Published: 21 November 2023
By Suzanne Evans, Director, Political Insight
Ahead of tomorrow’s Autumn Statement, it has been revealed that the Government borrowed £16.9bn less than official figures predicted in the first seven months of the year. Public sector net borrowing excluding banks stood at £98.3bn in the first seven months of the financial year, £21.9bn more than the same period last year, according to the Office for National Statistics, but £16.9bn less than the £115.2bn forecast by the Office for Budget Responsibility in March. The news has sharpened analyst’s expectation that Chancellor Jeremy Hunt may make tax cuts in tomorrow’s Budget, however for the month of October, total public sector net borrowing excluding public sector banks was £14.9bn, up from £14.3bn the previous month and well ahead of forecasts of £12.8bn. This is also £4.4bn more than the same month last year and the second highest October borrowing since monthly records began in 1993. Hunt has stated he will focus on boosting business investment and getting people back into work in tomorrow’s statement.
In yet another hint however, both Prime Minister Rishi Sunak and the new Chief Secretary to the Treasury, Laura Trott, have said the Government is now able to cut taxes. Speaking at Enfield College in London yesterday, Sunak would not confirm that tax cuts were coming in the Autumn Statement, nor where any cuts would be made, but said that because his Government had taken "difficult decisions" that included avoiding inflationary pay rises in response to strikes, it could now “move on to the next phase of our economic plan and turn our attention to cutting taxes". Meanwhile, Trott told Times Radio that cuts were possible after “turning a corner” on the economy. “Inflation has halved. That is really significant for people at home. We know how tough things have been,” she said, adding: “Real wages are, for three months, now ahead of inflation - again, that’s really important to kind of making a difference to how people feel. So we can now talk about tax cuts and focus on growth, and that is what we’re going to be doing”. Trott added that the decision to freeze tax thresholds, which has pushed some people into higher tax bands, was “really difficult”. Chancellor Jeremy Hunt said previously that tax cuts were “virtually impossible”.
The Chancellor is being urged by The Association of Chartered Certified Accountants (ACCA) to end “unacceptably poor service” at HMRC by including further funding for customer service in tomorrow’s Autumn Statement. The trade body, which represents 98,000 accountants in Britain, says the fact HMRC is known to have a huge backlog of cases is creating huge problems for its members. More than half of ACCA’s accountants say problems getting answers to queries from HMRC is hurting business productivity. Accountants also complain about how difficult it is to get through to the taxman on the phone and, when they do, it is only after a long wait times of more than 20 minutes on average, and they then find poor record keeping and inexperienced call handlers mean queries cannot be resolved. In a letter to Jeremy Hunt, the ACCA blamed the crisis on a lack of investment in customer services. “It is difficult to overstate levels of concern and frustration being experienced by a substantial proportion of our members in their contact with HMRC,” it said. A Treasury source told media outlets the Autumn Statement is not expected to contain plans to address the HMRC backlog. An HMRC spokesman told the Telegraph: “We are facing increasing demand, which we will meet by helping and encouraging more people to use our online services, which can answer queries quickly and easily without the need to wait on the phone or write to us. This will free up our expert advisors to help those who really need one-to-one support – those with complex queries, the digitally excluded, the particularly vulnerable. The ACCA knows this and, through the agents they represent, can play a valuable role in driving change.”
Labour Leader Keir Starmer has given an interview to City AM. Light on detail on his plans for the economy, it gives little insight into what the country might look like under a Labour Government, as Starmer’s answers to questions rarely go beyond soundbites. He believes the City of London is a “force for good,” he says, and that his party’s improved relations with the business community are a matter of “personal pride” for him. Starmer also pledged to be “laser-focussed” on the economy if he becomes the next Prime Minister, and says he wants to “preserve and protect” the City’s “powerhouse” status. He also promised a new “partnership” with the financial services industry.
The Supreme Court has refused permission for Deliveroo workers to be represented by a trade union for the purposes of collective wage negotiations. The Independent Workers Union of Great Britain (IWGB) has for the last seven years attempted to represent a group of Deliveroo riders in order to negotiate pay and conditions with the company, but the Court rejected this final appeal on the basis that riders are not “workers” under UK labour law and therefore do not have an “employment relationship” with Deliveroo. The ruling this makes them ineligible for collective bargaining on pay was unanimous. A spokesperson for Deliveroo said: “UK courts repeatedly and at every level have confirmed that Deliveroo riders are self-employed, and this now includes the Supreme Court, the highest court in the country. This is a positive judgement for Deliveroo riders, who value the flexibility that self-employed work offers. Thousands apply each week to work with Deliveroo because they want to be able to decide for themselves when, where and whether to work.” A spokesperson for IWGB expressed disappointment, saying: “As a union we cannot accept that thousands of riders should be working without key protections like the right to collective bargaining, and we will continue to make that case using all avenues available to us, including considering our options under international law.”
