However, despite Governor Sir Mervyn King’s prediction of a triple dip at the meeting, the Committee voted against an extension to its quantitative easing (QE) programme, after the last of the £375 billion of asset purchases was spent in November.
The reason for this decision was explained when the minutes revealed that inflation will be above the Bank’s target of 2 per cent into 2014, but claimed that this is out of policymakers’ hands and is due in part to the “continuing impact of the rise in university tuition fees and higher domestic gas and electricity and other administered and regulated prices.”
The Bank explained that although these prices only make up around 13 per cent of the consumer Prices Index basket, they will probably contribute around one percentage point to inflation and for it to be close to the target, the rate of inflation in the sectors that are influenced more by market pressures would have to be lower than usual.
In all, the warning is in keeping with the current Governor’s prediction that the UK will recover, but slowly, and via a “zigzag” path, a view that appears to be shared by business, as in a Bank survey, it was revealed that, while businesses are planning to increase investment spending next year, the main barrier to this is lack of confidence in the economic outlook.
However, in keeping with the minutes of the meeting, which said that the early signs of the impact of the Bank’s Funding for Lending Scheme were “encouraging”, the survey also found that the cost or availability of external finance were only constraining investment plans for “a small minority” of the firms surveyed.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 542 )Changes to the rules for collective redundancies announced yesterday (December 18th 2012) by the Department for Business Innovation and Skills have generally been welcomed by business groups.
Employment Relations Minister Jo Swinson said that Government plans to cut the current 90-day consultation period before large-scale redundancies can take place to 45 days would help workers and businesses.
A spokesman for the CBI said that the priority for businesses is a meaningful and shorter consultation period that will reduce uncertainty for staff and allow firms to focus on the future more quickly.
While the Institute of Directors said that companies facing problems have to be able to restructure swiftly, and a 45-day consultation period brings the UK closer to a number of EU competitors. In fact, they would have preferred a move to a 30-day consultation period, which is the same as for smaller-scale redundancies, as that would have made the law less complex.
Tim Thomas, head of employment and skills at the manufacturers' organisation EEF, said that the announcement will send a strong signal to industry that the government is committed to creating the flexible labour market that it needs.
While the British Chambers of Commerce commented that in this modern era, requiring a business to spend a quarter of a year consulting on how to restructure is unnecessary, frustrating and potentially disastrous.
Ms Swinson also announced plans to exclude fixed-term contracts from collective redundancy agreements when they reach the end of their "natural life".
Although business groups welcomed the proposed reforms, which came after a lengthy consultation process following the somewhat controversial Beecroft report, the Labour party and unions have criticised the announcement, saying that the plans merely make it easier for businesses to sack workers.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 687 )According to the Bank of England’s latest quarterly bulletin, its Funding for Lending (FLS) scheme is beginning to work, as early indications show that the scheme is leading to more and cheaper credit is flowing into the real economy.
The scheme was launched at the beginning of August and while it is still early days, the Bank says that early signs have been encouraging and that market funding costs for UK banks have fallen sharply, leading to a fall in many loan rates.
However, it also pointed out that, given the usual lags from credit being offered to loans being made, the scheme is unlikely to materially affect lending volumes until next year.
Many savers have also expressed concerns that one of the knock-on effects of the FLS has been to drive to the return on savings accounts, as with the cheap money available to them, banks and building societies are under less pressure to raise funds from the public.
In its bulletin, the Bank also discussed the effects of the various initiatives that it and the Government have launched since 2007 in a bid to boost economic growth.
Apart from the FLS, the Bank has kept its base rate at the record low of 0.5 per cent for nearly four years and has also pumped £375bn into the banking system via its policy of quantitative easing. Despite this, it says, output has been “broadly flat” over the past two years.
However, according to a survey by the Federation of Small Businesses, small firms are displaying “cautious optimism” because the FLS is starting to have an effect.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 700 )According to Business Minister Michael Fallon, businesses have benefited from a reduction in red tape costs to the tune of almost £1bn since the beginning of the year and he is promising a further saving of up to £83m by next summer.
The official “red tape scorecard”, published today, shows that the Government’s promised “bonfire of red tape” has resulted in net savings to business of £836m so far this year.
However, according to a CBI report published last week, economic growth faces being held back because of tens of millions of pounds in extra business red tape coming from the UK Government and Europe.
In its report entitled Changing the rules – eight steps to a better regulatory regime, the CBI calls on ministers to get a grip on the red tape and bureaucracy created in Whitehall.
It says that urgent action is needed to tackle an ingrained culture where there is too little detailed thinking about the real impact of regulation on business, while the report shows that the net added cost of regulation on UK businesses will increase by £177.7m as a result of policies created in 2011 alone, when for every £3 of costs that were removed, another £5 was added.
But Mr Fallon refutes the CBI’s figures and said that he will be sending officials to the business group this week to “talk through the numbers”, although the CBI says that it sticks by its calculations.
The main difference in both sets of readings are because the CBI has excluded recent major pension regulations from its calculation, including a switch in pension indexing from the Retail Prices Index measure of inflation to the Consumer Price Index, and its data also includes European red tape, which the Government’s calculations do not.
However, the CBI, along with other business groups, does accept that the Government is making progress on its pledge for deregulation on poorly conceived business rules.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 684 )The Confederation of British Industry’s (CBI) final Industrial Trends Survey of the year revealed that UK manufacturers reported an increase in their total order books for the third month running but remained cautious in their expectations for output at the start of 2013.
Of the 392 manufacturers surveyed, 18 per cent reported that total order books were above normal, while 30 per cent said that they were below. The resulting balance of -12 per cent is 9 points higher than in November and a little higher than the long-run average of -17 per cent for the first time since September.
The manufacturers polled expect output to be flat at 0 per cent for the next three months, which is an improvement on last month’s -9 per cent but still below the robust growth of 12 per cent that was forecast in October.
The investment goods sectors, especially mechanical engineering and aerospace, are the main drivers of growth, but half of the twelve main manufacturing sub-sectors expect output to fall.
Meanwhile expectations of output price inflation over the next three months rose by 9 points to 17 per cent, with all but two of the eleven manufacturing sectors reporting an increase. This is the highest anticipated rate of inflation since March’s 24 per cent and the food, drink & tobacco sector is by far the largest driver of the increased inflation expectations.
Since prospects for output remain weak, firms have kept the level of stocks at a low 6 per cent for the third-consecutive quarter, which is well below the long run average of 14 per cent.
Although the improvement in manufacturers’ order books is welcome after a largely difficult year, it is unsurprising that they are cautious about holding stock and future orders but the survey reveals a better end to the year than had been recently thought.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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