Whichever, there is no denying that yesterday was a Wednesday of pleasant surprises and improvements, albeit slight. For example, the Office for National Statistics (ONS) announced that unemployment had fallen in the first quarter of the year to 2.48 million, the first drop since last Autumn.
Yesterday also saw a surprise drop in the rate of inflation to 4 per cent, which has eased the pressure on the Bank of England to raise the base interest rate. And in its latest global financial stability report, which was broadly positive, the International Monetary Fund (IMF) described the UK’s spending cuts as ‘necessary’ in a bid to bring down the deficit.
And yet, most reports on the news have trampled over the good in their haste to get to the bad. Articles are littered with ‘buts’ and the flip side of the positive. The full story must be published, of course, but why not present the facts instead of the individual’s spin on them?
Of course, these small improvements are no reason to start cracking open the champagne just yet. There is a long way to go. As Employment Minister Chris Grayling said, while welcoming the good news: “… there are challenges ahead and our priority is to continue to support the economy, by reducing the deficit and putting in place measures to encourage growth in the private sector."
But wouldn’t it be nice, just once, to focus on the good instead of the bad and move forward with a feeling of optimism?
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( 2.9 / 148 )Companies which offer non-essentials – the discretionary spend arena – have been the hardest hit in the first quarter of 2011 according to a report issued by corporate recovery experts, Begbies Traynor.
In their Red Flag Alert report, which monitors UK firms facing financial difficulties, they say that there has been a 15 per cent rise in the number of companies facing “significant” or “critical” distress in the first quarter of this year compared with a year ago.
Of course, it could be argued that anything outside food, drink and warmth is non-essential but the hardest hit areas appear to have been leisure and the service industries. Compared with the first quarter of 2010, the level of combined distress (Significant and Critical) in the Bar & Restaurant sector was up by 68 per cent; businesses in the Leisure & Culture sector were faced with a 60 per cent rise and the Sports & Recreation sector show a 23 per cent rise.
Ric Traynor, Executive Chairman of Begbies Traynor Group said: “…it seems likely that a fall in consumer confidence and spending power driven by anticipated job losses lies at the core of the leisure sector's troubles."
The other sector seen to be experiencing a major rise in the number of companies in trouble is professional services, which is up by 61 per cent on the same quarter last year.
According to the report, companies with high fixed costs are being hardest hit and a stale property and corporate deals market hasn’t helped. According to Traynor, such companies “are finding the current market conditions increasingly difficult as their revenues fail to recover and the scope for further cost reductions becomes more limited."
In uncertain times, with looming redundancies across the board, it would appear that people are being careful where they spend – and save – their money.
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( 3 / 161 )In its twice-yearly world economic outlook, published yesterday, the International Monetary Fund (IMF) downgraded its forecast for growth in the UK economy to 1.7 per cent. This is down from 2 per cent in the November forecast. It also raised its expectation for inflation.
However, the IMF said that the UK has a strong fiscal framework and the overall tone of the global review was broadly positive. Among the challenges to growth are rising oil prices, political unrest in the Middle East, continuing inflation in China and debt problems across Europe.
The forecast for the UK’s recovery over the next two years is similar to other large, advanced economies but the USA, Germany and most of the Scandinavian countries are expected to grow quicker, although the USA’s forecast for this year has been cut as well. And it does look as though the threat of a double-dip recession has abated.
In the UK, the cuts in public spending, brought in as part of the package to tackle the deficit, are expected to slow growth down but the IMF approves of them as a fiscal measure. It says that the “necessary front-loaded fiscal consolidation” will dampen domestic demand and that governments with half-hearted public spending cuts were undermining efforts towards longer-term sustainable growth.
The outlook for the rest of the year in the UK is that there will be rising unemployment, particularly for younger people. “Unemployment poses grave economic and social challenges, which are being amplified in emerging and developing economies by high food prices," the review says.
Unemployment for Britain’s 16 to 25 year old may well tip over the million mark when the figures are published tomorrow.
The forecast for next year remains unchanged at 2.3 per cent, which almost matches that of the Office for Budget Responsibilities at 2.5 per cent.
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( 3 / 144 )People who regularly file their tax returns late are in line for hefty fines from the start of the new tax year, says HMRC. In the past, if someone filed their return after the 31st January deadline, the fine was an automatic £100. This is now set to rise sharply.
From now on, penalties will rise at £10 a day, potentially leading to hundreds of pounds in penalties. HMRC says the fines are aimed at a “hard-core” of taxpayers who habitually file their returns late.
An HMRC spokesman said: “The old £100 penalty was not much of a deterrent and these new penalties, which increase over time, will get people to submit returns as soon as possible.”
The fines are aimed at the 9.2 million people in the self-assessment area of the tax system, a minority of whom regularly files late. However, according to HMRC, it costs a huge amount in time and money for HMRC to pursue late returns and get involved in “unnecessary appeals work.”
There will still be the £100 fine for filing after January 31st but then people will be fined at a rate of £10 a day for up to three months, up to a maximum of £900. After that, for a further three to six months the fine will be a flat £300 or 5 per cent of the tax due, whichever is higher. This is duplicated for the period between six and 12 months and could mean that someone who failed to submit a return for 12 months would end up being fined at least £1,600.
A spokesman for the ACCA admitted that there were some people who never managed to file their tax return on time but hoped for “leniency” in some cases. "Where people have good reasons, perhaps because the information has come in late from overseas, the HMRC needs to use some discretion in applying the new penalties," he said.
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( 3 / 150 )The minimum wage for adults in the UK will cross the £6 barrier in October this year despite a division in the reaction of business and unions. The 2.5 per cent rise in the hourly rate comes after recommendations by the independent Low Pay Commission (LPC).
£6.08 will be the new rate for the 18 plus worker, while 18 to 20 year-olds will get £4.98. Apprentices will receive £2.60 an hour while 16 to 17 year-olds will get £3.68. The LPC was unanimous in its recommendations “despite all the economic uncertainties”, according to its Chairman, David Norgrove.
The rise in the rate has been welcomed in some quarters. Neil Bentley, deputy Director-General of the CBI said: “This moderate increase strikes the right balance during a period of economic uncertainty. It means workers on the minimum wage will not fall behind the rest of the workforce in terms of pay rises.”
Business Secretary, Vince Cable said that the rises would benefit 890,000 people and claimed that they “reflected the current economic uncertainty while at the same time protecting the UK's lowest-paid workers".
However, some unions and business groups are not happy at the rises, for different reasons. According to Len McCluskey, General Secretary of Unite, "This small increase in the minimum wage is completely outstripped by the current rate of inflation”. Whereas his counterpart at the TUC, Brendan Barber said that the "modest" rise should stimulate local economies where workers spend their wages.
According to the British Chambers of Commerce (BCC), the rises could price young people out of work at a time when youth unemployment is at a record high. David Frost, Director General of the BCC said that the rises were “the wrong increase at the wrong time” and that it was “clear from speaking to businesses that a significant number are having to freeze wages in 2011. These changes will be a barrier to job creation, and ultimately economic recovery."
Only time will tell who is right.
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