The IMF warned the private sector was being hampered by a lack of credit and economic uncertainty and have suggested that the Chancellor, George Osborne, considers changing his austerity plans in the light of ‘lacklustre’ private demand.
In its twice-yearly look at the global economy, the IMF said that recovery is progressing slowly in the UK, notably in the context of weak external demand and on-going fiscal consolidation. It also noted that rebalancing from the public to private sector was ‘being held back by deleveraging, tight credit conditions and economic uncertainty’.
However, Stephen Gifford, director for economics at business group, the CBI, said that recent data from business surveys suggesting that growth at the beginning of this year was broadly flat, it is not surprising that the IMF has lowered its forecast.
In fact, Japan was the only one of the developed economies to come out of the report with a good prognosis, as the IMF predicts growth both this year and next of 1.4 per cent and 1.6 per cent respectively, saying that the road to recovery in the advanced economies “will remain bumpy”.
However, the IMF’s projection for 2013 is more optimistic than the recent forecast of 0.6 per cent growth from the Office for Budget Responsibility (OBR).
In the Chancellor’s Budget last month, Mr Osborne said that the OBR had halved its forecast for 2013 from 1.2 per cent and had also cut its prediction for 2014 to 1.8 per cent.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 517 )The Government announced yesterday (April 15th) that the national minimum wage will rise by 12p per hour to £6.31 for adults and by 5p an hour for 18 to 20-year-olds from October, after recommendations from the Low Pay Commission.
There will also be a rise in the rate for apprentices of 3p per hour to £2.68, despite the Commission’s recommendation that the rate be frozen. All the increases are below current inflation levels.
Speaking at the Institute of Directors yesterday, Business Secretary Vince Cable said that the lower rise in the rate for young people was “recognising the higher unemployment rates amongst young people”.
He added that it is important that both the apprenticeship rate and the youth rates kept pace with increases in benefits, which are going to rise by 1 per cent.
Dr Cable also said that there will be a crackdown on “abuses of the minimum wage” in industry, pointing to the cash economy of some employers, such as restaurateurs, who make assumptions about tips or deduct essentials such as uniforms from an employee’s wage.
However, reaction to the news from business groups has been mixed. The EEF manufacturer’s organisation said the apprentice wage rise was unlikely to negatively impact on apprenticeships, while the TUC praised the extra helping hand for those on the lowest wage and said that the rise sends a positive signal about the importance of apprenticeships.
The British Chambers of Commerce (BCC), however, said that the adult rate increase, which is more than 50 per cent higher than current average pay growth, would add even further to the strain on small businesses and the rise could make some employers less inclined to hire additional members of staff.
The BCC was happier with the increase in youth and apprenticeship rates however, as they said it would ensure that employers still have an incentive to take on young people.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 537 )The Chancellor, George Osborne announced at the Dublin meeting of European finance ministers at the weekend that the UK, France, Italy, Germany, Poland and Spain are to launch an initiative against tax fraud and creative tax avoidance.
Going forward, the six countries plan to automatically exchange all relevant data on capital income with each other; enabling fiscal authorities to collect taxes more easily from taxpayers who invest money in the EU.
Of particular concern are the so-called tax havens of the Cayman Islands and British Virgin Islands, which will soon be forced to reveal details of customers suspected of hiding money offshore.
Mr Osborne said that there is a new international standard emerging along the lines of the Foreign Account Tax Compliance Act (FATCA) from the US, which was passed in the US in 2010.
This is being applied by an increasing number of countries worldwide, in bilateral agreements with the United States, as if countries do not comply they are banned from doing business there.
The largest EU countries now want to adopt a similar automatic data exchange for Europe, although Austria is still resisting, with the country’s Finance Minister, Maria Fekter, calling it an "attack on banking secrecy."
The Chancellor announced that the new transparency will also apply to tax havens in the UK’s sphere of influence and said that the Treasury has already signed agreements on automatic exchanges of information with the Crown dependencies.
He added that the Government is in “advanced stages of discussions” with the overseas territories but that they are in no doubt what is expected of them. Mr Osborne said that tax evaders should know that their hiding places are becoming few and far between.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 554 )New research carried out for the Government by the National Institute of Economic and Social Research (NIESR) has found that credit-worthy small and medium-sized enterprises (SMEs) are finding it harder to borrow money than firms in the same position would have done before the financial crisis began.
According to the report, which will be published today (April 12th), the steady fall in lending since 2008 is not just the result of weaker demand or applications from less credit-worthy firms but because of the banks’ attitude to risk and pressure on them to de-lever.
The results of the study, which was commissioned by the Department for Business Innovation and Skills (BIS) found that a higher proportion of loan applications from smaller businesses were being rejected since the crisis, even after controlling for their riskiness.
The findings will intensify calls for the Government to do more for SMEs, as the lack of funding available to them is damaging them economically, which in turn is damaging to the overall economy.
The NIESR analysed data from the UK Survey of SME Finances and its successor, the quarterly SME Finance Monitor, which was based on around 5,000 interviews with small firms.
Meanwhile, Bank of England data published recently shows that net lending to SMEs has been falling at an annual rate of around 4 per cent even several years after the financial crisis.
Publication of the report coincides with news earlier this week that the Government announced the launch of the first phase of the state-backed Business Bank, which is aiming to boost smaller firms struggling to access finance.
The Government hopes that the first transactions will take place by the autumn.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 557 )The first phase of the Government’s long-anticipated business bank was launched yesterday (April 10th) with the announcement of an investment of £300m, aimed at boosting smaller businesses struggling to get finance.
It is the first slice of £1bn of new capital, with ministers expecting initial transactions to take place by the autumn, although small and medium-sized enterprises (SMEs) that require loans were urged to submit an expression of interest by 22 May.
Business Secretary Vince Cable said that the bank has been set up because small and medium-sized businesses are saying that access to finance is their number one problem, preventing them from investing and growing.
He is confident that the business bank will allow a range of measures that will provide small firms with the power to choose the type of finance that suits them and added that the bank is a long-term project but with an emphasis as releasing cash as soon as possible.
The bank will also be funded by around the same amount of capital from private sector investors in a bid to reduce SME’s reliance on the high street banks.
Alternative providers of finance such as the small ‘challenger’ banks and online portals that match retail investors’ funds with small firms needing funds, are being urged to apply to distribute the Government’s capital.
However, critics, such as the British Chambers of Commerce (BCC) say that while they welcome the bank, the Government must “think bigger” if it is to be a game-changer for small business and must provide more seed money than the £1bn being put forward.
While the Confederation of British Industry (CBI) said the business bank will help SMEs to grow, but only if they are aware of the initiatives available to them.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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