UK construction sector grows for second consecutive month

Markit/CIPS construction PMI hits highest level since May 2012, fuelling hopes for faster economic growth

The UK's construction sector grew for a second month in June, boosted by a rise in house building and supporting expectations that economic growth accelerated in the second quarter.

Growth in output and new orders pushed the Markit/CIPS construction purchasing managers' index (PMI) to 51 from 50.8 in May, where anything above 50 indicates expansion. It was the highest level since May 2012.

Companies reported rising levels of client demand and larger volumes of new work.

Economists said the positive data raised the chances of stronger second-quarter growth than the 0.3% in the first three months of the year.

The positive news will be welcomed by the Bank of England's new governor, Mark Carney, who will oversee his first monetary policy committee decision on Thursday.

"June's construction data is one of the final pieces in the puzzle when it comes to survey evidence for second-quarter UK economic performance, and the sector's upturn adds to the upbeat news flow ahead of Mark Carney's first policy meeting at the Bank of England later this week," said Tim Moore, senior economist at Markit.

Construction sector employment rose for the first time since FebruaryHousing construction grew at the strongest rate in June according to the PMI, helped by the government's incentive schemes, although growth slowed to 51.5 from 54.4 on the index.

Commercial and civil engineering activity hit 50.1 and 50 respectively, improving after several months of contraction.

Employment in the sector rose for the first time since February and at the fastest rate since September, driven by the rising levels of new work and an improved outlook.

Howard Archer, chief UK economist at IHS Global Insight, said that although the positive survey reinforced the likelihood that the MPC will not announce additional stimulus this week, more quantitative easing was possible in August.

"This reflects our belief that Mark Carney is likely to be keen to build up escape velocity from extended economic weakness," he said.

Article Source : http://www.guardian.co.uk

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Mark Carney urged to kick start lending to small businesses

BBC ask Carney, who takes over from Sir Mervyn King today, to help sustain economic recovery by supporting small enterprises 

Business leaders urged Mark Carney on Sunday to back a £1bn investment bank at his first meeting as governor of the Bank of England to kickstart lending to small businesses.

The British Chamber of Commerce (BCC) also called on Carney, who takes over from Sir Mervyn Kingon Monday, to inject further funds into the economy as part of its quantitative easing (QE) programme to maintain the UK's fragile recovery.

BCC director general, John Longworth, said Carney needed to find ways to channel money to manufacturers and smaller enterprises or risk the recovery running out of steam.

"While we are seeing signs of a stronger recovery across the business community, we have no illusions about the challenges ahead for the UK economy," he said.

NEF spokesman Tony Greenham says Mark Carney’s arrival is the perfect opportunity to review the remit of our central bank.The Bank of England's interest rate setting committee is expected to reject boosting QE beyond its current £375bn level at its monthly meeting on Thursday, despite the arrival of Carney amid a welter of expectations that he will spur his colleagues into action.

City analysts agree that the monetary policy committee will hold its fire until the publication of a review in August of its policies, which will broaden its remit and encourage committee members to adopt a more radical mix of initiatives.

A report by the Bank's officials into the prospects for rising prices is also likely to show inflation falling over the next two years, giving the MPC more leeway to boost QE.

The chancellor wants the committee to take a more active role in encouraging lenders to promote borrowing to the wider economy. He has already allowed the committee to adopt a more flexible view of how to meet the 2% inflation target.

A report by the CBI and the accountants Price water house Coopers into the health of the financial services industry appeared to support the view that the banking sector is returning to health. It found that banks recovered strongly in the three months to the end of June after long period of cost cutting following the 2008 crash, though with lower profits and further cuts in employment.

However, the BoE's own figures show that RBS and Lloyds have reduced the amount of money they lend to households and businesses, while Barclays has threatened to cut back following demands from the main City regulator that it must bolster its reserves. Meanwhile the Co-op, which until earlier this year planned to take over 600 Lloyds branches, is in trouble after discovering a large shortfall in its capital reserves.

A funding for lending scheme designed to cut the cost of borrowing has pushed down the cost of mortgages since it was launched last year, but has so far had little effect on business lending.

A leading thinktank called on Carney to bypass the main banks with a direct intervention into the housing industry to support the building of 60,000 homes.

The New Economics Foundation said that instead of using quantitative easing to buy government bonds, the BoE should buy assets that will directly support the economy, which would mean purchasing bonds to support home building and energy efficiency, infrastructure projects and small business lending.

A foundation spokesman, Tony Greenham, said: "It's time for the Old Lady of Threadneedle St to get some new clothes. Mark Carney's arrival at the Bank of England is the perfect opportunity to review the remit of our central bank.