Marks and Spencer (M&S) has been given permission by The High Court to challenge Michael Gove’s decision to block the complete redevelopment of its flagship Marble Arch store on London’s Oxford Street. M&S wants to demolish the Art Deco store and replace it with a new 10-storey building featuring a new cafe, offices and a gym. It had received planning permission to do so from Westminster City Council when the Secretary of State for Levelling Up, Housing and Communities (DLUCH) stepped in, launching an inquiry and eventually blocking the proposal. M&S CEO Stuart Machin said on X yesterday that the Court “recognised the merits of our legal challenge on Marble Arch” and so a judicial review of Gove’s decision will be heard next year. “We have been clear from the very start that refurbishment of the existing store is not possible, so this is only the first step in the lengthy process of overturning the government’s senseless decision to reject our Marble Arch proposal – the only retail-led regeneration on Oxford Street,” he added. Machin previously branded Gove’s as “utterly pathetic” and “anti-business”. (Daily Business News 21.7.23). To win the case, M&S will have to show the Government made an error in its decision-making process, i.e. that it failed to consider information that was relevant, or took information that wasn’t into account. DLUHC has not yet commented.
Meanwhile, Archie Norman, the Chairman of M&S, has said the middle classes are being encouraged to shoplift by faulty self-checkouts. “With the reduction of service you get in a lot of shops, a lot of people think: ‘This didn’t scan properly, or it’s very difficult to scan these things through and I shop here all the time. It’s not my fault, I’m owed it’,” he said on LBC radio. M&S will not be tackling the problem in the same way that Sainsbury’s and Morrisons have, however. While they have put security gates in place after self-scan tills in some stores, requiring shoppers to scan receipts before they can leave the store, Norman said this approach turned shops into “prison camps”. “Our approach is to be open and welcome,” the former Conservative MP said, admitting to doing “little things” like making sure “the steak is positioned in the right place so people can keep an eye on it.”
Shell Energy has been fined £1.4m by Ofcom for failing to tell more than 70,000 mobile phone and broadband customers to review their contracts as they approached expiry, or provide information allowing people to find better deals, thereby breaking consumer protection rules introduced in 2020. The penalty was discounted by 30% after Shell admitted liability.
Heathrow Airport CEO Sean Doyle is warning that the new Electronic Travel Authorisation (ETA) scheme imposed on international travellers flying to the UK will damage the aviation industry’s competitiveness, ETA requires visa-exempt travellers passing through Britain to pay a £10 fee and wait up to three days for an online permit, which Doyle said will “put carriers like British Airways, who rely on connecting traffic, at a competitive disadvantage to European hubs.” His comments, made at the Airline 2023 industry conference in London, cautioned “we need to make sure by stealth we don’t make our industry uncompetitive.” Between 40% and 50% of BA traffic at Heathrow connects to other destinations, and most other countries do not require passengers who are moving from gate to gate at a hub, without going through passport control, to meet the requirements of the connecting destination, City AM says. The tax was introduced by the Home Office with the aim of improving border security and came into effect for Qatari nationals last week. Industry bodies’ Airlines UK and BAR UK have also said that taxing transiting passengers in this was is based on a false premise, as no borders are crosses, and that it will see the UK lose ground to European rivals. Meanwhile, the scheme is set to be rolled out to a number of other Middle Eastern countries in early 2024, and will be a requirement worldwide for visitors who do not need a visa for short stays.
EY, one of the ‘Big Four’ accountancy firms, is considering quitting its London headquarters as increasing numbers of staff choose to work remotely. In 2021, EY adopted a hybrid working policy that expected staff would spend at least two days a week working away from the office. Its office is now busiest on the so-called ‘Twat’ days, of Tuesdays, Wednesdays and Thursdays, when there is 88% occupancy. Although no decision on the future of its London HQ has yet been made, EY has launched a review in preparation for its 25-year lease on the More London building expiring in 2028.
Qinetiq has won a five-year contract worth £136m with the US Department for Homeland Security to run the Tethered Aerostat Radar System (TARS) which provide surveillance capabilities in detecting low-flying aeroplanes as well as tracking and stopping criminals and deadly weapons entering the US. The FTSE 250 British defence firm will deliver the aerostat operations, ground control systems monitoring and data analysis. Qinetiq CEO Steve Wadey said: “Winning TARS is another significant and exciting milestone in the US – a clear demonstration of Avantus delivering growth”. Qinetiq recently reported a surge in new orders to £953m in the six months to the end of September.
