Pay growth to remain slow until end of decade, suggests CIPD

Wage growth is predicted to remain slow until the end of the decade, a new survey by the Chartered Institute of Personnel and Development (CIPD) has suggested.

The data, which is based on survey responses from over 1,000 businesses, indicates that pay will rise by just 1.7% during the next year, contributing to the ‘jobs-rich, pay-poor’ UK economic environment.

This predicted low figure may possibly be due to weak productivity and the introduction of additional expenses for employers, such as the National Living Wage (NLW) and pensions auto-enrolment.

Mark Beatson, chief economist at the CIPD, stated: ‘The NLW and roll-out of pensions auto-enrolment were introduced to improve the living standards of low-paid employees, but this can only happen without significant job losses if the productivity of low-paid employees also increases’.

The wage growth predictions come as the Confederation of British Industry (CBI) cut its economic growth forecast for both this year and for 2017.

Carolyn Fairbairn, CBI director general, said: ‘A dark cloud of uncertainty is looming over global growth, particularly around weakening emerging markets and the outcome of the EU referendum, which is chilling some firms’ plans to invest.

‘At present, the economic signals are mixed – we are in an unusually uncertain period.’

Women affected by State Pension delays won’t be given concessions, says Minister

Women who will be adversely affected by a hike in the State Pension age may not be offered any relief, the Secretary for Work and Pensions, Stephen Crabb, has suggested.

Many of those affected had hoped that they would be granted early access to their State Pension.

However, Mr Crabb told MPs that a compromise to the issue would not be possible.

He stated: ‘I don’t see there is a do-able policy solution. It is just fiscally impossible.’

Many women born between April 1951 and 1960 have argued that they were unaware their State Pension age was due to be raised by up to six years.

Some have reported that they do not have sufficient funds to live on, and do not have enough time to make alternative financial arrangements.

Previously, Pensions Minister Ros Altmann had reported that she was looking into ways of dealing with the issue.

Members of the Women Against State Pension Inequality (WASPI) campaign group have said that they were disappointed with the latest decision, but remained hopeful that a solution could be reached.

From 2020, the State Pension age will be equalised for men and women, and will be set at 66. Previously, women could retire at the age of 60, whilst men could retire at 65.

EU Remain lead narrows amongst businesses, according to BCC poll

In its final pre-referendum poll, the British Chambers of Commerce (BCC) found that the majority of senior businesspeople surveyed intend to vote to remain in the European Union (EU), but that the gap between the Remain and Leave campaigns has narrowed.

Some 54% of the 2,200 BCC members surveyed in April said that they would vote to remain on 23 June. This was down from 60% in February’s survey, while the percentage intending to vote to leave was up from 30% to 37%.

Dr Adam Marshall, BCC Acting Director General, said: ‘As the EU referendum campaign enters the final straight, the race for the business vote has clearly tightened. Although a clear majority of the businesspeople we surveyed continue to express a preference to remain in the EU, the gap between Remain and Leave has narrowed significantly in recent weeks.’

Those trading with other EU markets expressed the strongest support for the Remain campaign, with the strongest levels of support for the Leave campaign among those that do not. Businesspeople representing large firms were found to be significantly more likely to vote Remain than those in micro-businesses.

The BCC’s survey also showed that individuals are now strongly committed to their voting preferences. Just 0.3% of respondents said that they were uncommitted, and only 10.8% said that they could change their mind between now and the day of the referendum.

Other findings included:

• The majority of business leaders reported that the referendum has had no impact to date on various aspects of their business, from orders and sales (71.3%), recruitment (87.1%) and investment (79.6%), to total costs (80.3%).
• If the UK were to leave the EU, 35.9% currently expect that this would have a negative impact on their overall growth strategy, whilst 36.3% feel that this would have no impact, and 15.9% believe that it would have a positive impact.
• Asked about the impact of the UK remaining a member of the EU, 12.8% currently expect this to have a negative impact on their overall growth strategy. Almost half (49.4%) feel that it would have no impact, while nearly a third (30.1%) believe that it would have a positive impact.

Dr Marshall added: ‘While only a minority of businesspeople report that the referendum campaign has had a material impact on their firms to date, significant numbers say that they expect significant impacts in the aftermath of the vote – particularly if Leave carries the day.

‘Whichever outcome prevails, Westminster must shift its attention back to the economy on June 24 without delay. Growth is softening, and Westminster’s referendum ‘tunnel vision’ over the past year has meant that far too many key economic issues have been given short shrift or delayed altogether.’

