Newsletter - April 2007

In this edition:

• Business group issues warning on 'Red Tape Friday'
• Workplace absence 'costs £13.4bn a year'
• Spring sunshine boosts retail sales
• HMRC announces 'tax amnesty' for offshore income
• Inflation rise sparks interest rate fears
• 'Broadband Britain' faces new challenges
• Report expresses concerns over Budget measures
• Business group calls for official recognition of workplace training
• Employers 'should help workers' to quit smoking

Business group issues warning on 'Red Tape Friday'

Red tape remains a key concern for SMEs, with the introduction of 73 new pieces of legislation which came into effect on 6 April, the British Chambers of Commerce (BCC) has warned.

The new legislation includes:

- An extension to the right to request flexible working

- Changes to the Construction Industry Scheme

- New situations in which statutory dispute resolution procedures apply.

Recent research published by the BCC has suggested that while new regulation introduced since 1998 has cost businesses more than £55bn, the Government is failing to properly assess the impact of new legislation on businesses.

Dubbing 6 April 'Red Tape Friday', David Frost, Director-General of the BCC, said, 'Our biggest concern is that the checks are not in place to assess the impact of new regulation effectively. Our research highlights serious cracks in the Regulatory Impact Assessment process which urgently need to be repaired if we are to realise the vision of a globally competitive economy'.

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Workplace absence 'costs £13.4bn a year'

Workplace absence is on the rise in the UK, according to the latest research, which suggests that workers took an average of seven days off sick in 2006, up from 6.6 days in 2005.

This equates to a total of 175 million lost working days, and costs the economy an estimated £13.4bn a year.

The study, conducted by the Confederation of British Industry (CBI), suggests that long-term absence of 20 or more days accounts for 43% of all working time lost, at a cost of £5.8bn.

However, companies which offered rehabilitation programmes and flexible working options were found to have a positive effect on absence levels, by helping employees to return to work.

Meanwhile, short-term absence was shown to be a key concern, with employers suspecting that around 12% of such absences are not genuine.

70% of employers believe that staff are often seeking an unauthorised extension to their weekend, with many sickness days falling on a Monday or Friday.

In addition, 68% of employers identified a link between sick days and holidays, while a further 39% had noted a link between sickness and major events such as sporting tournaments.

Susan Anderson of the CBI said, 'We've all just enjoyed the four day Easter weekend, but there is a culture of absenteeism in some workplaces that must be addressed'.

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Spring sunshine boosts retail sales

UK retailers enjoyed a boost in sales during March, largely as a result of the mild weather, figures from the British Retail Consortium (BRC) have revealed.

Driven in particular by sales of DIY and gardening equipment, and women's clothing, overall sales rose 3.9% on a like-for-like basis compared with March 2006, and like-for-like sales were up 3.5% in the quarter from January to March.

Food sales also strengthened in March, although some retailers still had to offer discounts to encourage consumers to buy some products, such as home and kitchenware.

The BRC has welcomed the news, although it pointed out that the figures may not be quite as strong as they first appear, due to the fact that Easter fell in April in 2006, rather than March, as in 2005.

Kevin Hawkins, Director-General of the BRC, said, 'While these results are obviously welcome, they must be set against the poor sales performance we reported a year ago. Discounting and competition generally show no signs of easing off and many consumers are increasingly wary of making big purchases'.

The news has raised speculation about the likelihood that the Bank of England may increase interest rates at its next monthly meeting.

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HMRC announces 'tax amnesty' for offshore income

HM Revenue & Customs (HMRC) has announced a new Offshore Disclosure Facility for those individuals with undisclosed offshore income, which will enable them to disclose any income and gains not previously included in their tax returns.

Under the scheme, investors will need to pay in full all previously unpaid taxes covering the last 20 years, plus any interest due, and those investors who have earned more than £2,500 will have their penalties capped at 10% of the tax owed.

However, investors must notify HMRC of their intention to make a disclosure by 22 June, and full payment must be made by 26 November. After this time the facility will be withdrawn, and the penalties will rise.

The move follows previous legal rulings which forced five major high street banks to divulge information about UK clients with overseas accounts, and it is expected to raise billions of pounds in revenue for HM Treasury.

We can help with all your tax and financial planning needs – please contact us for advice and assistance.

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Inflation rise sparks interest rate fears

Inflation rose from 2.8% to 3.1% in March, the latest inflation report has revealed, prompting the Bank of England to write a letter of explanation to the Government.

