Tag Archive | "bcc"

Will the base rate remain at 0.5% for the rest of 2011?


Savers and online accountants who have been hoping to see the Bank of England’s MPC raise interest rates sooner rather than later will be dismayed to learn that the Institute of Directors has said there is no case for rates to rise this year.

It said that it would be an unprecedented move to raise rates when the broad money supply was not experiencing double digit growth. Furthermore, a rise now could plunge the UK back into recession.

The BCC and the CBI both supported the decision to keep the base rate at its historic low 0.5% at the last MPC meeting.

David Kern, the BCC’s chief economist, said the MPC was right to keep the base rate down in order to help the fragile economic recovery and relieve some of the pressures both individuals and businesses are currently facing.

He went on to point out that the MPC is concerned about the current high rate of inflation and the prospect that it may rise further in coming months. However, it would be a major mistake to tighten policy at this stage. Increasing the base rate prematurely could damage economic growth and lead to more redundancies.

He added that the MPC could consider increasing the quantitative easing programme if the economy were to weaken any further.

The CBI’s chief economic adviser, Ian McCafferty, said the MPC was in a difficult position and will have to draw a fine balance over the coming months. However, he feels that if inflation reaches 5% by the autumn, the MPC might consider a change of policy before the year ends.

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90% of Britains think the economy is in a bad state


Only 10% of people in Britain think the economy is good, ranking us amongst the gloomiest nations in the world, according to a new survey.

24 of the world’s largest economies were polled and it transpired that Japanese and Hungarian citizens were the only nationalities that were more negative than us. And the Japanese have a good excuse after suffering the massive earthquake and tsunami earlier this year.

In contrast, at least 70% of citizens in Australia, China, India, Saudi Arabia and Sweden think their country’s economy is good.

The majority of us can’t see a light at the end of the tunnel either. Only 10% expect the economy to strengthen over the next six months.

The survey was conducted by Ipsos MORI and its MD, Bobby Duffy, said the level of gloom was understandable. We have absurd house prices and the cost of living is rising a lot faster than earnings. It is not surprising that people feel pessimistic and this will impact growth.

It’s not only the man in the street who feels less than happy about the state of the British economy. The BCC has now downgraded its expectations for growth for this year and next.

The Chamber has knocked 0.1 percentage points off its GDP forecasts and at the same time increased the forecasts for annual CPI inflation.

In slightly better news, the organisation now expects just 2.6 million people to be unemployed 15 months from now, instead of the 2.65 million it predicted 3 months ago.

The director general of the BCC, David Frost, said the economy still faces difficult challenges. However, he believes the coalition is right to continue with its plans to reduce the budget deficit. But, the government must also come up with policies that enable businesses to drive the recovery, he added.

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Contractor accountants could be in demand this year


Accountancy recruitment is continuing to increase according to the latest Ashdown Group Jobs Index.

The profession registered a 13.52% rise in recruitment during December and January and a 5.95% increase last month.

The BCC and the CBI have predicted Q1 economic growth and as business confidence returns to the marketplace companies will be looking to increase their headcounts. Financial professionals will be in demand as their numerical ability is vital for businesses looking to implement sustainable growth strategies.

Ashdown’s director, John Lynes, said it is not clear whether churn or departmental expansion is responsible for the increase in vacancy numbers. He pointed out that the considerable growth in online recruitment has made it easier for financial professionals to apply for new positions. Whatever the reason, more accountancy positions are now available.

He continued by saying that unless large numbers of accountants are quitting the profession, the trend points to new hirers. This bodes well for contractor accountants this year, both in terms of prospects and the ability to command higher rates.

Meanwhile, entrepreneurs are concerned that limited company contractors may be receiving poor business development and marketing advice from their accountants.

On the whole, accountants do not understand marketing and business development. Robert Craven, a marketing consultant, said a lot of accountants appeared to be interested solely in surviving and are making no attempt to win new business.

It has been suggested that this lack of interest in marketing could lead accountants to give aggressive cost-cutting advice to business owners.

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Employers want the employment tribunal system reformed


A new survey conducted by the CIPD has discovered that more than 50% of employers want to see changes in the law so that it is easier for them to sack members of staff.

69% also believe that employers are not protected against unjustifiable employment tribunal claims. 60% said an employee had claimed against them for unfair dismissal and added a claim for discrimination in the hope that they would get more compensation.

