Author Archives: david

Economic update – Nov 8th

posted at: 8:35 am, Posted in Latest News, By david

Recent indicators continue to suggest that the UK’s recovery is firming. The Markit composite PMI rose to 61.7 in October – its highest level since records began in 1998 – and suggesting that momentum remained strong and broad-based at the start of the final quarter of 2013. Activity accelerated in the service and construction sectors, the latter to its highest in six years, while growth in the manufacturing sector remained solid.

The official data showed that industrial production rose by 0.9% in September, following a 1.1% decline in August. Similarly, manufacturing output rose by 1.2% in September, reversing a 1.2% fall the previous month. Although slightly stronger than the ONS predicted in the Q3 GDP estimate, these figures are not sufficient to push up Q3 GDP growth from its current rate.

The CBI’s latest economic forecast (released 4 November) predicts growth of 1.4% in 2013 (revised upward from 1.2% previously), 2.4% in 2014 (revised up from 2.3%) and 2.6% in 2015. Increasing support to growth should come from residential and business investment, alongside small contributions from net trade. However, downside risks persist: the Eurozone crisis remains far from being fully resolved; risks to growth in emerging markets have increased; and the eventual unwinding of monetary policy stimulus poses a risk to financial market stability.

In the Euro area, the manufacturing PMI in October rose to 51.3 (from 51.1 in September), continuing to indicate a modest expansion in activity. The German PMI rose to 51.7 from 51.1 in September, but output continued to fall in France (with the PMI falling to a four month low of 49.1). Production was broadly flat in Italy (50.7), although the PMI remained above the 50 “no change” reading for the fourth month in a row.

Britain’s recovery depends on businesses and politicians working together to create the right conditions for private sector jobs and growth, the CBI president, Sir Mike Rake, told the organisation’s Annual Conference on Monday.

Sir Mike gave the opening address to the conference, at London’s Hilton Metropole, after which CBI members, politicians and journalists heard from prime minister David Cameron, shadow chancellor Ed Balls, mayor of London Boris Johnson and Polish deputy prime minister Jacek Rostowski.

Video: Catch up on all the sessions from the Annual Conference >>  
Multimedia: How the day unfolded >>

The CBI president said that the recent “crisis in public confidence” should not overshadow the key contribution the private sector can make to a return to economic prosperity.

“Some of the rhetoric we’ve heard recently suggests that business is somehow the enemy – we are not, and this could not be further from the truth,” he said.

“My message today is that we want to be, we can be, and we are partners in building prosperity.”

Following Sir Mike, Mr Cameron unveiled a five-pronged strategy to boost growth and engineer a “fundamental” rebalancing of the UK economy.

Mr Cameron called on firms to back his plan, which included a call for greater co-operation between business and education in the form of the Speakers for Schools initiative.

“We are turning this economy round and we are turning this country around but it is a long-term plan for success – a plan for which we need the support of the CBI and all its members,” he said.

Mr Balls welcomed a return to economic growth – but cautioned against taking a recovery for granted.

“The return to growth is something to celebrate and nurture,” he told delegates. “But with business investment still on hold and banking lending to small business still falling, with youth unemployment still very high, with living standards still falling for most people this is no time for complacency.”

On the day the CBI launched its agenda-setting Our global future report on the UK’s position as a trading nation, Mr Rostowski said that the EU was “a good thing and would be nowhere near as good a thing without Britain”.

And the closing speech from Mr Johnson addressed issues around UK aviation capacity.

Delegates at the Hilton also heard World Cup-winning former England rugby coach Sir Clive Woodwardexplain the importance of capturing knowledge to success in sport and business, as well as panel sessions on business trust and expanding overseas.

Once again the speakers – and their speeches – were captured on canvas by illustrator Matt Lawrence.See him in action drawing the mayor of London in this short video.

NIC Employment Allowance

posted at: 8:19 am, Posted in API Blog, By david

The Chancellor announced the creation of a National Insurance Contributions (NIC) Employment Allowance in the 2013 Budget. This is expected to be introduced from 6 April 2014 and this moved a step closer to becoming law with the First Reading of the Bill on 14 October 2013.

