliver a rebound in the merger and acquisition market, noting that activity has “been in the doldrums” since the start of the pandemic, with Office for National Statistics data showing that there were 152 domestic M&A transactions between April and June – a 66% year-on-year decline – while the value of deals dropped to £300m from £2.7bn the year before.
Majority favour tax hikes for the wealthy
A report compiled by Tax Justice UK found that 74% of Brits want to see wealth taxed more with supporters of the move including 64% of Tory voters and 88% of Labour. Robert Palmer, executive director of Tax Justice UK, said: “Brits want fair tax rises to support better public services, tackle inequality and deal with the climate emergency.”
Source Daily Mirror (10/09/2020)
Small business face local lockdown hit
James Hurley in the Times warns of the impact local coronavirus lockdowns could have on small firms, noting that British Chambers of Commerce director-general Adam Marshall says that as local restrictions are likely to become more frequent, “a comprehensive package of support will be needed for affected firms”. Ministers have announced that smaller firms with a rates valuation, annual rent or mortgage bill below £51,000 that are forced to shut amid a lockdown would be eligible for £1,000 every three weeks. The Federation of Small Businesses welcomed the assistance, but chairman Mike Cherry has called for “greater help”. He notes that resources are available, with £1.3bn linked to small business grants going unspent by local authorities. “There’s nothing to stop the Treasury repurposing that money to create a new discretionary fund for use by local authorities, aimed at those who have received no help to date and those affected by local lockdowns,” Mr Cherry suggested. He has also called for a successor to the job retention scheme, cuts to VAT and cost reductions “that can help those in hard-hit areas.”
Source The Times (14/09/2020)
New challenges for small firms
Sarah Bridge in the Mail on Sunday says small firms that have made it through the lockdown face new challenges as support schemes wind down, adding that local lockdowns and uncertainty over Brexit mean many smaller businesses “feel they must dig deep to ensure they survive”. Tej Parikh, chief economist at the Institute of Directors, says now is a “crucial” time for small firms, noting that while support schemes are being lifted, consumer demand isn’t back to previous levels. “As a result, there’s great uncertainty over making key decisions such as launching new products or committing to new investment,” he adds. Emma Jones, founder of small business network Enterprise Nation, points to optimism among SMEs, however, saying: “Businesses have gone through so much uncertainty in recent years – for example, the General Election, Brexit and coronavirus. Many feel that if they have survived all these events, they can survive anything.” She believes that a lot of small firms “have come out of lockdown stronger than when they went in.”
Source The Mail on Sunday (13/09/2020)
UK economy grows 6.6% in July as coronavirus restrictions eased
The Office for National Statistics (ONS) reported GDP grew by 6.6% in July as more parts of the economy opened up from the coronavirus lockdown. ONS director of economic statistics Darren Morgan said of July’s growth: “While it has continued steadily on the path towards recovery, the UK economy still has to make up nearly half of the GDP lost since the start of the pandemic.”
Unemployment hits 4.1%
Office for National Statistics (ONS) figures show that UK unemployment rose from 3.9% to 4.1% in the three months to July, with the total number of people jobless climbing by 62,000 over the period. The number of people unemployed from May until July was just above 1.4m. Redundancies increased by 48,000, quarter-on-quarter, with 156,000 recorded. Payroll data shows that 695,000 fewer people are in employment than when the coronavirus lockdown started in March.
Source The Daily Telegraph (16/09/2020) The Guardian (16/09/2020) The Independent (16/09/2020) The I (16/09/2020) Daily Mail (16/09/2020)
Shopper numbers slip
Market research firm Springboard has revealed that shopper numbers across UK retail destinations were down 6.3% last week compared with the week before, with the first week-on-week decline since April. Footfall across UK high streets declined 5.4% and by 5.2% at retail parks. While regional cities saw a 7.9% fall in footfall, the decline in central London was just 3%.
Source Daily Mail (15/09/2020) City AM (15/09/2020)