Today's business and finance round up 26th September 2022
Government gambles on growth with mega ‘mini’ budget
26th September 2022
Bite-sized business news from the UK and beyond
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Today's stories
Government gambles on growth with mega ‘mini’ budget
Made.com slashes workforce as it goes ‘for sale’
ECONOMYGovernment gambles on growth with mega ‘mini’ budget
What happened?On Friday the chancellor Kwasi Kwarteng unveiled a package of tax cuts and other measures aimed at easing the cost of living crisis and boosting UK economic growth. The announcement provoked strong reactions from the financial markets.The so-called ‘mini’ budget is the biggest tax change since 1972 and will cost £161bn over five yearsPlans include:
Confirmation of a cap on energy bills, due to cost £60bn in the first six months alone
Planned rise in corporation tax to 25% in April 2023 will be scrapped, leaving the headline rate on company taxes at 19% - the lowest in the G20
Cut in basic income tax rate to 19% from April 2023 and the 45% top rate of tax abolished
The 1.25% rise in National Insurance will be reversed from November 2022
No stamp duty on the first £250k (up from £125k) of property purchases, and no stamp duty on the first £425k for first-time buyers (up from £300k)
Cap on banker bonuses scrapped
Critics have warned that the budget will benefit the rich more than support struggling families. But the government believes that in order to kickstart the economy, businesses and high earners need to be incentivised to invest in the country with low taxes which will ultimately create jobs and more tax revenue. The market reaction has been brutalThe pound plunged as much as 3% and fell below $1.11 for the first time since 1985. Investors now believe there is a 1 in 7 chance of the pound reaching $1 by the end of the year.There was a huge sell off in short-term government bonds, pushing rates up at the fastest pace in decades. It means it will be even more expensive to finance government spending by borrowing. In other words, investors are sceptical that the policies will boost economic growth and is more likely to add to inflation and national debt.Former US Treasury Secretary and economist Larry Summers branded the budget ‘naïve and wishful thinking’ adding ‘I think Britain will be remembered for having pursuing the worst macroeconomic policies of any major country in a long time’.
Other stories to keep you in the loop
What the budget means for you
Boeing to pay $200m for misleading investors about plane safety
Cambridge University finds it gained ‘significant benefits’ from slave trade
Klarna to make second round of job cuts
GSK poaches Burberry CFO to create all-female top team
Goldman Sachs: Sexual assault claims revealed in pay bias suit
RETAILMade.com slashes workforce as it goes ‘for sale’
What happened?Last week Made.com announced it would cut a third of its staff and put itself up for sale as trading suffers from the cost of living squeeze and supply chain issues.Made had been a lockdown winnerFounded 12 years ago in London, Made has become known for its sleek furnishings aimed at Millennials that it sells in the UK and a handful of other European countries. As an ecommerce retailer, the company performed well during the pandemic with more of us wanting to make our home surroundings more aesthetically pleasing during lockdown. But the company is struggling to maintain the pandemic-related momentumThe company reported revenue growth of 30% in 2020 to £315m with over 1m customers but it’s not yet profitable. Made had forecast to turn a profit in 2022 but supply chain issues have scuppered those plans. Trading conditions have been worsened for high ticket items like furniture as consumers face an unprecedented squeeze on their incomes. Also demand for homeware has weakened as the pandemic eases and people spend more time outside the home. It marks a reversal of fortunes in the first 15 months as a public company Made floated on the London Stock Exchange in June 2021 at 200p a share but today trades at just 5p. The collapse in the share price and volatile stock market has made it difficult for the company to raise cash with existing investors. The company needs £50m to survive and will need a white knight to come to its rescue.
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