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The UK economy grew by 7.5% over the course of 2021

   News / 11 Feb 2022

Published: 11 February 2022
Location: London, UK

By Suzanne Evans, Director, Political Insight


The UK economy grew by 7.5% over the course of 2021, its best annual pace on record, despite a 0.2% fall in December, the Office for National Statisticssays this morning. For the October-December quarter, growth was 1%, which puts GDP back in line with its pre pandemic level, the ONS says. The bounce back follows the deepest slump for 99 years in 2020 when lockdowns were introduced by the government. In December, services fell 0.5% (but are still 0.5% above the Feb 2020 level); manufacturing grew 0.2% (2.5% below Feb 2020); and construction grew 2.0% (0.3% above Feb 2020). Total underlying goods imports grew £0.6bn (1.4%) in December, due entirely to a £0.6bn (2.5%) rise in imports from non-EU countries, while total underlying goods exports grew £1.1bn (3.9%) driven by a £1.0 bn (7.4%) increase in exports to EU countries.
 
The European Commission has cut its economic growth forecasts for 2022, after the year got off to a weaker-than-expected start. The Commission now expects the European Union and Eurozone to both grow by 4.0% in 2022, and by 2.8% and 2.7% respectively in 2023. Last autumn it predicted the Eurozone and wider bloc would grow by 4.3% in 2022. The EU's economy grew by 5.3% in 2021.
 
Price rises in the US accelerated by more than expected last month, pushing annual inflation up to 7.5% - the highest rate since 1982. Food and energy costs helped to drive the increases, which left few spending categories untouched, the BBC says. Washington is now under pressure to address the issue, and the US central bank expected to raise interest rates. Fears of aggressive interest rises took their toll on the US stock market yesterday, and the jitters are being felt around Europe this morning.
 
The Public Accounts Committee (PAC) has criticised HMRC’s “unambitious plans” for recovering a total of £6bn it estimates was paid incorrectly in Covid support loans. According to the committee’s report, chancellor Rishi Sunakrisks “writing off at least £4bn” of taxpayers’ money, far more than the £2bn originally reported by HMRC. It transpires the taxman is yet to publish its estimates of error and fraud for 2021-22; the current figures only account for 2020-21. MPs on the PAC say that the "ignorance" displayed by HMRC makes it “look soft”. Chair Meg Hillier said: “The level of fraud and error in furlough that employers will get away with is a real concern. What signal does it send when HMRC rolls over on billions of pounds of fraud and error directly related to COVID support packages? With the current parlous state of the public finances we can ill-afford to be so cavalier over so much of taxpayers’ money.” The Bounce Back Loan scheme was set up in April 2020 with the aim of keeping small businesses afloat during the coronavirus pandemic. A total of 1.5 million loans worth £47bn were issued through the initiative. To streamline the process, paperwork for the scheme was minimal, with self-certified applications and no credit checks, Yahoo Finance UK says. HMRC responded to the PAC report saying that nothing had been written off. "While we acknowledge lessons that need to be learned in this report, we reject many of the statements made by the PAC. No fraudulent payments have been written off and we are taking action on multiple fronts to recover overpayments," a spokesman told the BBC.
 
Demand for UK workers continued to grow as coronavirus restrictions eased, but vacancies cooled to their slowest pace in nine months, the Recruitment and Employment Confederation (REC) and KPMG said. Their index of demand for staff eased to 68.6 from 69.3 in December. Although this was the lowest reading since May it is still well above its long run average.
 
Nearly two-thirds of workers expect their pay to go up by less than the cost of living, according to a new poll published by the Trades Union Congressyesteray. The poll of over 2,000 working people in England and Wales found that 63% do not expect their wages to rise in line with their living costs and nearly three out of every 10 (29%) do not expect their pay to rise at all this year. In a call directly at odds with comments by Bank of England governor Andrew Bailey last week that "moderation of wage rises" was needed to prevent inflation becoming entrenched, TUC general secretary Frances O’Grady said: ““Britain needs a pay rise – not more pay restraint….The best way to give people long-term financial security is to get wages rising across the economy.”
 
