Archive forMarch, 2017

Forward Diary: 3rd – 7th April

Company and economic announcements planned for the week commencing 3rd April 2017

Hospitality firms warn on EU recruitment

The hospitality sector has warned it faces a shortfall of 60,000 workers a year if immigration from the European Union is too tightly controlled. The British Hospitality Association (BHA) said that thousands of businesses are facing having to drastically reduce their dependence on EU workers. Staff from the EU make up nearly a quarter of all jobs in the sector. Immigration is set to be one of the most controversial issues to be settled during the Brexit negotiations. The hospitality industry represents 3 million workers and about a tenth of the UK’s economic wealth. In the first major business intervention since the triggering of Article 50, a report by KPMG for the BHA says that it will take 10 years to reduce the need for EU workers by training British staff, targeting older workers and encouraging younger people to take jobs in the sector. But with the UK economy approaching full employment, the report says that there are no easy pools of labour to exploit and that EU nationals will still make up a large part of the workforce.

Insurer Lloyd’s of London confirms new Brussels base

Lloyd’s of London says it will establish a new European base in Brussels to avoid losing business when the UK leaves the EU. The 329-year-old insurance market confirmed the plan as it released its latest annual results. “A subsidiary office will be opened in Brussels with the intention that it will be operational for the January 1 renewal season in 2019,” it said. The company’s continental business generates 11% of its premiums. Other financial institutions are also planning to relocate business within Europe. Several investment banks, including Bank of America, Barclays, and Morgan Stanley are considering relocating staff to Dublin. Frankfurt, Madrid and Amsterdam are also likely to benefit. HSBC is expected to move significant numbers of employees to Paris. Lloyd’s also announced it had made a profit of £2.1bn for 2016, the same as for the year before.

Brexit: What do businesses want from Article 50 talks?

Prime Minister Theresa May is set to trigger Article 50 later, formally starting the process of the UK leaving the European Union. The next two years of negotiations will have far-reaching implications for British businesses and their staff. The three main areas companies will be watching in the Brexit talks are: migration, customs, and tariffs. But different firms – often within the same industry – will rank them in different orders of importance. With so many competing interests, what message is business sending to the government about the Brexit talks?

Tesco fined £129m for overstating profits

Tesco has agreed to pay a fine of £129m to avoid prosecution for overstating its profits in 2014. The supermarket giant has reached a deferred prosecution agreement with the Serious Fraud Office (SFO) after a two-year investigation. The SFO said Tesco had co-operated with the investigation and had undergone an “extensive” period of change. Tesco also said it had accepted a finding of “market abuse” from the Financial Conduct Authority. It says it will compensate investors who bought shares or bonds between 29 August and 19 September, which Tesco estimates will cost it about £85m.

BT fined record £42m for late installations

BT has been hit with a record fine from telecoms regulator Ofcom and has set aside £300m to repay providers for delays in installing high-speed lines. Ofcom has issued the firm with a £42m fine, which it said was the largest it has ever handed down. It found BT’s Openreach division had cut compensation payments to telecoms providers for delays in installing the lines between early 2013 and late 2014. Openreach said it “apologised wholeheartedly” for the mistakes. The investigation found BT had broken rules about its “significant market power” by cutting the payments. Gaucho Rasmussen, Ofcom’s investigations director, said: “These high-speed lines are a vital part of this country’s digital backbone. “We found BT broke our rules by failing to pay other telecoms companies proper compensation when these services were not provided on time. “The size of our fine reflects how important these rules are to protect competition and, ultimately, consumers and businesses.”

Call for ‘decently paid’ maternity leave

Statutory maternity pay for UK mothers is among the worst in Europe, according to an analysis by the TUC. The trade union body says only Ireland and Slovakia have worse “decently paid” entitlements. It defines decently paid as two-thirds of a woman’s salary or more than £840 a month. The government said the UK’s maternity system was one of the most generous in the world and most mothers could take up to 39 weeks of guaranteed pay. That was nearly three times the EU minimum requirement of 14 weeks, a statement said. The TUC argues that statutory maternity pay should be at least as much as the minimum wage so mothers do not have to return to work prematurely. “The UK is in the relegation zone when it comes to decently paid maternity leave,” said Frances O’Grady, general secretary of the TUC. “Many European countries offer decent support to new mums, but lots of parents here are forced back to work early to pay the bills.” The analysis is based on research by the Leave Network, an international group that analyses and researches leave policies.

