14th November 2022
Bite-sized business news from the UK and beyond
- Higher taxes ahead for everyone
- Bad week for tech billionaires
Higher taxes ahead for everyone
Yesterday the chancellor Jeremy Hunt warned that all Brits will pay more tax and public spending will be cut ahead of Thursday’s Autumn Statement.
How did we get here?
In September then chancellor Kwasi Kwarteng announced the ill-fated ‘mini-budget’ pledging debt-funded £45bn of tax cuts. However the lack of detail of how it would be paid for led to chaos in the financial markets and ultimately the end of Kwarteng’s tenure and Liz Truss’s premiership.
Fast forward two months and new PM Rishi Sunak and his chancellor Jeremy Hunt are trying to rebuild the UK’s reputation as a financially responsible state.
This means higher taxes and lower public spending to plug an estimated £55bn black hole in the country's finances with public spending falling by £35bn and taxes increasing by £20bn.
So what changes could be on the cards?
- Freezing of thresholds and personal allowances for income tax, national insurance and VAT.
- Reducing the threshold for the 45p additional rate of income tax from £150,000 to £125,000.
- Cutting household energy bills support from £60bn to £20bn from April.
- Spending cuts or freezes to spending across all government departments including the NHS.
Meanwhile on Friday official data showed the UK economy shrank 0.2% between July and September, better than the 0.5% expected by economists but still further evidence that the country is heading into a recession. The contraction was driven by a decline in manufacturing output and an extra bank holiday to mark Queen Elizabeth II's death. The news comes after the Bank of England warned that the UK may be in recession until 2024.
Zooming out: The UK economy is the only one of the seven major industrialised economies that is still smaller than it was before the pandemic. There are concerns that more cuts after the austerity of the 2010s could hurt the economy further. The chancellor has said that “if we do this wisely, we can make this recession that we may be in as short and shallow as possible”.
Other stories to keep you in the loop
Bad week for tech billionaires
The past week has been dramatic for tech billionaires: one-time crypto king Sam Bankman-Fried, social-media pioneer Mark Zuckerberg, electric carmaker Elon Musk and investment guru Masayoshi Son.
FTX, the world’s second-biggest crypto exchange, filed for bankruptcy on Friday days after a plan to sell itself to rival Binance for $1 (a far cry from its recent $32bn valuation) fell apart. The exchange’s meltdown took the net worth of founder Sam Bankman-Fried, from $16bn to $0. Founded in 2019 FTX attracted billions of dollars of investment from high profile investors including SoftBank and Sequoia Capital as well as sport starts Tom Brady and Naomi Osaka, all of whom will lose their money.
Meta laid off 11,000 employees on Wednesday, with the company dragged down in large part by CEO Mark Zuckerberg’s commitment to building a metaverse that possibly no one else wants.
In his first address to employees, Elon Musk warned that bankruptcy was a possibility for Twitter if his $44bn acquisition didn’t start generating more cash. The warning capped a whirlwind week that included firing half Twitter’s staff across the globe and ordering employees to stop working from home.
Masayoshi Son, SoftBank’s founder and the man behind the world’s biggest tech investment fund, said he’d step back from the day to day after the firm’s signature Vision Fund reported a $10bn quarterly loss as startup valuations plunged. Son said he will now focus his time on listing British chip designer Arm on the stock market. With Arm’s own profits declining and public markets having their worst year in a while, that may be another steep hill to climb.
Zooming out: The missteps of the past week have raised serious questions of the judgement of tech founders once revered for their genius with investors now left with big losses and thousands of employees out of work.
Stat of the day
Interesting links from around the web