Businesses, Charities and Community Amateur Sports Clubs will be able to reduce their Employer Class 1 NICs bill by up to £2,000 per year.

HMRC plan to release more details on how to claim the Employment Allowance in the New Year and we will keep you informed of developments.

Internet link: HMRC news

HMRC announce another disclosure facility

posted at: 8:01 am, Posted in API Blog, By david

HMRC have launched yet another disclosure facility, the Health and Wellbeing Tax Plan, which runs from 7 October 2013 to 6 April 2014 and is aimed at physical therapy, alternative medicine or therapy and other therapy.

Notification is required by 31 December 2013 and disclosure and payment by 6 April 2014.

If you have any concerns in this area please do get in touch.

Internet link: HMRC publications

HMRC announcements for employers

posted at: 8:00 am, Posted in API Blog, By david

The latest Employer Update issued by HMRC contains a number of pertinent articles which may be of interest to employers and employees:

  • Age Exception Certificates- HMRC will no longer issue age exception certificates to confirm that a person has reached State Pension age and therefore ceases to be liable to pay Class 1 NIC. HMRC advice is that employers will need sight of an employee’s birth certificate or passport as evidence of the person’s date of birth and retain a copy.
  • Automatic cancellation of PAYE schemes - from October 2013 if there has been no activity for a PAYE scheme, for example no RTI submissions, within 120 days of it being set up it will be automatically reviewed to see if it can be cancelled.
  • Employee shareholder status - HMRC is to offer employers the opportunity to apply for HMRC agreement (for tax purposes) to their share valuation which will hold for 60 days.

Internet link: To read more about these issues visit the HMRC website and search for Employer Bulletin 45. Please note this is a large pdf document.

Transferable Tax Allowance for some

posted at: 7:59 am, Posted in API Blog, By david

The government has announced that from April 2015 married couples and civil partners may be eligible for a new Transferable Tax Allowance.

The Transferable Tax Allowance will enable spouses and civil partners to transfer a fixed amount of their personal allowance to their partner.

The option to transfer will be available to couples where one partner is a basic rate taxpayer (earning below £42,285 in 2015/16) and the other partner has unused personal allowances for the year. One individual will be able to transfer £1,000 of their personal allowance to their spouse or civil partner. It will mean that the higher earner will be able to earn £1,000 more before they start paying income tax.

The claim will be made online and entitlement will be from the 2015/16 tax year. Couples will be entitled to the full benefit in their first year of marriage.

For those couples where one partner does not use all of their personal allowance at the moment the tax saving will be up to £200.

Economic update – Nov 1st

posted at: 7:57 am, Posted in Latest News, By david

In the UK, the GfK consumer confidence index edged down in October from -11 to -10, after five consecutive increases. However, the index has improved significantly since the start of the year and remains 15 points higher than its January reading.

The CBI’s October Distributive Trades Survey showed retail sales failed to rise in the year to October, following three months of strong year-on-year growth and disappointing expectations of another robust rise. Nonetheless, sales volumes are expected to return to solid growth again in the year to November.

In Spain, official data showed the economy grew 0.1% in the third quarter of the year, up from the 0.1% fall recorded in the previous quarter and the first growth since Q2 2011. However, output remained 7.4% below the Q1 2008 peak.

Meanwhile in Japan, the manufacturing PMI came in at a 41-month high in October (54.2), up from 52.5 in September (an index above 50.0 denotes improving activity).

