According to the ONS the fall in output was largely due to a drop in mining and quarrying, after maintenance delays at the UK's largest North Sea oil field; with the sector’s output falling by 10.2 per cent, the biggest decline since records began in 1997.
If oil and gas extraction were excluded from the overall gross domestic product (GDP) calculations, then the data would have shown that the economy shrank by only 0.1 per cent in the fourth quarter.
The figures were worse than expected and could put pressure on the government to consider a "Plan B" that would stimulate demand, although the Chancellor has insisted as recently as yesterday (January 24th) that he will not reconsider his austerity measures programme.
However, the prospect of a triple-dip recession, which will become official should the economy contract again in the first quarter of 2013, is expected to further dent the confidence of consumers and companies, hitting high street spending and business investment.
The contraction in GDP in the last three months of 2012 followed a near 1 per cent rise in GDP in the third quarter when the economy had been boosted by the London Olympics.
The economy remains 3.5 per cent below its peak in 2007 and is not expected to regain its previous level for at least another two years, making it the longest recovery in 100 years while in the words of the ONS, the underlying picture was flat over 2012, with the economy working well below its potential.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 603 )According to official data from the Office for National Statistics published yesterday (January 23rd), the level of unemployment in the UK has fallen to 2.49 million, its lowest level for 18 months.
In addition, the number of people in work has reached another record high, climbing to 29.7 million, giving an employment rate of 71 per cent, which is the highest since records began in 1971.
The figures reveal that the unemployment rate fell to 7.7 per cent in the three months to November, down from 7.8 per cent in the previous quarter, while the number of people employed full time rose by 113,000, offsetting a fall in part-time employment of 23,000 and the number claiming Jobseeker's Allowance fell to 1.56 million in December, which is the lowest since June 2011.
The fall in unemployment was the 10th consecutive drop in numbers and was echoed by the number of people classed as economically inactive, such as those no longer looking for a job, which fell by 13,000 to just over nine million.
However, the data also showed a 26,000 increase in the number of women out of work for up to six months, to reach 571,000, which may reflect changes to the benefits system resulting in more single mothers looking for work.
In addition, the number of unemployed 16 to 24-year-olds fell 90,000 to 625,000, excluding people in full-time education.
Employment Minister Mark Hoban pointed out that the UK employment rate was growing at almost double the rate of the US, and faster than any other G7 country.
He said that the positive figures show employment rising for 15 months despite difficult economic circumstances, but stressed that the Government is not complacent and will continue to give jobseekers the support and training they need to achieve their goal of returning to work.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 571 )Despite the recent cut in corporation tax, in real terms, companies in the UK have faced tax rises of 19 per cent in recent years, as various other taxes on business, including VAT and property rates, have risen by 58 per cent since 2005.
In a survey of finance directors of both UK-based private firms and multinationals, the consensus was that businesses are being hit by other levies, even though the Government appears to want to make the UK an attractive place to be based. In fact, corporation tax is now only one of 24 business taxes levied by the UK.
In addition, the finance directors polled showed an “overwhelming consensus on the need for simplicity and certainty in the UK tax system.” They accepted that efforts had been made to benefit business and improve the UK’s competitiveness, including the reduction of corporation tax from 28 percent in 2010 to 21 percent in 2014, but called for a moratorium on further changes to the tax system now that the Government’s corporate tax reform programme has been delivered.
However, according to a Reuters' analysis of official data published late last year, large companies in the UK now pay less tax than they did twelve years ago and have been a lot more profitable.
This indicates to tax campaigners that tax avoidance has increased under a more business-friendly strategy at HM Revenue & Customs (HMRC), which the department refutes.
Instead, HMRC cites recent economic weakness and the lower corporation tax rate for the reduction. A spokesperson for the department also said that the downward trend may also have been emphasised by a shift in the way taxes were paid from 1999 which led to "elements of double counting" in 2000/01 and 2001/02.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 2.9 / 447 )It is expected that the Director of Public Prosecutions, Keir Starmer, will unveil plans later this week that will see the number of tax files handled by the Crown Prosecution Service (CPS) increase fivefold to 1,500 a year by 2014-15.
Since the Service's current tax conviction rate is almost 86 per cent, the fact that it secured 200 convictions in 2010 puts this new set of figures into perspective and should alarm tax consultants who push dishonest advice and the professionals who invest in them, as they are the primary targets.
HM Revenue & Customs (HMRC) is adopting a generally tougher stance on tax evasion, as both it and the CPS are trying to curb the practice, which is estimated to cost each household around £533 a year.
The taxman also announced yesterday (January 21st) that it is investigating over £1bn of UK taxes that may have been avoided by multinationals through transferring profits earned in Britain to their parent companies or to lower tax jurisdictions.
Following a Freedom of Information Act request, HMRC revealed that the amount of 'tax under consideration' from large businesses, in relation to transfer pricing and thin capitalisation inquiries, was 1 billion pounds at 31 July 2012, up from 680 million at the end of March 2011. This represents a 47 per cent increase in transfer pricing investigations over the last 12 months.
Concerned by these practices, the Liberal Democrats are drawing up plans for new taxes on businesses using such accounting mechanisms and as part of preparations for talks on this year’s Budget, which is due on March 20, they are looking at introducing a minimum UK tax charge on multinational companies.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 586 )According to the newest member of the Bank of England's Monetary Policy Committee (MPC), the Bank's quantitative easing programme (QE) is no longer as effective as it was and could have "inflationary consequences" if extended.
Mr McCafferty, who joined the MCP in September, said in his first speech on Friday that confidence on the asset purchases tool, otherwise called quantitative easing, was at its strongest when it was first introduced.
However, he added, the novelty of the instrument and the MPC's readiness to act quickly to loosen policy further at a time of ultra-low interest rates no doubt acted to lift "animal spirits", while the effect has become weaker as QE has become part of the policy landscape.
So far, the Bank has bought £375bn of Government bonds but Mr McCafferty has voted with the majority on the Committee to leave this amount unchanged since he joined.
Despite his views on the weakening of the effectiveness of QE, McCafferty said that there are other avenues for the Bank to take in a bid to stimulate the economy.
He said that policies targeted at specific bottlenecks in the economy, such as small business-lending, may be needed, while targeting growth, as measured in gross domestic product without adjusting for changes in prices, or nominal GDP, could also be considered.
In this opinion, he concurs with incoming BOE Governor Mark Carney, who takes over from Sir Mervyn King in July. Mr McCafferty added that there are significant shortcomings to nominal GDP-targeting and that pursuing such a policy should be a temporary measure only.
Mr McCafferty went on to say that he expects the annual rate of inflation to return to the Bank's target of 2 per cent slowly over the next two years, with its decline frustrated by wage pressures and high commodity prices.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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