More than 70% of Brits think that setting up a new business is easy, but less than one in ten has any intention of doing so, a new survey has found. The Global Entrepreneurship Monitor (GEM) report for 2021/2022, unveiled at the Dubai Expo on Tuesday, looked at entrepreneurial activity across 47 high, medium and low-income economies. 51% of Brits who took part believed that they had the skills and knowledge to start up their own business, and 61% felt there were good opportunities for startups in their area. However, 52% of those cited fear of failure as a reason for not starting a new business. Overall, British participants seemed less confident than the respondents from other countries, ranking just 40th in terms of ‘entrepreneurial intentions’ and 32nd in ‘personally having the skills and knowledge’. The UK came seventh in terms of 'fear of failure'.
 
The government is “tightening the financial screws” on university studentswho face a substantial cut to the value of their maintenance loans, according to a new report by the Institute of Fiscal Studies (IFS). All UK university students will see a decrease in the value of their loans as the parental earnings threshold is frozen in cash terms and the increase in the loans falls short of inflation, the IFS says. The threshold below which students are entitled to full maintenance loans – funding for everyday expenses paid directly into their bank accounts in instalments – has remained at £25,000 in cash terms since 2008. Had it risen in line with average earnings, it would now be around £34,000, the IFS claims.
 
New data by SpareRoom shows women are most likely to feel the pinch with increased energy bills and looming national insurance tax hike. The flatshare site says over 85% of women are spending 30% or more of their income on rent, compared to 75% of men, highlighting the affordability gap between men and women. Traditionally, people spending over 30% of their household income on rent are deemed to be "rent burdened", while those who spend more than 50% are considered "severely rent burdened". Over 80% of renters are spending more than 30% of their take home pay on rent, and almost one in three (29%) are handing over more than 50% of their pay. SpareRoom's figures show that the majority of renters are currently rent burdened. This means many are already struggling to afford necessities such as food, transport and medical care on top of rent.
 
Beer sales plunged in the UK during the Covid pandemic as people avoided pubs and drank wine and spirits at home instead, analysis by the British Beer and Pub Association (BBPA) shows. BBPA says pubs, bars and restaurants lost £5.7bn of revenue from beer sales alone in 2021 alone, and called on the government to cut beer duty to help the trade recover from the effects of the pandemic restrictions. In 2021, pubs, bars, restaurants and clubs served the equivalent of 1.4 billion pints less, the trade body said. The Treasuryresponded by saying it froze beer duty for a fourth year saving brewers £900m.
 
HM Revenue & Customs (HMRC) has issued a winding-up order against four companies owned by metals tycoon Sanjeev Gupta. Court records reveal one of the firms includes Speciality Steel UK Limited, a division of Liberty Steel, which employs about 2,000 people in England and supplies the aerospace, oil and gas industries. The Financial Times reported three other firms, Liberty Pipes, Liberty Performance Steels and Liberty Merchant Bar, also had petitions against them, as the four companies owe HMRC £26.4m. HMRC declined to comment further when approached by Yahoo Finance UK.  Gupta has been scrambling for cash since a request for £170m from the governmentto keep Liberty Steel afloat was rejected. Globally, the Gupta Family Group Alliance (GFG), employs 35,000 people. It has been marred with troubles and has faced growing pressure from creditors and tax authorities since its primary lender Greensill Capital collapsed when one of its main insurers declined to renew cover.  The Serious Fraud Office is currently investigating "the financing and conduct of the business of companies within the GFG, including its financing arrangements with Greensill Capital UK”. Meanwhile, the Financial Reporting Council (FRC) has just begun a probe into HW Fisher'saudit of Liberty Commodities, another part of GFG Alliance. The accounting watchdog will look at the audit of financial statements for the year to March 31, 2020. There are already open FRC investigations into the audits of the now collapsed Greensill Capital and Wyelands Bank, also part of GFG.  
 