Forward Diary: 27th – 31st March 2017

Company and economic announcements planned for the week commencing 27th March 2017

Next sees first annual profit fall in eight years

Next (NXT.L) has reported its first fall in annual profit for eight years and warned of “another tough year ahead”. Pre-tax profit at the clothing and homeware retailer dropped 5.5% from £836.1m to £790.2m last year. The firm, which had already warned profits would fall, said it remained “extremely cautious” about trading. It said shoppers were shifting their spending away from clothing, at the same time as inflation was rising and incomes were being squeezed. The profit fall in 2016 is the first for the retailer since the financial crisis of 2008. Sales at Next’s bricks-and-mortar business fell 3% to £2.3bn, as the retailer said shoppers continued to shift away from the High Street. Its online and catalogue business did better, with sales growing 4% to £1.7bn. Next chairman John Barton said: “Trading conditions in the year ahead will continue to be tough, however I believe that by focusing on our core strengths, as we did during 2008, we will see Next emerge from this period stronger than before.”

The women still working into their 70s

The proportion of women working into their 70s in the UK has doubled in the last four years and is starting to catch up with men. Analysis of official data reveals that 5.6% of women only stopped working after the age of 70 in 2012. This had risen to 11.3% in 2016. Worries over pension income and a motivation to stay active have pushed up working ages. An estimated 15.5% of men stopped work in their 70s in 2016. Changing laws and workplace regulations, such as the end to age discrimination and the right to request flexible hours, have also helped people to work for longer as longevity increases.

Bill Gates tops Forbes’ rich list but Trump’s wealth slips

Microsoft founder Bill Gates again tops Forbes’ list of the world’s richest people, in a year when the number of billionaires rose 13% to 2,043. According to the magazine’s annual rich list, Mr Gates’ fortune rose to $86bn, from $75bn, followed by investor Warren Buffett, up $14.8bn to $75.6bn. It was bad news for US President Donald Trump, who slipped 220 spots to 544 and must now rub along on just $3.5bn. Forbes said the $1bn fall in his wealth was due to the slow US property market. There were 183 tech billionaires on the Forbes list, with a combined $1tn in wealth. The list is dominated by US billionaires. Others in the top 10 included Amazon founder Jeff Bezos, who moved up to number three with the biggest gain of any person on the planet, a $27.6bn rise in his fortune of $72.8bn. Facebook founder Mark Zuckerberg was number five and Oracle co-founder Larry Ellison was number seven.

Vodafone’s Indian unit and Idea Cellular announce merger

UK telecoms giant Vodafone (VOD.L) has merged its Indian business with Idea Cellular, India’s third-largest network, to create the country’s largest operator. The combined company will have almost 400 million customers, accounting for 35% of the market share, the firms said in a statement. The announcement ends months of speculation over an impending deal. Analysts say the merger was to fend off competition from a new operator – Reliance Jio. Owned by the country’s richest man, Mukesh Ambani, Jio has forced Vodafone India and Idea Cellular, together with current market leader Bharti Airtel, to cut prices. Shares in Idea rose almost 4% in Mumbai following the announcement of the deal. India’s leading mobile networks are embroiled in what analysts have described as “a vicious price war”, started by the arrival of Jio. More than 10 telecom operators are battling it out to try and attract India’s one billion mobile phone users. That has forced firms to keep tariffs low – significantly impacting their profitability.

MPC member calls for interest rates to rise

UK interest rates should be raised, despite risks in the economy, according to a member of the Bank of England’s rate-setting committee. Kristin Forbes, a US academic, was the only member of the Monetary Policy Committee to vote to raise rates this month. This was the first split between policymakers on rates since last July. “Monetary policy should not go on hold,” Ms Forbes wrote in an opinion piece in the Daily Telegraph. Ms Forbes, who is due to leave the Bank in June, said raising rates would lessen the risk of above-target inflation, and boost an improved outlook for unemployment and UK output.

Forward Diary: 20th – 24th March 2017

Company and economic announcements planned for the week commencing 20th March 2017

Sainsbury’s sales fall at start of year

Underlying sales have fallen at Sainsbury’s (SBRY.L) in the first nine weeks of the year, but the newly-acquired Argos reported strong growth. The supermarket’s like-for-like sales, which strip out new stores, fell by 0.5% in the period to 11 March. However, Argos sales rose 4.3%, resulting in a 0.3% increase across the Sainsbury’s group as a whole. Mike Coupe, chief executive, said the impact of rising cost pressures “remains uncertain”.

Ikea drivers living in trucks for months

Lorry drivers moving goods in Western Europe for Ikea and other retailers are living out of their cabs for months at a time, a BBC investigation has found. Some drivers – brought over from poorer countries by lorry firms based in Eastern Europe – say their salary is less than three pounds an hour. They say they cannot afford to live in the countries where they work. One said he felt “like a prisoner” in his cab. Ikea said it was “saddened by the testimonies” of the drivers. The drivers the BBC spoke to were employed by haulage companies based in Eastern Europe, which are paid to transport Ikea goods.

