18th October 2022
Bite-sized business news from the UK and beyond
- Mini budget undone as gov U-turns mount
- Eve Sleep finds rest with new owner
Mini budget undone as gov U-turns mount
Yesterday the new chancellor reversed nearly all of the tax cuts in last month’s mini budget to try to calm markets and restore confidence in UK public finances.
How did we get here?
Less than four weeks ago the then chancellor Kwasi Kwarteng unveiled a £45bn package of tax cuts – the biggest in 50 years - that sent financial markets into a tailspin. In the days that followed the U-turns began. First the decision to remove the 45p top rate of income tax and then the reduction in corporation tax from 25% to 19%, were cancelled.
Yesterday his successor Jeremy Hunt pressed undo on most of the rest of the plans, with all but the proposed stamp duty changes, removal of banker bonus caps and national insurance tax changes being scrapped. The UK's tax burden - tax as a % of GDP - will remain at the highest level in 70 years.
- No cut to the basic rate of income tax from 20% to 19%
- No cuts to dividend tax rates
- No new VAT-free shopping scheme for overseas visitors to the UK
- No freeze on alcohol duty rates
Altogether this will reverse £32bn of the original mini budget. Perhaps the most seismic announcement was that the ‘energy price guarantee’ – that would cap an average household’s energy bills at £2,500 – will run for six months instead of two years. The message is that from April consumers will shoulder more of the increase in energy prices with support only for the most vulnerable.
Amid the scaling back there was one addition
The chancellor announced the creation of an economic advisory council to provide independent expert advice to the government – a clear attempt to rebuild the government’s financial reputation after weeks of turmoil.
Zooming out: Hunt has – to quote one commentator – taken a “wrecking ball” to the remnants of Liz Truss’ dream of a high-growth, low-tax economy. The financial markets received the U-turns well with the FTSE 100 gaining 0.9%, the pound appreciating against the dollar by 1.7% to 1.14 and borrowing costs on UK government bonds falling. However despite this positive reaction the huge change of policy continues to raise questions of how long the PM can cling on to power.
Other stories to keep you in the loop
- City workers hunting for jobs face dwindling number of available roles
- Average London rent hits record £553 a week amid property shortage
- Average energy bill forecast to hit £4,347 after Truss U-turn on support
- Goldman Sachs plans major reorganisation
- Europe's richest man sells private jet to avoid Twitter trackers scrutiny
- China delays the release of economic data without explanation
Eve Sleep finds rest with new owner
Yesterday Eve Sleep announced it had been bought by fellow mattress retailer Bensons for Beds.
How did we get here?
Launched in 2015, London-based Eve made its name delivering mattresses in a box with a free pickup and return offer within 100 days if customers were not happy with the product. Its online only operation challenged traditional high street bed retailers and attracted Millennial customers. Amid rising sales, Eve listed on the stock market with a valuation of £140m in 2017.
But 2022 has been a difficult year for the company as the cost of living crisis has led to consumers delaying big ticket purchases like beds. Eve’s share price has plunged 90% and it has tried to restructure to cut costs.
In June, it revealed it was looking for a buyer or new investor as it warned it would miss revenue targets for the year.
Eve went into administration yesterday – a legal process that gives a company that can’t pay its bills time to find a buyer - when Benson for Beds came to the rescue to buy its website and brand.
The deal marks a change of fortunes for Benson
Just two years ago the company which has 166 stores was in administration before being saved by a private equity firm. Benson hopes that by acquiring Eve it can widen its appeal to a younger customer.
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