Cryptocurrency exchange Bullish has bought CoinDesk from Digital Currency Group for an undisclosed sum. Bullish CEO Tom Farley said: "With its acclaimed editorial coverage, premier events and market-leading data and indices, CoinDesk continues to shape the global crypto and blockchain ecosystem. Bullish will immediately inject capital into several of CoinDesk's most exciting growth initiatives which will power the launch of new services, events and products. We also want to express our unwavering support for CoinDesk's commitment to journalistic independence." Kevin Worth is staying on to run CoinDesk, as is the existing management team. It will operate as an independent subsidiary within Bullish. Matt Murray, the former editor-in-chief of The Wall Street Journal, has also been appointed chair of its Editorial Committee.
Estate agent Foxtons is said by The Times to be under pressure from 10% of its shareholders to sell itself. Both Canadian investor Converium Capital and investment fund Milkwood Capital have demanded a sale, saying the company is undervalued on the London Stock Exchange. Milkwood boss Rhys Summerton said: "If you look back, in 2015 Foxtons was a £1 billion company. But the public markets are no longer valuing the good work the management has done recently and the only way to extract fair value is for the board to carry out a sale process." Michael Rapps, managing partner at Converium, said: "Chairman Nigel Rich and CEO Guy Gittins have led an impressive turnaround in Foxtons' business over the last 18 months. Today, as the largest estate agent in London with a significant recurring revenue lettings book, Foxtons is a highly strategic acquisition target that we think would attract multiple bidders.
FTSE 250 outsourcer Capita says it will cut up to 900 jobs as part of its ongoing cost-cutting programme. The cuts will help it save £60m a year from the first quarter of next year, it said, adding that it “continues to trade in line with its expectations” having won contracts worth a total of £2.9bn so far, ahead of its total of £2.6bn for 2022.
London-listed electricals retailer AO World has made a half-year profit of £13m after suffering a loss of £12m last year. The firm attributes the turnaround to removing unprofitable sales and introducing charges on all deliveries. The company also tightened advertising and marketing spending and reduced warehouse costs by 18% to £25.5m.
McDonald's is buying back a large stake in its Chinese operations, six years after selling off an 80% holding to the state-owned investment company CITIC Group and US private equity firm Carlyle for a reported $2.1bn (£1.68bn). Now, McDonald's is buying back Carlyle's 28% stake to take its interest to 48%. The purchase price was undisclosed; however it is known that Carlyle was seeking a valuation of between $8bn and $10bn for the stake. China is now McDonald's second-largest market. The firm has doubled its number of restaurants to over 5,500 since 2017, and is now looking to increase that to 10,000 plus by 2028. McDonald's President and CEO Chris Kempczinski said: "Our strategic partnership with CITIC and Carlyle has been extremely successful in growing McDonald's presence in the region since it began. We believe there is no better time to simplify our structure, given the tremendous opportunity to capture increased demand and further benefit from our fastest growing market's long-term potential."
At least 700 of OpenAI’s 770 employees are threatening to resign unless founder Sam Altman is reinstated and the board of the ChatGPT creators resigns. Altman has since been hired by Microsoft to lead its artificial intelligence (AI) team, although it had supported the effort to reinstate Altman until the OpenAI board put a new CEO in place. Microsoft had pledged to invest up to $13bn (£10.4bn) into OpenAI under Mr Altman’s leadership. A letter to the board signed by the employees said: “We are unable to work for or with people that lack competence, judgement and care for our mission and employees. We, the undersigned, may choose to resign from OpenAI and join the newly announced Microsoft subsidiary run by Sam Altman and [co-founder] Greg Brockman. We will take this step imminently unless all current board members resign.” One surprise signatory was Ilya Sutskever, chief scientist and board member at OpenAI, who played a key role in the ousting of Mr Altman, but has since said he deeply regrets that. Employees also posted “OpenAI is nothing without its people” en masse on X, formerly Twitter, and many of them were retweeted by Altman, who said on the social media platform that he is incredibly proud of his team and that an OpenAI/microsoft partnership will continue “some way or other”.
Meanwhile, Microsoft shares hit an all-time high yesterday. News of Altman and Brockman’s appointment sent Microsoft up more than 2% on the NASDAQ where they closed at close to $378 (£301), giving the firm a $2.75tn (£2.2tn) valuation.
Elon Musk has, as promised, launched legal action against Media Matters for America (MMA) for “maliciously” trying to drive advertisers away from his social media firm X by reporting that ads for major brands including IBM, Disney, Comcast, the European Commission and Apple were being run deliberately next to pro-Nazi content. X claims that MMA is running a “blatant smear campaign” as part of an attempt to “destroy X Corp.,” the company said in a lawsuit filed in federal court in Texas. "Media Matters knowingly and maliciously manufactured side-by-side images depicting advertisers' posts on X Corp's social media platform beside Neo-Nazi and white-nationalist fringe content and then portrayed these manufactured images as if they were what typical X users experience on the platform,” the suit continues. Angelo Carusone, the President of Media Matters, said in response: “This is a frivolous lawsuit meant to bully X’s critics into silence… Media Matters stands behind its reporting and looks forward to winning in court”.
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