The news came as the pound reached a 26-year high against the dollar, and broke through the $2 mark for the first time since 1992.

Mervyn King, Governor of the Bank of England, was forced to write the letter when inflation rose more than one percentage point above the Government's target of 2%.

According to the Office for National Statistics, the largest upward effect on the CPI annual rate came from food and non-alcoholic drinks.

The news has fuelled speculation of further rises in UK interest rates, with the British Chambers of Commerce describing another rise as 'inevitable'.

Ian McCafferty of the Confederation of British Industry said, 'Looking forward, the headline rate of inflation is almost certain to fall later this year as previous energy price rises drop out of the calculation. The Bank will be concerned, however, that continued strength in the economy will leave core inflation at an uncomfortable level'.

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'Broadband Britain' faces new challenges

Britain must take steps to upgrade its broadband capabilities in the next two years or risk damaging UK competitiveness, a new report has warned.

According to the Broadband Stakeholder Group (BSG), the UK needs to encourage investment in the next generation of high-speed broadband, as existing internet access will become too slow to meet the increasing demands of businesses and householders.

The advisory group warned that pressure on broadband pricing has meant that incentives for building the infrastructure needed for high-speed broadband are 'particularly weak', and the UK's existing telecoms network may be unable to bring new high-speed broadband to much of the population.

The UK currently has one of the highest rates of fast internet connectivity in Europe, with top broadband speeds of 8 megabits per second (mbps), which are set to be increased in the future.

However, other countries such as Germany and France are now trialling broadband speeds of 50 and 100mbps.

Kip Meek, Chairman of BSG, said that if the necessary measures are not put in place now, then it may be 'too late to catch up'.

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Report expresses concerns over Budget measures

A new report has expressed concerns over some of the economic forecasts and targets that were announced in the 2007 Budget.

The Treasury Committee's report on the Budget has highlighted a number of issues, including child poverty, migration and the output gap, the fiscal rules, and projected North Sea oil revenues.

On the issue of child poverty, the Committee welcomed the additional resources announced in the Budget, but said that a 'significant improvement' will be needed during the period of the Comprehensive Spending Review if the Government is to meet its target of halving child poverty over the next four years.

The Committee also expressed some concern regarding the Treasury's forecasting of North Sea oil revenues, noting that the volatility of the revenues poses a risk to overall fiscal planning and forecasting.

Meanwhile, the Committee has called into validity of using the output gap as a primary tool of economic analysis, in the face of the changing character of the UK economy.

The Committee also reiterated its recommendation that the Government reviews its two fiscal rules, with a view to making the golden rule less dependent on the dating of the economic cycle, and giving an account of the circumstances in which it would change its current interpretation of the sustainable investment rule for the next economic cycle.

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Business group calls for official recognition of workplace training

The training provided by employers in the workplace should be officially recognised, according to a new report from the Confederation of British Industry (CBI).

The employers' organisation argues that British workers are being wrongly branded as low-skilled because training schemes undertaken at work are not recognised by the UK qualification system.

The report suggests that UK businesses invested £33bn in staff training last year, but only one pound in every three was recognised with a formal award – despite the fact that as a share of payroll, the investment was the highest in the European Union.

The CBI believes that allowing employers to award nationally recognised qualifications would address this problem, as well as helping to attract more inward investment to the UK.

John Cridland, CBI Deputy Director-General, said, 'UK workers are wrongly branded as laggards in the skills stakes'.

'The qualifications framework must give official recognition to the training provided in many firms and ensure that the skills of UK employees are accurately reflected, as both Lord Leitch and ministers recognise.'

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Employers 'should help workers' to quit smoking

The National Institute for Health and Clinical Excellence (NICE) has called on businesses in England to help workers to give up smoking, ahead of the forthcoming smoking ban.

With effect from 1 July 2007, smoking will be outlawed in all enclosed and substantially enclosed workplaces and public places in England. The new rules follow the introduction of similar legislation in Scotland, Wales and Northern Ireland earlier this year.

Smoking currently costs businesses an estimated £5bn in absenteeism, lower productivity, and fire damage caused by cigarettes.

NICE has made a number of recommendations, including the suggestion that employers should allow workers paid time off so that they can attend 'stop smoking' clinics.

However, pro-smoking organisation Forest has warned that this could cause resentment among those workers who do not smoke.

Employers are advised to ensure that they have in place an appropriate policy on smoking, ahead of the new regulations.

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