"Measures like QE and funding for lending are not providing the investment boost our economy clearly needs. Strategic QE can enable the Bank of England to maintain independence and control over inflation whilst more effectively supporting the government's economic objectives."

Greenham said Carney should adopt a new monetary allocation committee that would redirect central bank funds for investment in green projects and house building.

Like the BCC, the thinktank also backed funding for an investment bank.

"The funding for lending scheme uses public money to give cheap loans to banks to persuade them to lend to small businesses. Strategic QE could make loans to a British Business Bank, set up specifically to support lending to SMEs.

"Capitalising the green investment bank and British business bank so they could reach a scale similar to the investment banks of our major competitors like Germany, Brazil and Scandinavia would be a good place to start," Greenham said.

Article Source : http://www.guardian.co.uk

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Government to end tax scheme as part of energy company crackdown

Government announce plans as chancellor accuses gas and electricity distributors of trying to game the tax system

Fresh attempts to crack down on alleged abuse by energy companies were underway last night with the UK government announcing plans to end a £900m "windfall" tax scheme, and a further inquiry into BP over possible fuel price fixing in Spain.

In the middle of a series of existing investigations into alleged petrol and gas price manipulation by regulators, the chancellor, George Osborne accused gas and electricity distributors of trying to game the tax system.

"It is completely unacceptable that utility companies think they can claim for huge amounts of money, that business customers have already covered the cost for. By legislating today, we will prevent utility companies from making these claims, ensuring fairness for British taxpayers."

The Exchequer claims that energy distributors have only recently started to try to claim "windfall" capital allowances for costs dating back decades. The draft legislation, introduced yesterday, will form part of the current Finance Bill but will be acted on by the tax authorities with immediate effect.

George Osborne believes, 'It is completely unacceptable that utility companies think they can claim for huge amounts of money'

It is only a matter of weeks since some of the big six companies such as RWE npower admitted to a House of Commons select committee that they had paid almost no tax and yet made huge profits from recent earnings. The energy companies claim that this is because they are investing billions of pounds on new power plants which can be legitimately "written off" against capital allowances.

But Osborne's move also coincided with Spanish competition authorities announcing they were investigating BP and two local firms, Repsol and Cepsa, for possible collusion in the raising of local fuel prices.

The local regulator, CNE, said it had been keeping a watch on the oil sector since witnessing a significant rise in power prices. The initial inquiry does not imply wrongdoing at this stage but if found guilty, BP and others could be fined 10% of total sales, CNE, explained. BP said it could not comment but is committed to helping the authorities with any inquiries.

The British oil company is already in the middle of a wider price manipulation investigation being undertaken by the European Commission through a series of dawn raids only two weeks ago.

The offices of two rival groups, Shell and Statoil of Norway, plus a price reporting agency, Platts, were also targeted by staff working for the competition authorities in Brussels.

The pressure on oil, gas and electricity companies has partly mounted over recent years as they have continued to make increasing profits through higher prices at a time when customers are being hit by recession.

But there is also increasing concern that the energy markets are not regulated toughly enough and are open to the kind of Libor- interest rate abuses for which the large banks have been fined hundreds of millions of pounds.

The gas and electricity market in Britain is dominated by big six companies such as Centrica, the owner of British Gas, SSE and Scottish Power many of which have been fined by the regulator, Ofgem, for mis-selling or other breaches of their license agreements.

Not all of the big six own the kind of distribution companies that have being tried to take advantage of the tax loophole being closed by the government. The Treasury declined to say which of them had been trying to claim extra allowances and some industry experts said they had been encouraged to do so by some of the big four accounting firms.

But the government was recently embarrassed when it was highlighted that the former head of RWE npower, Volker Beckers, since January was working as a non-executive director for HM Revenue and Customs.

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Article source : http://www.guardian.co.uk

One tax law for us and another for Amazon

Britain's reluctance to pursue multinationals risks turning us into another Italy

On the edge of Rugeley stands Amazon's largest distribution centre in Britain. Life for the workers who trudge around the 800,000 sq ft warehouse is not as bad as it was for the men who once worked in the pits of the Stafford shire coalfield, but that is not saying much. They must carry satnavs, which direct their movements round the stacks and flash warnings from managers to stop dawdling or chatting with colleagues. Britain being the way it is, they have no job security.

