Published: 01 November 2022
By Suzanne Evans, Director, Political Insight
Everyone in Briton will need to pay more in tax in the coming years to fix a hole in public finances, a source at No. 11 Downing Street has told Reuters, following a meeting between Prime Minister Rishi Sunak and Chancellor Jeremy Hunt. "It is going to be rough. The truth is that everybody will need to contribute more in tax if we are to maintain public services," the Treasury source said, adding: "After borrowing hundreds of billions of pounds through Covid-19 and implementing massive energy bills support, we won't be able to fill the fiscal black hole through spending cuts alone”. Hunt is due to present a fiscal statement on 17th November, which will be accompanied by the first growth and borrowing forecasts since March from the Office for Budget Responsibility.
Mortgage lender Nationwide says house prices have recorded their first monthly fall since July 2021 last month. They dropped by 0.9% in October after being unchanged in September, but are still 7.2% higher than a year earlier, slowing from September's annual increase of 9.5%, it said.
Figures from the Bank of England show that mortgage approvals for house purchases decreased “significantly” to 66,800 in September, down from 74,400 in August, in a further sign the housing market is slowing. The 10% fall last month left mortgage lending unchanged at £6.1bn, however. The actual interest rate paid on newly drawn mortgages climbed by 29 basis points to 2.84%.
Government-backed battery start-up Britishvolt has reportedly moved closer to entering administration, with The Guardian suggesting an announcement could be made on Monday, with accountancy firm EY lined up to carry it out if it goes ahead. Britishvolt was founded less than three years ago with the aim of building an enormous £3.8bn ‘gigafactory’ that would be able to supply batteries to carmakers. It quickly became a flagship project for the UK automotive industry, and gained the support of former prime minister Boris Johnson, who repeatedly cited the project as an example of Britain leading the way in a shift from fossil fuels. The government eventually promised the company £100m in financial support, when current prime minister Rishi Sunak was chancellor. However, Britishvolt has not yet received the money, which was earmarked for tooling within the factory, which has not been bought. Insolvency would lead to the potential loss of almost 300 jobs in north-east England. A Britishvolt spokesperson told the newspaper: "Company policy is to not comment on market speculation."
The Government has cleared Royal Mail’s biggest shareholder, an investment vehicle part-owned by a Czech billionaire with links to Russia, to increase its stake in the company. Previously, former Business Secretary Kwasi Kwarteng said he "reasonably suspected" that arrangements were in progress or contemplation which would result in Luxembourg-based VESA Equity Investment increasing its 22% shareholding to 25% or more. Czech citizen Daniel KÅ™etínský, who part-owns VESA, has strong links with Russian business, including state-run energy giant Gazprom. Given the sanctions against Russia following its invasion of Ukraine, Kwarteng exercised his call-in power under the National Security and Investment Act. However, current business secretary Grant Shapps will not be preventing any increased stake in Royal Mail’s parent company, International Distribution Services, it was confirmed yesterday.
Meanwhile, Royal Mail has put a new pay deal on the table for workers following meeting with the Communication Workers Union (CWU) at the Advisory, Conciliation and Arbitration Service (Acas) yesterday. Royal Mail’s parent company, International Distribution Services group, said the new offer is worth 9%, including a 7% salary increase over two years, plus a lump sum payment of 2% this year. "We urge the CWU leadership to accept the change and pay offer without delay, call off damaging strike action, and help us to transform the business. That is the only way to secure Royal Mail's future and ensure job security for our people," the company said in a statement yesterday. However, the CWU has already rejected the new offer, citing "unacceptable changes," and says strikes will now resume on 12th November, having been temporarily halted.
Audio streaming giant Spotify has called on the UK competition watchdog to investigate Apple, accusing it of blocking its new audiobook service. According to the Telegraph, Sweden-based Spotify met with the Competition and Markets Authority (CMA) to allege Apple had rejected several iterations of updates to its app for the iPhone and iPad. Spotify added audiobooks to its streaming platform last month, allowing users to buy recordings to listen to through its service. In order to avoid Apple's much-criticised 30% fee charges for purchases made on apps through its devices, Spotify initially emailed users links to purchase an audiobook, but was reportedly forced to stop even doing that by Apple when submitting app updates for its listing in the App Store. Spotify CEO Daniel Ek last week slammed Apple for "choking competition" with its requirement that any purchase made through an app be processed by its system - and attract the 30% fee. "Apple has once again proven just how brazen it is willing to be with its App Store rules, constantly shifting the goalposts to disadvantage their competitors," he said. The CMA is already running a probe into the App Store and its fees. Apple, which offers its own audiobook service, continues to deny its fees and the forcing of transactions through its system are unfair.
