Economic Update 22nd February 2012
No rise in interest rates before 2014
Following an assessment that inflation is likely to fall below the 2% target over the next three years, Governor of the Bank of England, Sir Mervyn King, has suggested that the base interest rate will remain at the record low 0.5% until 2014.
With continuing economic uncertainty, Sir Mervyn King says that a rise in interest rates could push the economy into recession, put more people out of work, and cut the value of assets.
http://www.bankofengland.co.uk/publications/inflationreport/irlatest.htm
CBI forecasts anemic growth in 2012
The Confederation of British Industry is predicting that the UK economy will narrowly avoid a double-dip recession, posting growth of 0.2% in both of the first two quarters of 2012.
Gross Domestic Product for the whole of the year is forecast to reach 0.9% in 2012, followed by 2.0% growth in 2013.
CBI Director-General John Cridland says that UK recovery will depend on the successful resolution of the Eurozone crisis.
HMRC eases pressure on business records checks
HMRC’s programme of visits to up to 20,000 small businesses to inspect tax records has been suspended after critics said that the scheme went against the government’s promise to cut red tape.
In future HMRC will target inspections on sectors with a high risk of keeping inadequate tax records.
In a pilot of the visits scheme 2,437 businesses were checked and 28% were found to have a problem with their record keeping. For 11% the problem was serious enough to warrant a further visit.
From April HMRC will instead adopt an approach that relies more on education and support for record keeping.
http://www.hmrc.gov.uk/businessrecordscheck/review.pdf
http://www.moneymarketing.co.uk/politics/hmrc-suspends-business-record-checks/1045589.article
Big Banks fail on small business lending
Barclays, HSBC, Lloyds Banking Group, RBS and Santander have undershot the target agreed with the government at the start of 2011 under Project Merlin, for increasing lending to small businesses.
£74.9 billion was lent to smaller firms against a goal of £76 billion, with the number of small businesses using bank overdrafts and loans falling over the past two years. The banks put the shortfall down to the reluctance of smaller enterprises to ask for credit.
Bank of England figures also show that total lending from the five main UK banks fell last year, with a 3% drop in lending in the final quarter of 2011. In total there was a £9.6 billion contraction in business lending in 2011.
http://www.bbc.co.uk/news/business-16987063
http://www.bbc.co.uk/news/business-17009985
http://www.bankofengland.co.uk/publications/other/monetary/additionaldata.htm