BY EDITOR, HRREVIEW – THURSDAY, OCTOBER 10, 2013

  • A quarter of people in the UK (26%) have been diagnosed with depression according to the UK IDEA survey report (European Depression Association (EDA), Impact of Depression in Europe Audit Survey (IDEA Survey), 2012)
  • The wider economic cost of mental illness in England has been estimated at £105.2 billion each year. This includes direct costs of services, lost productivity at work, and reduced quality of life.
  • The cost of poor mental health to businesses is just over £1,000 per employee per year, or almost £26 billion across the UK economy.
  • In 2008/9, the NHS spent 10.8% of its annual secondary healthcare  budget on mental health services, which amounted to £10.4 billion. Service costs, which include NHS, social, and informal care costs amounted to £22.5 billion in 2007 in England.
  • 15% of people in UK have taken time off due to depression according to UK IDEA survey report
  • In the UK were 29.84 million people in employment aged 16 and over from May-July 2013 according to Office for national stats. That means 7.8m working people could have been diagnosed with depression in UK and 4.5m working people in UK could have taken time off due to depression
  • More than 34.6 million employees in the European Union could be at risk of taking time off work due to depression and its cognitive symptoms, with a potential loss of one billion working days.

The Target Depression in the Workplace initiative aims to recommend concrete tools and resources that will enable company executives to better identify and support employees with depression as well as promote good mental health in the workplace.

Senior executives from some of the largest employers across Europe are spearheading a  programme to ‘Target Depression in the Workplace’. A group of major European employers today launch a drive to combat the impact depression and its cognitive symptoms have in the workplace. One in 10 employees in Europe take time off work due to depression, which equates to more than 34 million people at risk of missing work in Europe. This is the first time senior European executives have come together to assess and address depression in the workplace.

“The catastrophic impact depression can have on the individual and their family is well acknowledged, but largely unresolved is the impact depression has on work,” said Professor Martin Knapp, Professor of Social Policy and Co-Director of LSE Health and Social Care. “New research has shown that an average of 36 days is taken off work per episode of depression.  Across the European working population this could mean something approaching 1 billion working days lost to depression.  The economic impact is potentially enormous, and this does not take into consideration the reduced productivity of people who keep on working while they are depressed.

Depression, the leading cause of disability worldwide, has a direct impact on company profit due to presenteeism (attending work whilst ill) and absenteeism (taking time off work). The cognitive symptoms of depression – concentration difficulties, indecisiveness, and/or forgetfulness – are present up to 94% of the time in an episode of depression and cause significant impairment in work function. People with depression report on average 5.6 hours per week of total health-related lost productivity time more than those without depression.

Some of the largest employers in Europe, including Royal Mail Group Ltd, BT Group plc, Barclays, Unilever and Deutsche Post DHL, that collectively employ over 600,000 people in Europe and generate revenues of almost €200 billion annually, have formed a Steering Committee with the aim to come up with concrete action to help other businesses reduce the impact of depression. The Steering Committee includes representation from the Federation of European Employers and the International Labour Organization.

“Mental health is the dominant workplace health issue of our time.  Work can either be beneficial or harmful to mental health and employers can make a major contribution to the wellbeing of society by their actions,” said Dr Paul Litchfield, BT Group plc Chief Medical Officer and Target Depression in the Workplace Steering Committee Advisor. “Combatting depression has been a priority for BT for many years and is an integral part of our Mental Health Framework which has delivered significant business benefits as well as helping very many of our people.  Through the Target Depression in the Workplace initiative, we are looking forward to working with other employers to drive best practice to a higher level and to disseminate it as widely as possible.”

Economic Update – Nov 11th 2013

posted at: 11:10 am, Posted in Latest News, By david

The IMF published its assessment of the global economy in their bi-annual World Economic Outlook (WEO). On the whole, they note that advanced economies have continued to improve while emerging markets have slowed. For the UK, the IMF forecasts growth of 1.4% in 2013 (CBI August forecast: 1.2%) and 1.9% in 2014 (CBI August: 2.3%), both upwardly revised from the previous WEO update (published in July).

While the IMF noted that recent UK indicators signal an improvement in economic conditions, data out this week was disappointing on the whole. Industrial production unexpectedly fell sharply in August, by 1.1%, against a consensus forecast of 0.4% growth. The decline was driven by a 1.2% fall in manufacturing output, which also disappointed consensus forecasts of growth (also of 0.4%).
Meanwhile, the UK’s goods trade deficit narrowed slightly in August (to -£9.6bn), driven by a rise in goods exports to the non-EU. However, the growth was not enough to offset a large decline in July, and the goods trade deficit remains very large – still close to the record in April 2012 (-£10.3bn).