Bank stocks benefitted yesterday from a report in The Times saying that two senior sources close to Prime Minister Rishi Sunak and Chancellor Jeremey Hunt say they are not considering a windfall tax on the sector. Discussions between Sunak and Hunt were thought to be focused on the 8% surcharge that banks pay on top of corporation tax. When Sunak was chancellor, he said he would cut this to 3% alongside his plans to raise corporation tax to 25% from 19%. This would give an overall rate of 28%. As Hunt has not said in public whether he intends to press on with the cut to the bank surcharge, lenders have been warning that they could face a total corporation tax levy of 33%. The latest news that Hunt is expected to go ahead with the surcharge cut to 3% as planned, leaving banks with a 28% rate. Although this would still amount to a small overall rise, it would be much lower than feared. UK Finance, the industry's lobby group, warned last week that London's banks already pay more tax than those in New York and Dublin.
Energy companies however could face windfall taxes as high as 30%, and an extension of its imposition by three years, according to fresh reports in The Times. The newspaper cites "senior government sources" as saying that chancellor Jeremy Hunt was mulling hiking the energy profits levy by five percentage points, and extending it to the current end of the Office for Budget Responsibility's forecasts in 2028. It said the plans were being considered amid government forecasts that oil and gas prices were unlikely to fall back to historic norms until at least the end of the decade. The government is also again considering plans to extend the levy to electricity generators, the newspaper said.
The National Grid has launched a £50m fund to provide financial relief for consumers struggling with rising energy costs over the next two winters. The fund will support charities providing immediate, emergency financial support to households using pre-payment energy meters; charities which fund energy efficiency measures; and charities which provide advisory services for households who need help with energy bills, payments and debt.
British Airways owner International Consolidated Airlines Group (IAG) is turning its attention to industry consolidation, according to The Times, with ailing rivals thought to be in its sights. When announcing positive third-quarter results – with sales back to pre-covid levels - CEO Luis Gallego stated the firm was "a platform for consolidation. We will only do what makes sense, but we see there are opportunities to be stronger,” he said. While IAG has seen passenger demand bounce back following the removal of restrictions, other airlines are struggling. The Portuguese government is poised to sell off the country's flag carrier, TAP, while UK budget airline easyJet is expected to report losses of £180m this year. It has also cut capacity for the winter, with the shares now down sharply over the year to date.
FTSE 250 specialist solar and energy storage fund NextEnergy Solar has bought the development rights for a 250MW portfolio of battery storage projects and grid connections for £32.5m. The strategic portfolio - named Project Lion and located in the East of England, will increase the current announced standalone battery storage in NESF's joint venture partnership with Eelpower to 300MW.
Shares in engineering company TP Group surged 180% yesterday after it agreed to be bought by rival Science Group for around £17.5m. Science Group already owns a stake of about 28% in TP Group. Under the terms of the deal, TP shareholders will be entitled to receive 2.25p a share in cash, a premium of around 190% to the closing share price on Friday. Both companies are listed on the London Stock Exchange (LSE).
Also rising yesterday were shares in sports data, services and software company 4Global after news it has been awarded a £4m project over five years with a "major" sporting infrastructure project for a city in the Middle East. The AIM-traded firm said £600,000 of the project was expected to be delivered and recognised in the current financial year. "This is a significant contract win for the company, representing one of the largest initial wins in our history and providing valuable foundations to our plans over the next few years," said CEO Eloy Mazon. The firm closed on the LSE over 19% up.
Online property portal Boomin has called in liquidators after failing to secure new funding. Sky News reports that the company - founded by former Purplebricks boss Michael Bruce and including Channel 4 among its investors – called in accountancy firm BK Plus to handle its insolvency yesterday. Boomin was launched to challenge established online property sites Rightmove and Zoopla. It attracted investment from blue-chip backers including Foxtons and DN Capital, but was unable to raise about £6m of additional equity. In a statement to Sky, Bruce said timing had "not been our friend". "Our move to a fee-paying, revenue-generating model from April 2022 coincided with the start of the economic slowdown and the drying up of funding,” he said, adding: "While we had a plan, support from a number of existing shareholders and a solution with a new investor, the progressively worsening economic situation, combined with increasing uncertainty in the housing market, has resulted in us being unable to get the necessary funding round over the line in time to enable us to continue”. Boomin employs 65 people.
British billionaire James Dyson has failed in a libel claim he launched against Channel 4 News after a story it ran in February about alleged abuse at ATA Industrial, a Malaysian company that used to make Dyson-branded vacuum cleaners. Judge Matthew Nicklin said there was no dispute that the broadcast referred to Dyson, the 75-year-old inventor of the bagless vacuum cleaner who was named and pictured, but it did not convey any meaning that was defamatory of him, Reuters reports. "The broadcast is simply not about him, and no ordinary reasonable viewer could conclude that he was being in any way criticised," he said in a judgment published yesterday.
A US court has blocked a $2.2bn (£1.9bn) merger between the world's largest book publisher Penguin Random House (PRH) and its US rival Simon & Schuster. US District Judge Florence Pan said the deal could "substantially" lessen competition in the publishing industry. The US Department of Justice filed the lawsuit to stop the deal last November. PHR was formed through the merger of two major publishers from the UK and the US in 2013. It said in a statement that it would appeal against the decision, calling it "an unfortunate setback for readers and authors".
Elon Musk dissolved Twitter's entire board of directors yesterday, leaving him alone as CEO. Twitter did not respond to a request for comment on the move from the BBC.
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