Today's business and finance round up 26th May 2021
Today's issue - 💷Government borrowing falls as UK reopens
26th May 2021
Good morning Two reasons to be optimistic this Wednesday:
The vaccine roll out is making its way through Millennials and is almost at people in their 20s in England.
The forecast for the bank holiday weekend looks really good, as in warm and dry
Government borrowing falls as UK reopens
UK corporate diversity one year on from George Floyd’s murder
Yesterday's market moves
FTSE 100 -0.3% 7,030 FTSE 250 -0.2% 22,439
The FTSE 100 and FTSE 250 dipped 0.3% and 0.2% respectively with trading volumes remaining light for a second day. Markets were still relieved that central banks in the US and UK were not too concerned over the recent uptick in inflation. As a result tech stocks (who's value are negatively impacted by the prospect of rising prices) were the outperformers.
ECONOMYGovernment borrowing falls as UK reopens
What’s going onLatest data showed that the government borrowed £32 billion in April, £16bn less than a year ago. Easing of lockdown restrictions has meant less workers on furlough and more tax income as businesses reopened. Why is this importantThe pandemic has had a major impact on the economy and as a result the government's finances. Since March last year at least 50 initiatives have been announced by the government to support individuals and businesses during the pandemic such as the furlough scheme. All this has been incredibly costly and the government has had to borrow more to plug the gap between lower tax receipts and higher public spending. Government borrowing for the year to March 2021 was £300 billion about ten times what was forecast pre-pandemic and the highest borrowing in peacetime. The total national debt (that’s the accumulated government borrowing over the years) now stands at almost £2.2 trillion – that’s close to 99% of GDP or the size of the UK economy. This is equivalent to around £32,000 per person in the UK.The last time the national debt reached this proportion of GDP was back in the 1960s.The Chancellor, Rishi Sunak, said he had committed to "bringing debt under control over the medium term"."But we also need to focus on driving a strong economy recovery from the pandemic," he added."That is why the government is continuing a comprehensive package of support to help businesses and workers get back on their feet."
TakeawayAs alarming as a £2 trillion IOU sounds, the UK gets one of the better borrowing rates of any country in the world.Also it's hard to make a case for frugality in the middle of a global pandemic.How quickly the government can repay the debt will depend on how fast the economy recovers as restrictions lift.Economists have upgraded 2021 growth prospects in the past few months and, if realised, should deliver greater tax revenues for the government.
DIVERSITYUK corporate diversity one year on from George Floyd’s murder
Yesterday marked a year since the murder of George Floyd, a Black American man, by a White police officer; it sparked protests across the world against racial injustice. It led to corporations both in the US and UK speaking out about the need to better address racial disparities, many for the first time.In June last year, an open letter signed by leaders of British businesses, including Tesco and ITV, pledged to address their own systemic racism. So a year on, what’s changed:
The number of companies signed up to the Race at Work charter - which commits businesses to driving change on workplace equality - has risen from 250 to 700.
There are no Black executives in any of the top three roles at FTSE 100 companies.
Almost a fifth of FTSE 100 companies still lack ethnic minority representation on their boards.
Tesco published a blog post reflecting on the past year. It said it had done a range of training and development courses aimed at tackling racial equality but gave no quantitative progress against the commitments from the open letter.
Lloyds Bank and HSBC published the ethnic breakdown of their workforce, less than 1% of senior roles are held by Black employees.
ITV has increased its off-screen BAME representation in the year to 12.9% of all colleagues. On-screen it met its BAME target, with 17.6%. representation.
While there appears to have been some progress it’s clear that there’s still a long way to go on the road to racial equality in business.
The challenge will be to ensure leaders don’t consider diversity and inclusion to be “the flavour of the month” or a tick box exercise, but truly believe in it.
Stat of the day
There are now a record 171 billionaires in UK, with their wealth rising 22% during the pandemic to £597 billion.
Other stories to keep you in the loop
UK under pressure to back US’s global corporation tax plan
Deutsche Bank to move 100 banking roles out of London
Peloton to invest $400million to build its first US factory in Ohio
US issues Japan travel warning weeks before Olympics