Elsewhere, the Chinese services PMI continued to signal moderate growth in the sector (52.4 in September, down from 52.8 in August). Alongside a broadly flat manufacturing PMI (50.2), the data point to a stabilisation in China’s economy, rather than any material build in growth momentum.

US government shuts up shop – CBI Oct 9th

posted at: 1:59 pm, Posted in Latest News, By david

The US government was partially closed for the first time in 17 years on 1st October after lawmakers
were unable to reach a deal to fund the government past the end of the fiscal year (which in
the US, runs to end-September). For now, neither the Republicans nor the Democrats appear willing
to back-down without securing concessions over broader fiscal issues. Meanwhile, politicians’
attention is increasingly turning to a second deadline looming around 17th October, when
the debt ceiling will need to be raised. The shutdown is expected to knock around 0.1% points off
fourth quarter growth for every week it persists, but the final cost could well be higher.

Government shutdown to drag on fourth quarter GDP
US budget talks failed after an ultra-conservative faction
of the Republican Party refused any deal that did not
include a repeal or delay of the US president’s signature
healthcare reform, Patient Protection and Affordable
Healthcare Act (known as “Obamacare”). There is no
direct link between the passage of the federal budget and
Obamacare, which became law more than three years
ago. Rather, some Congressional Republicans are seeking
political advantage by making a stand over the issue—the
latest in a series of failed attempts to repeal the law.
The shutdown initially saw around 800,000 people in
“non-essential” jobs cease working (out of a total of 2.7m
civilian federal employees ). This represents around 6%
of the civilian workforce. A further 1.3m have been asked
to continue working, with the promise of pay at some
point in the future. Cultural attractions have been closed,
civil court cases delayed, the processing of immigration
and visa applications suspended, and important
economic data releases postponed. Most of the
department of defence’s 350,000 furloughed staff
returned to work after an absence of four days, which
should help reduce the economic impact. Congress has
also decided that the remaining 450,000 or so federal
workers who remain at home would receive full pay
during the shutdown. Government benefits will also
continue to be paid.

With a sizeable majority of federal employees unaffected,
the direct impact of a short-lived shutdown on the
economy should be fairly small. Based on the proportion
of federal government spending going to non-essential
employees, the shutdown could knock around 0.1
percentage points off GDP (on an annualised basis) in the
The US government was partially closed for the first time in 17 years on 1st October after lawmakers
were unable to reach a deal to fund the government past the end of the fiscal year (which in
the US, runs to end-September). For now, neither the Republicans nor the Democrats appear willing
to back-down without securing concessions over broader fiscal issues. Meanwhile, politicians’
attention is increasingly turning to a second deadline looming around 17th October, when
the debt ceiling will need to be raised. The shutdown is expected to knock around 0.1% points off
fourth quarter growth for every week it persists, but the final cost could well be higher.
Economics in focus
October 2013
fourth quarter for every week it lasts. However, this
estimate represents only the direct “technical” effect on
real GDP of lost working hours. The disruption to
government services will clearly have a broader impact.
The closure of the Inland Revenue Service is interfering
with mortgage approvals, for example. Tourism and
airline receipts will be hit by the closures of parks and
museums. Employees of federal contractors may also be
sent home without pay. The longer the shutdown lasts,
the greater the impact on wider economic confidence is
likely to be, which could weigh on household and
business spending decisions, ensuring a bigger hit to the
economy than the estimate of the direct impact suggests.
At the time of writing, there was no indication over
whether the impasse would be resolved within days or
weeks. Since the shutdown began, there have been no
direct talks between Republicans and Democrats to break
the deadlock over the budget. Previous negotiations have
failed to bridge differences between Republicans, who
have been pushing for long-term reforms to major health
and welfare spending programmes, and Democrats, who
are seeking to overhaul the tax code to raise new
revenues and reverse a series of planned spending cuts