Rents fall for first time in six years

The average monthly rent for newly-let properties has fallen for the first time since late 2010, according to estate agency Countrywide. The drop has been due to a big recent increase in the supply of properties becoming available, mainly in London. That was due to some landlords rushing to buy last year before a 3% stamp duty surcharge came into effect. The average new tenancy in England, Wales and Scotland fell 0.6% in the year to February, to £921 a month. The main factor was a big drop in rents in London and the south east of England. In the capital they fell by nearly 5% in the past year to an average of £1,246 a month, and in the south east of England they fell by nearly 3% to £1,152. Everywhere else rental levels continued to rise. “Rents are growing in most of the country but falls in London and the south east are dragging down the national growth rate, ” said Countrywide’s research director Johnny Morris. “Early signs point towards 2017 being a rare year where rents rise faster in the north of the country than in the south.”

Vodafone to create 2,100 UK customer service jobs

Mobile phone giant Vodafone (VOD.L) says it will create 2,100 jobs across the UK. The company is expanding existing customer service centres, with 800 additional posts in Manchester, almost 150 in Newark, more than 150 in Stoke-on-Trent and about 100 in Glasgow. Its third-party customer service partners will create another 600 jobs in Newcastle, nearly 200 roles in the west of Scotland, and 100 in Cardiff. It comes days after it announced hundreds of job cuts at its Newbury HQ. The firm said the jobs would improve the quality of service for its 18 million UK customers and was part of a wider, three-year, £2bn investment programme in network and services. “These new, skilled roles will make a real difference to our customers and a real difference to the communities that are the focus of our customer services investment,” said Vodafone UK chief executive Nick Jeffery. Last October, regulator Ofcom fined Vodafone £4.6m for “serious” breaches of consumer protection rules, its largest fine for a telecoms operator.

BT strikes deal to legally separate Openreach division

BT (BT.A.L) has bowed to demands by the telecoms regulator Ofcom to legally separate Openreach, which runs the UK’s broadband infrastructure. Ofcom said that Openreach will “become a distinct company with its own staff and management, together with its own strategy and a legal purpose to serve all of its customers equally”. It must consult with customers such as Sky and TalkTalk on major investments. Its boss will be appointed by an Openreach board with its own chairman.

Forward Diary: 13th – 17th March 2017

Company and economic announcements planned for the week commencing 13th March 2017

Tax-free dividend allowance slashed

Businesses owners who pay themselves in dividends on top of a small salary will be hit by a change announced in the Budget. From April 2018, the total amount of dividends that company directors and shareholders can receive tax-free will fall from £5,000 to £2,000. The Federation of Small Businesses called the move “a further disincentive for businesses to invest and grow”. The change is the biggest tax raiser in Chancellor Philip Hammond’s Budget. It will net an increasing amount for the Treasury, bringing in £930m in 2021-22. It means a basic rate tax payer who receives £5,000 in dividends will have to pay an extra £225 tax from April 2018. A higher rate tax payer will pay an extra £975.

Budget 2017: Hammond’s ‘upbeat’ message over Brexit future

Chancellor Philip Hammond will use his first Budget to help prepare Britain for a “new chapter” in its history after Brexit, the Treasury has said. In an “upbeat” speech, he is expected to say the economy has proved resilient since the referendum but admit that many families are “feeling the pinch”. Extra money is expected to be found for social care in England and to help firms facing steep business rate rises. A £5m fund will be set up to mark the centenary of female suffrage next year. The Budget, which coincides with International Women’s Day, will support projects celebrating the 1918 Representation of the People Act, which gave more than eight million women the vote for the first time and which paved the way for universal suffrage a decade later. With the public finances proving stronger in recent months than expected, and defying forecasts of a post-EU referendum downturn, economists say the chancellor has more room for manoeuvre than he might have expected at the time of last November’s Autumn Statement. He has already announced £320m in funding for new free schools and the expansion of existing grammar schools, while the science budget is also expected to be a winner, with funding for electric vehicles, robotics and artificial intelligence.