The employee relations adviser at the CIPD, Mike Emmott, said that a large number of employers feel the tribunal system has broken down. There have been many attempts to find a solution in recent years but the volume of claims continues to increase.

The survey also found that plans to increase the minimum period employees work before they are allowed to claim unfair dismissal to 2 years is not likely to dramatically reduce the number of claims. Currently an employee can claim unfair dismissal after 12 months. Many of the claims that come before the tribunal are linked to discrimination and that claim can be made as soon as a person starts a job.

An increasing amount of employers are making compromise agreements, whereby they pay compensation in return for the employee not taking the case to a tribunal. The BCC published research earlier this year showing that the average compensation was £5,400 whereas the average tribunal award was £8,500.

The TUC has warned the government over reforming the tribunal system saying any change must make it more effective for the thousands of employees who are wronged at work to receive justice. Employer groups complain about the costs of tribunals but if they treat staff properly, employees would not need to seek redress.

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Companies are completely confused by government regulations


The continual changes to employment and tax regulations are leaving companies confused, stifling the country’s competitiveness and hindering job creation.

61% of businesses are unclear as to what is classed as tax avoidance and what constitutes legitimate tax planning and 33% believe they are treat as guilty by HMRC until they can prove their innocence, according to BDO LLP.

A large proportion of UK companies think the current tax framework is to complex and the situation is made worse by HMRC’s aggressive stance. Companies feel they now need to spend more time on their tax affairs instead of focusing on growing their business. Dealing with the Revenue has become more of a burden in the last five years, according to 65% of business leaders and 88% think things would be much easier if the tax rules were simplified.

Employers also have to fight their way through a ridiculous amount of employment legislation. David Frost, the director general of the British Chamber of Commerce, said that there was a growing consensus that employment law is weighted in favour of employees. A lot of employee rights have been implemented as a result of EU legislation but European labour markets are very different to ours.

The UK government should be prioritising job creation as this will lead to future prosperity. Mr. Frost said the coalition must desist from implementing any new employment laws for the next three years and cancel the 1% increase in employer NICs in order to encourage companies to recruit more staff.

Over the next four years, BCC estimates show that new legislation and tax will cost UK employers £25.6 billion.

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Are contractor accountants held back by employment legislation?


Contractor accountants should be aware that the government is planning to overhaul the UK’s employment laws in order to help the economic recovery.

One of the proposals, which has already provoked fury, is to allow firms to fire employees who are underperforming during their first two years of employment, without the threat of facing an unfair dismissal tribunal. Under the current regulations, an employee can seek redress from an employment tribunal if they are sacked after 12 months.

The coalition is also looking into the system of tribunals at present. Business groups, such as the BCC are urging for immediate reform but the TUC suggested that workers could be discouraged from seeking justice if major changes are implemented.

Union leaders are also concerned that increasing the qualifying period to two years could give a green light to unscrupulous employers to break the law.

The coalition is likely to launch a consultation into the future of tribunals after business groups complained that there was a 56% increase in the number of cases in 2010.

One possible solution would be to charge claimants a deposit of up to £500 which would be refunded if the case was successful. But the TUC argues that this will deter low-paid workers from seeking justice.

Meanwhile, Vince Cable, the business secretary, has been asked to look into whether small businesses could be exempted from some employment regulations but any such changes could see the government in hot water from the EU.

David Cameron wants to see new jobs created this year in order to boost the economic recovery and whilst large companies have promised to do exactly that, smaller firms need more encouragement. Reforming the employment tribunal system and reducing the red tape for small businesses could go a long way towards providing it said David Frost from the BCC.

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What does 2011 have in store?


Contractors could be amongst those set to benefit from internal skills shortages at UK firms as we go into 2011.

The Chartered Management Institute recently said that 43% of managers in the UK think they cannot fulfil their objectives for next year with the staff they currently have. As a direct result, 48% are expecting to make further redundancies in 2011. This could lead to openings for highly-skilled limited company contractors as companies look to complete tasks without increasing the size of their permanent workforce.

The CMI’s chief executive, Ruth Spellman, said that 2010 has been a very difficult year for managers and in many cases they have had to deal with the difficult conditions without a suitable team.