UK trade deficit widens to highest level since 2008, ONS figures reveal

The gap between imports and exports for the first three months of 2016 was £13.3 billion, up from £12.2 billion in the fourth quarter of 2015, according to figures from the Office for National Statistics (ONS). This means that the UK’s trade deficit for the first quarter is the biggest it has been since 2008.

The ONS said that the widening trade gap was partly attributable to a £1.9 billion rise in imports, such as machinery, cars, clothing, jewellery and footwear. Meanwhile, exports increased by only £500 million, driven by chemical products.

There was, however, a slight improvement in March, with the trade in goods deficit narrowing to £11.2 billion from £11.4 billion in February.

David Kern, Chief Economist at the British Chambers of Commerce (BCC), said: ‘In spite of the small improvement seen in March, the UK’s trade deficit worsened over the quarter and remains unacceptably large.

‘The trade figures are a further reminder that our external position remains vulnerable. It needs to be a national priority to support businesses in exporting goods and services, and additional efforts are needed to help firms to break into new and faster-growing markets.’

Meanwhile, economist Howard Archer from IHS Global Insight called it ‘a truly horrible first-quarter trade performance that clearly weighed down on GDP growth’.

He added: ‘The hope has to be that UK exporters will increasingly be helped by the overall marked weakening of the pound in 2016, although the pound has climbed off its April lows’.

UK economic growth has already slowed to 0.4% in the first quarter of 2016.

Rate of inflation significantly higher for millennials than for pensioners, analysis suggests

New research from financial services group Fidelity International has suggested that young adults in the UK face inflation rates that are significantly higher than those for pensioners.

The analysis indicates that the inflation gap is being widened due to millennials spending proportionately more on amenities that are increasing in price.

The report also found that individuals aged below 30 are spending less of their income on groceries, compared to those from older generations – meaning that they have not been taking advantage of falling food prices.

In March, the rate of inflation for the under 30s was 0.9%, compared to the official rate of 0.5%. During this same month, the inflation rate for retirees was just 0.3%.

Maike Currie, investment director for personal investing at Fidelity International, stated: ‘On the surface, it may look like the cost of living has barely increased over the last year, but scratch beneath the surface and there is a clear generational divide when it comes to the cost of living.

‘Our analysis shows the current rate of increase in the cost of living is three times more for millennials than it is for retirees, with those under 30 spending a greater proportion of their income on the areas which have suffered the highest price increases – education and housing.’

Businesses urged to rethink staff management as job satisfaction falls

Employers are being advised to re-evaluate their approach to staff management after a new survey found that one in four workers are unhappy in their current role.

According to a report by the Chartered Institute of Personnel and Development (CIPD), job satisfaction is now at its lowest level for two years, with around a quarter of those surveyed actively looking for a new job.

Many cited being dissatisfied with the lack of opportunities for career development in their current organisation.

Of the 2,000 people questioned, some 31% claimed that they suffered from exhaustion at the end of the working day.

The survey found that job satisfaction was lowest amongst those working in large, private businesses.

Following its findings, the CIPD has urged firms to consider new strategies to help keep employees motivated.

‘Today’s research shows that our approaches to job design and career management have not kept pace with the rapidly changing world of work or with employee expectations,’ commented the CIPD’s Claire McCartney.

‘Despite wider global economic uncertainty, employers need to think of new ways to keep their employees engaged and committed.’

She added: ‘They need to think about career growth in a more holistic way, rather than traditional, hierarchical progression, and instead give employees opportunities for a breadth of diverse experiences and opportunities that maximise their skills and their employability going forward’.

UK economic growth experiencing slowdown

The forthcoming EU referendum may be having an adverse effect on UK economic growth, a new survey suggests.

Financial data firm Markit’s Purchasing Managers Index (PMI) survey revealed that economic growth during April totalled just 0.1%.

The survey also indicated that the PMI reading for the UK’s services sector fell from 53.7 in March to 52.3 in April. A PMI reading above 50 indicates growth.

Furthermore, during April, the sector grew at its slowest pace in three years.

Business activity also fell to a 38-month low.

Chris Williamson, chief economist at Markit, said: ‘Some of the slowdown may be attributable to the early timing of Easter, though April also saw an increase in the number of companies reporting that uncertainty about the EU referendum caused customers to hold back on purchases, exacerbating already-weak demand linked to global growth jitters and ongoing Government spending cuts’.

He continued: ‘The deterioration in April pushes the surveys into territory which has, in the past, seen the Bank of England start to worry about the need to revive growth’.