FTSE 250 cyber security firm Darktrace has signed a million-dollar deal with an unnamed global electronics corporation in order to ensure its business will be protected from "sophisticated and fast-moving" cyber-attacks. Darktrace said its client, which has over 250,000 employees across over 70 countries, had deployed its Darktrace Enterprise Immune System to defend the business from a growing level of advanced cyber-attacks. Detailed financial terms of the agreement were not provided.
 
FTSE 100 events organiser Informa has agreed to sell its pharma intelligence business to US investment firm Warburg Pincus for £1.9bn. Pharma Intelligence, which provides specialist intelligence and data for clinical trials, drug development and regulatory compliance, is the largest business within Informa's intelligence division.
 
Vodafone has rejected a takeover offer for its Italian business from French telecoms group Iliad, arguing it is not in the best interests of shareholders. The London-listed group said it had received a "highly preliminary" approach from Iliad, which is controlled by French billionaire Xavier Niel, and private equity firm Apax Partners to acquire 100% of Vodafone Italy. No value was given, although the Financial Times - which first reported the bid – and Bloombergsaid Iliad had offered more than €11bn, a figure which represents a valuation of roughly seven times earnings before interest, taxes, depreciation, and amortisation.
 
Online car retailer Cazoo has raised $630m (£462m) to support its expansion in the UK and EU. Cazoo said investors led by Viking Global will buy 2% convertible senior notes through a placement. These will then be turned into Class A ordinary shares and sold at an initial price of $5 (£3.67), which is a premium of around 20% to the trailing five-day volume-weighted average share price.
 
Rolls-Royce Motor Cars is reportedly set to invest millions of pounds expanding its Goodwood site. The British marque recently recorded the highest sales in its 117-year history and its West Sussex factory is running at near maximum capacity to meet record global demand.
 
Heathrow Airport is giving a pay rise to at least 1,300 staff members who work in its supply chain, extending the London Living Wage to all the 1,300 people working in its direct supply chain and providing a total boost of at least £4.5m for airport workers at companies including outsourcer Mitie and car park operator APCOA.
 
 
AstraZeneca (AZ) last year made $3.9bn (£2.9bn) in sales from the Covid jab it developed with Oxford University based pharma Oxford Biomedica, and $36.5bn (£26.9bn) in total sales. AZ delivered 2.5 billion doses of its covid vaccine around the world last year. The Anglo-Swiss drug maker initially supplied the vaccine on a not-for-profit basis but has since started signing a series of for-profit agreements and expects to make a “modest” income from it. Despite the jump in sales, AZ made an annual loss before tax of $265m (£194bn), compared with a profit of $3.9bn (£2.64bn) the year before, after spending more on product launches, research and development, and the acquisition of the rare diseases specialist Alexion. Its research spending rose by 62% to $9.7bn (£7.11bn).
 
Binance, one of the world's biggest cryptocurrency companies, will take a $200m stake in 105-year old media brand Forbes, the BBC says. Forbes, known for its ranking of billionaires, said the deal would help make it a leader supplying information about digital assets, like Bitcoin, but news of the investment sparked questions among media watchers about potential conflicts of interest. Analysts noted that crypto assets have proven particularly vulnerable to manipulation by celebrities and media hype, prompting warnings from regulators around the world. However, on Twitter, Binance’s Chinese founder Changpeng 'CZ' Zhao whose net worth is estimated to be nearly $100bn, said Forbes' editorial independence was "sacrosanct". Forbes said Binance - which has faced scrutiny from regulators in the US, UK and elsewhere - would provide technology advice, helping the business publication "maximize its brand" and advance plans to convert readers to paying subscribers. In 2020, Binance sued Forbes in 2020 for defamation, later dropping the case.
 
Twitter reported a "solid" end to the year on Thursday after annual revenuestopped $5bn (£3.67bn). The social media platform said fourth-quarter revenues came in at $1.57bn (£1.15bn), compared to $1.29bn (£950m) a year previously, in line with forecasts. For the year as whole, revenues jumped 37% to $5.08bn (£3.72bn).


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