The latest news from the financial sector.
Osborne faces-off with EU
On his first day representing the new British coalition government in Europe, Conservative Chancellor of the Exchequer, George Osborne, told his new partners it is “unacceptable” for Brussels to demand a 6 per cent increase in its 2011 budget at a time of crisis and belt-tightening.
Commenting on the suggestion he said: “I put to [fellow ministers] that there should be a cash freeze for 2011 in the budget, given what many member states are having to do.”
US economy falters
The pace of the US economic rebound may be slowing, manufacturing data suggested on Monday, as concerns grow about the impact of Europe’s debt crisis on global growth. The New York Federal Reserve said its gauge of manufacturing in New York state showed the pace of growth slowed in May, though the jobs index component rose to its highest level in about six years. “This is just confirmation that the recovery is not exactly robust,” said Peter Kenny, managing director of Knight Equity Markets in Jersey City, New Jersey.
Industry needs clarification
Britain’s manufacturers have urged the new coalition government to move swiftly to set out a credible plan for reducing the public sector deficit and a vision for creating a new economic model and a more balanced economy with a stronger role for manufacturing. Commenting, EEF the manufacturers’ organisation Chief Executive, Terry Scuoler, said: “Industry will be relieved that the uncertainty of the last few days is behind us. But now it needs to see clarity from government on how it will tackle the big issues such as reducing the deficit and rebalancing the economy. This new model of government gives it a great opportunity to think and act differently in how it approaches these major challenges. It is vital that it now grasps it.”
Acquisitions on the cards
Despite turbulence in the Euro-zone and increased levels of volatility in the equity markets, activity is building up in the manufacturing sector. Barclays Corporate reports that it has seen increasing numbers of companies approaching the bank for acquisition financing, pointing to large acquisitions on the horizon. According to the bank, “the financing behind these deals is shifting from debt funding, as was seen in the past, to more broad funding packages incorporating bonds, US private placements and new equity. Companies that have developed a long-standing strategic approach to growth are looking at the financial benefits of enacting their plans in the current environment of distressed pricing, and beginning to make their moves. As ever with acquisitions businesses should be careful to ensure that their actions fit within their wider business plan and not just buy on price.”
The need for new tax
The Engineering Employers Federation has urged the new Government to grasp the opportunity for tax reform, claiming that the current system was “close to breaking”. The EEF complained that taxes were tilted against manufacturing and stood in the way of promoting investment and innovation. The EEF said taxes needed to encourage manufacturing investment and be competitive enough to attract international companies to the UK. Director of Policy Steve Radley said: “The current tax system is not fit for purpose, is close to breaking and simply cannot deliver an economy that allows the UK to pay its way and generate the wealth necessary to repay our debts.
Corporation tax cut welcomed
Commenting on George Osborne’s speech at the CBI Annual Dinner on May 19, Stephen Herring, Senior tax Partner, BDO LLP said: “We warmly welcome the Chancellor’s commitment to cut the rate of corporation tax significantly; this should include an immediate cut to 25% with further reductions to 20% during the lifetime of this Parliament.
Indeed, we have consistently argued that the single most important feature of the UK tax system for businesses is to have a competitive headline corporation tax rate; it is a shame that we had to fall behind the likes of Sweden, Denmark, Ireland and much of Central Europe in this respect.”