Economic Update 5th October 2011
Fuel price and insolvency rate linked
Three out of four transport company business failures have high fuel prices as one of the main reasons for their financial difficulties according to Simon Plant, partner at insolvency practitioners SPF.
Speaking to the Credit Management journal, Plant advised operators to try to pass on some or all of the rising costs for fuel to their customers in order to stay solvent.
He said, “With petrol now over £1.35 a litre (on average), those businesses with narrow profit margins are being squeezed harder than ever, and some to the point of insolvency.”
Minimum wage blow to young
The Low Pay Commission which advises the government on the level of the minimum wage has admitted that the current minimum pay rates may be stopping employers taking on young unskilled people with no work experience in the current climate.
Increased rates for the minimum wage came into force on 1 October. For 18-20 year olds, the minimum wage is now £4.98. For 16-17 year olds it is now £3.68.
Currently, almost 1 million of the 2.5 million unemployed in Britain are aged between 16 and 24.
UK revised growth down to 0.1%
UK gross domestic product (GDP) grew by only 0.1% in the second
quarter of 2011, down 0.1% on the previous estimates. This means the economy is slowing to a halt, and increases fears that the country may be heading back into recession.
However manufacturing rose by 0.2%. Output for the service increased by 0.2% and construction industries was up by 1.1%.
Household expenditure dropped by 0.8% in volume terms in the latest quarter.
http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q2-2011/stb---qna-2011-q2.html
http://www.bbc.co.uk/news/business-15178959
North Sea oil production slump
North Sea oil production is down 16% from last year, a fact that will hit tax takes which totalled £9 billion from the sector in 2010.
The government has put the decline down to production and maintenance problems, but some analysts say that reduced output is partly related to imposing £2 billion windfall tax on North Sea profits brought in by Chancellor George Osborne in order to cover the cost of the fuel duty reduction in the March Budget.
Oil industry figures say that more work needs to be done by the government to encourage investment in the sector, which is already in long term decline, because easiest to reach fields are now depleted.
http://www.bbc.co.uk/news/business-12905225
Minimum wage blow to young
The Low Pay Commission which advises the government on the level of the minimum wage has admitted that the current minimum pay rates may be stopping employers taking on young unskilled people with no work experience in the current climate.
Increased rates for the minimum wage came into force on 1 October. For 18-20 year olds, the minimum wage is now £4.98. For 16-17 year olds it is now £3.68.
Currently, almost 1 million of the 2.5 million unemployed in Britain are aged between 16 and 24.
Public call for fuel duty cut
The high costs of fuel and utilities have been picked out by the public as the main pressures on household budgets.
A recent Pulse of the Nation survey by ASDA, found that 40% of respondents put a freeze on the cost of domestic utility prices at the top of their wish list, followed by a cut in fuel duty which was favoured by over 25% of those surveyed.
A little under 25% of people wanted to see a cut in VAT from 20% to 17.5%.
The survey shows families as typically around £728 a year worse off than a year ago, with a 7.9% drop in average household discretionary spending. The current drop in the standard of living has been assessed to amount to a pay cut of £1,000 for someone on average earnings.
http://www.which.co.uk/news/2011/09/family-weekly-spending-power-falls-by-8-266615/
Do more to stimulate growth says FSB
With the party conference season drawing to a close, the Federation of Small Businesses (FSB) is calling for more effective, real-world measures to kick-start growth from the Coalition.
The FSB wants action taken to aid the 2.5 million people currently out of work by prioritising existing schemes to encourage small businesses to take on staff and to adopt other measures that could boost the economy.
The FSB, says that while welcome, the programme of cutting red tape does not do enough to help business.
It is calling on the government to extend some of the existing schemes to help small businesses take on staff and to adopt targeted measures to boost growth.
On top of this the FSB is proposing extending the National Insurance contributions holiday to existing businesses with three members of staff that decided to create up to four new jobs, putting VAT to 5% in the tourism and construction sectors for one year, as well as the expansion of apprenticeship and internship schemes.