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Chancellor Jeremy Hunt will deliver his Spring Budget tomorrow

   News / 14 Mar 2023

Published: 14 March 2023

By Suzanne Evans, Director, Political Insight

Chancellor Jeremy Hunt will deliver his Spring Budget tomorrow. It is widely reported that he will increase the total amount workers can accumulate in pension savings before paying tax, with speculation they will be able to save up to £1.8m over a lifetime, up from £1.1m currently. The policy is aimed at persuading people not to reducing their hours or retire early, to help boost economic growth. The chancellor could also increase the £40,000 annual cap on tax-free contributions to pensions, to £60,000, it is rumoured. Meanwhile, Hunt has also announced the creation of 12 "investment zones" in England to spur the regional economy outside London, a scaled-back version of a policy announced under former prime minister Liz Truss. Each of the zones will be backed by £80m spread over five years that can be directed towards tax relief for businesses, training and infrastructure, the Treasury said. Hunt has also announced a £100m in funds to be shared across Glasgow, Manchester and parts of central England to improve research and development centres.

Wages have been eroded by high inflation for the 15th month in a row now, as regular pay in real terms fell by 2.4% in November to January, according to the Office for National Statistics (ONS). This is despite employees in the private sector taking home a 7% average per cent pay rise over the past three months, exceptionally high by historical standards. “Although the inflation rate has come down a little, it’s still outstripping earnings growth, meaning real pay continues to fall,” Darren Morgan, director of economic statistics at the ONS, said. City workers took home the largest pay rises of any sector, with regular wages up 7.7 per cent.  Inflation is currently 10.1%.  Meanwhile, the ONS also said the rate of UK unemployment stayed at 3.7%, the same as in the previous three-month period, and only a slight increase from a low not seen since 1974. Employment was 75.7%, and economic inactivity dropped 0.2 points to 21.3%, meaning some 9m people aged between 16-64 are not working or looking for work, a level still much higher than pre-Covid. Job vacancies also fell for the 8th month in a row: there here were 1.124m job vacancies on average across December 2022 to February 2023, down 51,000 on the previous quarter, as employers continued to cite economic pressures. In the public sector, there were 5.8m employees in December 2022, the ONS said, up 34,000 on September 2022. At 17,000 up, the NHS accounted for half this rise. Total actual weekly hours worked were 1.043bn in November 2022 to January 2023, up 7.3m on the previous 3 months, but still 9.5m below pre-pandemic levels, although figures are still muted partly due to strike action.

It is looking as if London’s economy is ahead of the rest of the UK and on track to power the country’s GDP out of its current slump, according to the NatWest, which released it latest purchasing managers’ index (PMI) for the capital yesterday, revealing that it shot up to 56 points last month, up from 50.5 points in January. This is far higher than the 50 point threshold that separates growth and contraction, and the reading was the highest in Britain, being well above the country-wide PMI of 53 points. The north east registered the lowest reading at 50 points.

New West End Company (NWEC) and Knightsbridge Partnership (KP), the bodies which represent each of the two London districts, have submitted a joint proposal to Chancellor Jeremy Hunt in which they ask him to relax Sunday trading restrictions, saying the move could result in additional estimated net sales of £350m annually. NWEC and KP say both districts are “major attractions” for international shoppers, who help to bring £28.4bn in the UK economy, yet they are not performing as well post-covid lockdowns as other cities in continental Europe which have more relaxed weekend trading laws. “For international visitors who are only here for the weekend, this is particularly disappointing. International tourists are used to visiting shopping destinations that stay open for longer, with Galeries Lafayette in Paris closing at 8pm on Sunday, while the Mall of Emirates is open to shoppers until midnight,” Dee Corsi, CEO of New West End Company, said. Steven Medway, head of Knightsbridge Partnership, added: “Authorities in competitor markets like Paris and Milan have moved with the times in accommodating changing consumer habits and are experiencing faster growth relative to 2019 levels”. London Mayor Sadiq Khan also told City A.M. that he reiterated his call for the Chancellor to “reinstate tax-free shopping for overseas visitors to support further the return of international tourists back to London”.

British Gas owner Centrica has announced it will extend the lives of the Heysham 1 and Hartlepool nuclear power stations to 'strengthen the UK’s energy security in uncertain times'. They will now close in March 2026, two years later than previously forecast.

Direct Line has swung to a full-year loss, blaming elevated motor claims inflation, higher-than-expected weather event claims, new regulatory changes and "challenging" investment markets. In the year to the end of December 2022, the insurer swung to a pre-tax loss of £45.1m, significantly down on a profit of £446m the year before. Operating profits slumped 94.6% to £32.1m. Direct Line said claims inflation was most acute in the motor segment, where severity inflation of around 14% was above what was assumed in the group's pricing. Direct Line warned its 2023 earnings will also be impacted.  

Phoenix Group’s has reported annual losses for last year following a decline in the value of assets backing the company's pension schemes. The savings giant reported a £1.76bn loss for 2022, up from £709m the previous year, as increasing yields, inflation and a widening of credit spreads impacted its investment returns.  Losses were further impacted by an accounting discrepancy from retirement schemes that were the subject of buy-ins, the firm said.

London merchant bank Close Brothers has seen its half year adjusted operating profit slump by 90% to £12.6m because it has had to set aside over £100m for bad loans relating to legal finance specialist Novitas. Close Brothers acquired Novitas in 2017, then in 2021 ceased approval of new loans from Novitas and let existing loans run off. Excluding Novitas, Close Brothers saw “good demand and strong margins” in its banking division, CEO Adrian Sainsbury said.

The Parker Review Committee, set up by government in 2015 to recommend ethnic diversity targets for the boards of Britain's top 350 listed companies, has drawn up new, more ambitious targets for board members and senior staff by 2027. The committee said that in 2022, 96 of the FTSE 100 companies met a target of at least one minority ethnic director on their boards, with 49 having more than one minority ethnic director, effectively meeting a goal it set in 2017. Ethnic minorities now account for 190 of the 1,064 board positions at FTSE 100 companies, 31 as chairs or executive directors. Meanwhile, FTSE 250 companies are making progress towards a 2024 deadline of one minority ethnic director, with 67% meeting the target last year, the committee said. "There’s still more to do however, and the Parker Review’s recommendations clearly set out how companies must improve diversity from top to bottom in the coming years, so they can make the most of untapped talent available and ensure British boardrooms are truly reflective of British society," business minister Nusrat Ghani said in a statement. The new targets call on each of the top 350 listed companies to also set a percentage target for senior management positions by December 2027. Additionally, 50 of Britain’s largest unlisted companies, including law firm Allen & Overy, auditor Deloitte, retailer John Lewis Partnership, Virgin Atlantic and Thames Water have been asked to have at least one ethnic minority director by December 2027.

The Countess of Carnarvon and chatelaine of Highclere Castle, which features as the fictional Earl of Grantham’s family home in ITV drama Downton Abbey, is blaming Brexit for her inability to hire staff for weddings at the stately home, saying she can now only do fewer, smaller weddings at the luxury venue. "There are no staff," Lady Fiona told Reuters, claiming this was because of a dearth of workers from the EU. She added: "When we go to our usual agencies and try to find people, they are not there," she said. "If we asked for 10, three might turn up ... there's nobody we haven't asked."

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