There are also conflicting reports on the state of the UK economy and its jobs market. The latest figures from the ONS show that unemployment reached 29.13 million in the quarter to October. 33,000 of the 35,000 job losses were in the public sector which is to be expected considering the government’s austerity measures.

The CIPD says the figures bring no joy to jobseekers and its chief economic advisor, Dr John Philpott, said the data was far worse than expected. He believes the jobs market has run out of steam which does not bode well for prospects in 2011.

The British Chamber of Commerce, on the other hand, said that whilst the figures were disappointing, they gave no cause for despondency and longer-term trends point to a strong labour market.

The REC was also disappointed by the latest figures. Kevin Green said that employers are still cautious about hiring new employees but he still believes growth will return to the jobs market in the New Year. However, contractors, temporary staff and interim workers are likely to play an important role in helping businesses meet increased customer demand.

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2011 looks encouraging for most industry sectors


Contractor accountants with clients operating in or relying on a number of UK sectors will be pleased to hear of some positive growth.

For example, new research from the EEF shows that the UK’s manufacturing sector reported strong output and good order balances in quarter three.

Manufacturers have already started hiring new staff and making new investments which will undoubtedly come as welcome news for contractors. Ms Lee Hopley, the chief economist at EEF, said that the manufacturing industry was ending 2010 on a high and this will provide the sector with a strong footing to begin the New Year. EEF also predicts that manufacturing and engineering will outperform other contributors to the UK economy in 2011.

It’s not only the UK that has witnessed this welcome boost in manufacturing either. Markit Economics recently reported that last month, the manufacturing sector across Europe increased at its fastest rate for 4 months.

But manufacturing isn’t the only sector planning to expand next year. Research by PwC shows that 28% of firms in the UK intend to increase recruitment in 2011. In addition to manufacturing, the technology and services industries should see vigorous recruitment, the study showed.

The recent Growth Review from the government also contained encouraging news for a lot of UK contractors.

David Frost, from the British Chamber of Commerce, said that enterprises will be reassured now that the focus is to return to balanced, sustainable growth. The review talks about creating a framework for growth and also acknowledges the vital contribution made by SMEs. However, it remains to be seen whether the coalition can bring down the barriers that have been preventing firms from thriving.

One piece of not so positive news regarding the service sector has come from the CBI. Although professional and business services have remained steady over the past few months, consumer services have tumbled. The CBI cited reduced consumer discretionary spending as a contributory factor along with rising costs and falling prices.

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What now for contractor accountants in depressed areas?


Vince Cable confirmed this week that 24 local enterprise partnerships have been given the go-ahead, a move welcomed by the Federation of Small Businesses.

Whilst the FPB is pleased by the announcement, it has called on the LEPs to make sure SMEs are put at the heart of local communities. The policy chairman at the FSB, Mike Cherry, said the Federation has always encouraged local businesses and local authorities to work in partnership and therefore the setting up of these LEPs is a logical step.

Cherry believes that small businesses must have a genuine involvement in decision making and business activity if the partnerships are going to be successful. LEPs will not work if civic leaders simply pay lip service to the SME sector, he added.

The Regional Growth Fund, which is designed to support private sector job creation in areas that currently depend on the public sector, was also declared open for business this week. The fund has a pot of £1.4bn and Vince Cable said he was delighted to see so many imaginative proposals to help drive economic growth in local communities.

David Frost from the BCC thinks these moves are a good start but explained that LEPs must concentrate on getting the basics right in order to give businesses greater confidence to invest and create new jobs.

However, not everybody is confident that the new initiatives will be successful. Mark Prisk, the business minister, believes that many LEPs lack focus and will fail to help economic growth. In a leaked letter to Vince Cable, Prisk said that the business community felt many LEPs do not have the ambition necessary to make an economic impact.

Shadow business secretary, John Denham, is also critical of the government’s plans saying that almost 800,000 businesses have been excluded. 60 local partnerships applied to become LEPs and because only 24 have been approved in the first wave, 21 million people will not be covered. Denham said the plan for growth is a shambles and leaves massive areas with no organisation to support economic development. He thinks that this proves the coalition has given up on growth.

More than 75% of inhabitants in the North-west and Yorkshire and Humberside will be covered by an LEP whilst only 26% of people in already depressed areas like the North-east will be in an LEP area.

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