over the next decade, known as the “sequester”. With the

stalemate dragging on, legislators now appear to be
eyeing a broader agreement ahead of a second, more
significant deadline looming around 17th October: the
need to increase the debt ceiling to avert a possible
default. However, the precise deadline for these talks is
unclear, which could encourage US lawmakers to engage
in economically damaging brinkmanship.
The debt ceiling is looming large
Since the middle of this year, the US Treasury has been
using “extraordinary” accounting adjustments to enable
it to continue issuing debt and fund the government,
while also respecting the federal government’s debt limit
of $16.7trn. This ceiling is expected to bite from around
17th October, after which time it would have to begin
drawing down a $30bn cash balance, which it maintains
as a minimum buffer. According to the Congressional
Budget Office, this reserve would run out sometime
between 22nd October and the start of November, when
the government faces major spending commitments of
around $70bn. The Treasury could initially prioritise debt
servicing over other spending to avoid the prospect of
missing payments on government debt, but if no increase
in the ceiling is agreed before the end of October, the
government will have to choose between large-scale,
indiscriminate cuts to public spending to effectively force
the federal budget deficit from around 4% of GDP to zero
overnight, or defaulting on its debt. Either result would be
very likely to trigger a chain of events that would tip the
US economy into recession.
But deal on debt ceiling highly likely
A default by the US would be unprecedented, causing
incalculable damage to the US and global economy.
Given the importance of the dollar as a global reserve
currency and of US Treasuries as “safe” asset, a default
would send shock-waves through the global financial
system, leading to widespread selling of US Treasuries, a
spike in US interest rates, a freezing up of credit markets
and a sharp dollar depreciation. The prospect of an
economic recession reminiscent of that in 2008-09 would
be a step too far for even the most conservative
Republican lawmakers, who also want to avoid tipping
the US back into recession by slamming on the fiscal
brakes so suddenly. So a deal seems very likely.
But even if the worst outcome is avoided, brinkmanship
over the coming weeks could cause financial market
economics in focus – october 2013
stress to build and persist for several months, as it did in
the second half of 2011 following a similar tussle over the
debt ceiling (though other factors, such as the sovereign
debt difficulties of Spain and Italy, were also at work). The
experience of 2011 suggests that a deterioration in
financial market conditions could quickly feed through to
the real economy through tumbling equity markets and
the impact on household wealth, and the effect of higher
borrowing costs, lower credit availability and weaker
confidence on consumption and business investment.
Difficult to resolve both budget and debt ceiling
simultaneously

Given the short timescale, it seems unlikely that
Democrats and Republicans will be able to strike a
“grand” bargain that would simultaneously satisfy their
respective positions on spending and tax reforms, fund
the government until the end of the fiscal year and raise
the debt ceiling to a level that would put the issue beyond
debate until after mid-term elections in 2014. Two
previous attempts to reach such a deal have failed and, if
anything, the debate has become more acrimonious since
the shutdown started. Ultimately, it may be public
opinion that forces one side or the other to climb down.
As the prospect of the shutdown loomed, polls suggested
that the US public blamed Republicans. If this remains
the case, John Boehner, the Speaker of the House, may
seek to persuade moderate Republicans to pass a
continuing resolution to fund the government at the same
level as the previous budget, followed by another bill to
raise the debt ceiling. However, if US voters attribute
blame for dispute on “Washington” in general, this could
lead the Democrats to grant some concessions related to
Obamacare, in return pressing for a solution that obviates
the need to raise the debt ceiling again until after midterm
elections.

If, as seems increasingly likely, neither side gives way,
then US lawmakers could opt for a stop-gap solution that
mean the issues of the budget and debt ceiling will need
to be revisited in the coming months. This would ensure
that uncertainty over the direction of US fiscal policy in
the medium-term will persist. In the short-term, however,
such an agreement would likely lock in the spending cuts
from the sequester, confirming existing expectations for
fiscal policy to remain a drag on growth. The CBO’s
central estimates suggest that the cuts would lower real
GDP growth by around 0.6 percentage points in 2014 and
lead to around 800,000 fewer full-time equivalent jobs.

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