The rise in the basic cost of living has come despite a sharp fall in mortgage rates to their lowest level on record. Mortgages are households' second-highest monthly expenditure after food,
The average mortgage rate is 3.43 per cent, but the size of households' debt burden means that this accounts for 17.7 per cent of disposable income.
Darren Winder, Oriel's UK economist, said that interest rates will have to remain low for the forseeable future if households are to deal with their debt. "Debt is crowding out growth in the economy," he said. "Households need more cash."
The analysis come as householders surveyed reveal that over half of them are considering eating into their savings to meet mortgage payments or just to pay for other essentials such as food and heating.
Oriel's analysis estimates that the average household spends £2,091 a month on essentials, puts £162 into savings, and has just £854 left for "discretionary", that is non-essential items, which could be anything from holidays, to books, to clothes. Adjusting for inflation, the last time discretionary spending was so low was in 2000.
Household spending accounts for 60 per cent of GDP and this has contracted by 1.7 per cent in the last year as householders feel the economic squeeze. According to Mr Winder, the biggest impediment to an improvement in cash flow would be a rise in interest rates.
However, the Bank of England’s Monetary Policy Committee (MPC) has indicated that interest rates are likely to remain at the historic low of 0.5 per cent until 2014.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3.1 / 170 )The Government announced the start of a consultation yesterday, which could see small businesses saving more than £600m in audit fees every year. The consultation on Audit Exemptions and Change of Accounting Framework sets out plans to allow more small companies and subsidiaries of larger ones to change their accounting framework.
Current EU rules mean that to classify as ‘small’ for accounting purposes, a company must comply with two out of three criteria relating to their turnover, balance sheet total and number of employees. However, to obtain an audit exemption in the UK, small companies must fulfil both the balance sheet and turnover criteria.
Under the new proposals, UK SMEs would be eligible for audit exemption by meeting any two of the three criteria, saving them an estimated £206m per year.
The Government is also proposing to introduce legislation in 2012 to exempt most subsidiary companies from mandatory audit, provided their parent is prepared to guarantee their debts. Savings are estimated at £406m per year.
These moves are part of the Government’s wider focus on cutting red tape and reducing unnecessary burdens on business, in particular addressing the impact of European legislation.
The Minister responsible for Corporate Governance, Edward Davey, said:
“Over time, both the volume and costs of reporting requirements for UK companies have increased, and businesses have stressed to us the need for more flexible and targeted rules. Tackling these problems now will save UK SMEs millions every year and give them more opportunities to expand and grow their business.
“Audit is very valuable for many companies. But the proposals we’ve published today are aimed at removing EU gold plating and freeing up enterprise, which ultimately benefits the whole UK economy and will help put us on the path to long-term, sustainable growth.”
The consultation closes on December 29th 2011.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 159 )The UK economy only grew by 0.1 per cent in the second quarter of this year, which was less than the 0.2 per cent estimated by the Office for National Statistics (ONS). And output from the service sector grew by 0.2 per cent in the quarter, compared with the previous estimate of 0.5 per cent.
However, since the figures actually show some growth, small though it might be, the Treasury has said that it will continue with its deficit-cutting measures.
A Treasury spokesperson said: "While the UK cannot insulate itself from what is happening to our major trading partners, with financial turbulence in the eurozone and a weaker outlook for global growth, the economy is still growing and this week's survey data for the manufacturing and service sectors are consistent with continued expansion."
Critics point to past figures, however, and given the 0.5 per cent contraction in the final three months of 2010, the new figures actually reveal that the economy has remained static for the past nine months.
Ed Balls, the shadow Chancellor, said: "These deeply concerning figures show the British economy has stagnated since the autumn of last year, well before the eurozone crisis... They show things are even worse than we thought."
Alan Clarke at Scotia Capital said: “What we believe is of more significance, not least for monetary policy, is where GDP growth has been over the last year and where it is going from here. The Bank had banked on some chunky upward revisions to the last year or so and what we have got is the opposite – slight downward revisions!
Some analysts now believe that the pressure is on the Bank of England to back calls for another stimulus into the economy, which could well mean further quantitative easing. Others think that the Bank will hold on until after the publication of third quarter GDP data later this month.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 152 )For the first time since the survey began 12 years ago, stress is the most common cause of long-term sickness absence for employees, according to this year’s Chartered Institute of Personnel and Development (CIPD) Simplyhealth Absence Management survey.
Apparently most of the stress is caused by worries about job losses, with particularly acute stress levels in the public sector, where half of employers reported an increase in stress-related absence over the past year.
Other causes of stress are tougher workloads, having a ‘bad’ boss and money worries leading to problems at home. All these add to a “vicious circle” of workers’ woes according to the survey.
However, the report praised many workplaces for increasing their focus on worker wellbeing despite squeezed budgets. Counselling services were being offered by almost three-quarters of the 592 employers surveyed.
But CIPD adviser Jill Miller seized on evidence of the downturn's repercussions for mental health to urge employers to do more to reassure nervous staff.
"Stress is a particular challenge in the public sector where the sheer amount of major change and restructuring would appear to be the root cause," she said.
For manual workers stress is now level with acute medical conditions as a cause of absence and has overtaken musculoskeletal problems to become the main cause of long-term absence.
UK employers estimate that they lose an average £673 per employee per year because of time away from work for reasons ranging from serious illness to stress and family responsibilities, according to the report.
David Frost, the former head of the British Chambers of Commerce, is leading a review for the Government on what the country can do to reduce absence rates. The review was commissioned as part of the Government’s drive to create the right conditions for economic growth.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 135 )According to a survey conducted by PwC, B2B companies know that they need a social media strategy but are not spending their money in the right places, effectively wasting millions.
Despite investing financially in social media, to the tune of over £1m, fewer than 12 per cent of the companies surveyed have full time social media teams in place and those that do are not backing this up with clear strategies to their staff on how to use it.
Sean Mahdi, director in PwC’s digtal transformation group, says that B2B companies should follow the example of B2C companies, which are using social media much more effectively and profitably.
"The results of our survey demonstrate that, although B2B is investing in social media, they appear to be doing so with limited strategies that don’t fully exploit social media in the way that B2C is doing, There is evidence that sectors you might expect to be proficient in this area such as Technology and Entertainment and Media have much better tools and processes in place, but the majority of B2B organisations have much work to do to effectively use this 'new' medium to interact with their clients and customers."
The report also discusses how social media can be used not only to drive sales but also to create brand loyalty and a two-way channel of communication between the business and its customers.
"As embracing social media represents a significant change to the way in which many organisations interact with their customers, a social media strategy is essential. Becoming a social business requires insight ... about your customers, about what your brand stands for; and about the additional value that you can provide your customers through social media engagement," Mahdi added.
However, some of the more cautious business advisers criticise the use of social media as a strategy to drive sales because of its lack of accountability.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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