Vauxhall’s fight for survival begins

Carlos Tavares, the man who will determine the future of Vauxhall workers, downplayed the threat to more than 4,000 Vauxhall workers – but he chose his words very carefully. The head of PSA insisted that the new combined company would have an opportunity to set new internal benchmarks for performance. They will allow plants to be compared and improve. Production commitments expire in 2021 for Ellesmere Port and 2025 for Luton. After that it will be every plant for itself in a battle for jobs. The combined company will have 24 factories and everyone at the Geneva motor show agrees that is a few too many. Several senior executives who asked not to be named had the same message. Consolidation is good because it’s the best way to take out overcapacity. That has to happen and that means plants will close and jobs will go. In this inevitable fight for survival, the UK starts at a disadvantage according to most executives here. Uncertainty over Brexit and the terms of trade with Europe is one handicap. The fall in sterling is another. Although labour costs have gone down, the price of the 75% of parts for a Vauxhall Astra that come from Europe has gone up. Having said that, Mr Tavares said that in the event of a “hard” Brexit, it may be more – not less – important to have manufacturing in the UK.

Peugeot-Citroen agrees deal with GM to buy Vauxhall-Opel

The French company that owns Peugeot and Citroen has struck a 2.2bn euro (£1.9bn) deal to buy General Motors’ European unit, including Vauxhall. PSA Group and GM announced the sale ahead of a press conference in Paris. The deal has raised fears of job losses at Vauxhall’s UK factories, which employ 4,500 workers. With GM’s Opel and Vauxhall operations, PSA would become Europe’s second largest carmaker, behind Volkswagen but overtaking Renault-Nissan. In a statement, Carlos Tavares, chairman of PSA’s managing board, said: “We are confident that the Opel/Vauxhall turnaround will significantly accelerate with our support, while respecting the commitments made by GM to the Opel/Vauxhall employees.” GM chairman and chief executive Mary T. Barra said she believed the deal would put Opel and Vauxhall “in an even stronger position for the long term”.

Forward Diary: 6th – 10th March 2017

Company and economic announcements planned for the week commencing 6th March 2017

Zero hours contracts reach record levels

The number of people on controversial zero hours contracts has reached a record high of 910,000. New figures based on an analysis of Office for National Statistics data reveal that 110,000 more people were on contracts that do not guarantee work in 2016 compared with the same period in 2015. That’s an increase of nearly 14%, and 30% higher than 2014. In 2005, there were just 100,000 people on zero hours contracts (ZHCs). But although the new figures are a record, they also reveal a sharp slowing in the rate of increase in the last six months of 2016. “It’s notable that the increase of 0.8% in the second half of 2016 compares to a 7.6% rise over the same period in 2015,” said Conor D’Arcy, policy analyst at the Resolution Foundation, which undertook the analysis of the ONS’s Labour Force Survey. “Ever since ZHCs hit the headlines the numbers have increased sharply every six months. The latest figures bring this run to an end.” That decline in the rate of increase for such contracts – which have been criticised for being forced on lower paid workers – could be down to three reasons.

‘Long shadow’ of financial crisis hits incomes

Typical household incomes in the UK will not grow for the next two years due to the “long shadow” of the financial crisis, a report suggests. In five years’ time, median income will be 4% higher than it is now, the Institute for Fiscal Studies predicts. The recession and tepid recovery mean that from the start of the crisis to 2021, households will suffer the worst income squeeze for 60 years, it says. They will be £5,000 a year worse off than they might have expected. The IFS has produced a report on living standards for the Joseph Rowntree Foundation, which campaigns to reduce poverty. It suggests, based on official forecasts produced for the government by the Office for Budget Responsibility, that long-term income growth is a relatively slow 2% a year. “If the OBR’s forecast for earnings growth is correct, average incomes will not increase at all over the next two years,” said Tom Waters, an author of the report. “Even if earnings do much better than expected over the next few years, the long shadow cast by the financial crisis will not have receded.” This was generally the result of small increases in wages, low productivity levels, tax and benefit policies and the state of the UK economy. The squeeze would be felt worst by low-income households with children, he said, owing primarily to the four-year freeze in working-age benefits.

‘Still stains’ on Sir Philip Green over BHS

Retail tycoon Sir Philip Green’s £363m payment to the BHS pension scheme does not wipe away the stains from his reputation, a senior MP has said. Business committee chairman Iain Wright told the Daily Mirror letting him keep his title would be the “biggest case of cash for honours that we’ve ever seen”. Sir Philip agreed the settlement with the regulator to help fill the failed retailer’s pensions black hole. But fellow Labour MP Frank Field said the BHS saga was far from over. Under the deal with the Pensions Regulator announced on Tuesday, former BHS workers will get the same starting pension that they were originally promised. Mr Wright and Work and Pensions Select Committee chairman Frank Field led questioning of Sir Philip over the sale of the chain and its eventual collapse. He owned BHS for 15 years before selling it for £1 to former bankrupt Dominic Chappell.