Trade unionists call the Amazon shed a "slave camp". But whatever arguments they have with Amazon's management, one point should be beyond dispute – Rugeley is in Britain. British customers send Amazon their money. British workers package their goods and send them off in vans along roads built and maintained by the British taxpayer. If workers steal – and before they can go home or visit the canteen, they must walk through airport-style security scanners to prove they have not – Amazon will call on the taxpayer-funded police to arrest them and the taxpayer-funded criminal justice system to prosecute them. Admittedly, Amazon's buyers who supply the stock are based in Slough rather than Rugeley. But the last time I looked Slough was in Britain too.

Amazon.co.uk is a UK company. It has to be. An online retailer cannot relocate offshore. It needs local distribution centres to service local markets, otherwise the costs of moving its stock would be ruinously expensive.

Yet Amazon pays just £3.2m tax on sales of £4.2bn because the Revenue allows it to get away with arguing that it should be taxed in Luxembourg. The same lack of connection between corporate tax status and commercial reality applies to Starbucks, Google, Vodafone,Goldman Sachs and every other company the British state allows to dodge tax.

The traditional defence that companies just take advantage of legal loopholes and you would "do the same in their position" falls apart in a country where the tax regime defies the evidence of our eyes. Leaving all other considerations aside, you will never be "in their position".

If you want to understand any society, look at its tax system. If one man or a clique can tax at will, you can conclude the society is a dictatorship or oligarchy. If you have reasonably progressive and universal taxes, you can assume it is a modern democracy. Britain has elements of democratic taxation. The same rules on occasion apply to everyone. But other parts of the system resemble the ancien régime of pre-revolutionary France. Only in our case the privileged estates the government exempts from taxation are the corporations rather than the aristocracy and the church.

For a generation, politicians have extended exemptions by selling Britain as a country where big businesses would be lightly taxed. When I put it like this, I make the policy sound too cool and rational. The process was far more emotional than that. Tycoons enchanted politicians. They convinced them that their interest and the national interest were as one. So deep was the ideological capture of the top of the British state that corporations have not on the whole had to corrupt ministers.

No one has accused Gordon Brown of taking bribes, to quote the most egregious example. But in his abject period as chancellor, Brown ensured that his friends in private equity were taxed at a lower rate than their cleaners. One might have thought that the crash of 2008 would have discredited the notion that all will be well if we let capitalism run riot. Not a bit of it. George Osborne invites multinationals to advise him on how to tax multinationals. At their behest, he allows companies to move money to tax havens and then deducts the costs of their shady transactions from their British tax liabilities. The result of two decades of special treatment for vested interests can be summarised in one statistic. Between 1999 and 2011, British companies' profits increased by 58% but revenues from corporation tax increased by just 5%.

An Amazon warehouse, where workers carry satnavs 'that flash warnings from managers to stop dawdling'

To understand the scale of the avoidance, it is not enough to look at the permissive laws, however. Richard Brooks's The Great Tax Robbery is close to being this year's indispensable book because, as a former tax inspector turned Private Eye journalist, he has the material to show how the wealthy are exempt from what few laws apply to them.

"Dear Saddam," ran a spoof letter doing the rounds of the Revenue in the run-up to the Iraq war, "we are trialling a new weapons inspection regime modelled on the Inland Revenue's approach to large corporate taxation. All you have to do is tell us you don't have any and we'll go away."

One inspector said in his bitter farewell speech that he once thought that the Revenue's advertising slogan "tax doesn't have to be taxing" was a bad pun. "Now I realise that for big business it meant what was said on the tin."

British politicians and a series of negligent and doltish managers ordered the Revenue to back away from big business. In his justifiably notoriouss peech to the Confederation of British Industry in 2005, everyone remembers Gordon Brown promising "light-touch" regulation for a financial services industry that was already careering towards bankruptcy. We forget that he went on to say that he would apply a light touch to "the administration of tax" for big business as well.

The Revenue itself promises corporations that, rather than doing its job and collecting monies owed, it will follow a "customer-focused supportive and enabling approach". Or as Dave Hartnett, the former permanent secretary for tax, who cut sweetheart deals with Vodafone and Goldman Sachs, explained it in 2010, Britain had a "non-confrontational" approach.

I have written before that the willingness of New Labour, the Tories and the Revenue's senior managers to pursue the working and middle classes while exempting powerful corporations would turn the British into Italians. We would start to believe that tax evasion was respectable. We would view a state that hit the ordinary man and woman while sparing big business as immoral and illegitimate. That moment is drawing closer. The old complaint that there is one law for the rich and another for the rest does not do justice to the debasement of public authority in Britain. When it comes to tax, too often there is no law for the rich whatsoever.

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Article source : http://www.guardian.co.uk