Businesses should do more to prevent online fraud, says consumer group

Consumer group Which? has called for businesses to take more responsibility in protecting customers against online fraud and scams.

In a survey of 2,066 UK adults, Which? found that around six in ten people said they’ve been targeted by online scams in the past 12 months, and a clear majority believed that businesses should do more to prevent internet fraud.

Which? executive director, Richard Lloyd, said: ‘When we know that even the savviest people can be scammed by fraudsters, it’s vital that everything possible is done by businesses to better protect consumers. And where firms haven’t done enough to protect their customers, it’s entirely right that the responsibility to put things right should be with them.’

In February, Home Secretary Theresa May established the Joint Fraud Taskforce to investigate fraud in the financial system, but Which? argues that its scope should be widened to:

• examine whether businesses are taking enough responsibility when their customers are defrauded
• investigate what improvements should be made to the processes they use to prevent fraud
• recommend, by the end of 2016, how businesses can better protect their customers from fraud.

Richard Lloyd added: ‘The Government’s taskforce must not let businesses off the hook, more must be done to prevent fraud and protect consumers’.

According to the survey, the three most common online scams reported by consumers were: phishing emails purporting to be from a bank or payment service (49%); phishing messages seeking money for services or help – for example, a friend stuck abroad (26%); and bogus computer support (25%).

Study suggests that the ‘Bank of Mum and Dad’ is now a £5 billion mortgage lender

Parents helping their children to buy a first home will lend over £5 billion in 2016, according to a new study by the financial services group Legal & General (L&G).

L&G found that the ‘Bank of Mum and Dad’ is the equivalent of a top 10 mortgage lender in the UK, and will be involved in 25% of all property transactions that take place in the UK market this year. It will provide deposits for over 300,000 mortgages, purchasing homes worth £77 billion.

Nigel Wilson, CEO of L&G, said: ‘The Bank of Mum and Dad plays an increasingly vital role in helping young people take their early steps on the housing ladder.

‘But the generosity being displayed by UK families doesn’t make up for intergenerational unfairness – younger people today don’t have the advantages the baby-boomers had, including cheap housing that delivered windfall gains.

‘People will always want to help family members – it is a natural thing to do. Relying so heavily on the Bank of Mum and Dad, however, risks increasing inequality as many young people today are not lucky enough to be able to access parental support when buying a home, or can’t afford to buy even with parental help.’

The study also found that the average financial contribution from parents is £17,500, or 7% of the average purchase price, and that 57% of parental contributions are gifts, 18% are loans with no interest and 5% are loans with interest.

However, Mr Wilson warned: ‘We have a supply-side problem in housing – we are simply not building enough houses. We need to build more, especially as the Bank of Mum and Dad could soon start to experience a funding crisis of its own.’

He added: ‘If we are ever to end or reduce our reliance on the Bank of Mum and Dad (and Government initiatives such as Help to Buy 2), we need a new innovative approach to housing. Helping first-time buyers is necessary – but not the whole solution.

‘We need to modernise house building and make it more efficient so that we can increase supply and quality for all forms of tenure… Infrastructure, jobs and local economic growth are all key to creating thriving communities where people want to live.’

The new tax year brings updated Key Guides

As a result of the Chancellor’s Budget in March, there have been a number of important changes across the finance and tax planning sector. Our series of Key Guides has undergone a quarterly review and each one contains the most up-to-date and accurate information reflecting the new 2016/17 tax year (www.nhllp.com). These specialist publications provide you with expert content on topics ranging from starting and selling a business to strategies for a high tax environment.

• The taxation of investments: The new personal savings allowance has come in as well as changes to tax allowances, bands and rates. Alterations to the way your interest and dividend income will be calculated are also important.

 

• Pensions freedom – drawing from your pension: The spring Budget included changes to the lifetime and annual allowances and the announcement of the new Lifetime ISA. You should also be aware of personal protection 2016.

 

• Workplace pensions and auto-enrolment: While auto-enrolment continues, the new single-tier state pension has now come in. Plus plans for a ‘pensions dashboard’.

 

• Starting and selling a business  We have added information about the British Business Bank which can help smaller businesses and updated to include changes to capital gains tax.

 

• Making the most of fringe benefits: Since 6 April 2016, all employees (with certain exceptions) are treated the same when it comes to the taxation of fringe benefits. There have also been some changes to reporting requirements.

For further information on any of the topics above and to view our full set of updated Key Guides, please visit our website / click on the links. Or contact us to discuss any issues that may affect you.