Corporation tax to hit 25% as UK retail hit by pandemic

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Latest news

• U.S. private employers added fewer jobs than expected last month, a sign of the uneven nature of the labor market recovery

• Covaxin, a vaccine developed by India’s Bharat Biotech and effective against the ‘British variant’ of the virus, has achieved 81% efficacy in late-stage trials

• Brazil’s economy shrank 4.1% last year, one of the best performers in Latin America, thanks to a major fiscal stimulus

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Coronavirus bill hits £407bn

UK Chancellor Rishi Sunak today pledged to do ‘whatever it takes’ to support UK businesses by revealing the extent of the pandemic that has hit the UK and outlining measures to restore the businesses on the ground.

Sunak’s budget speech — the government’s annual unveiling of its tax and spending plans — was largely a matter of “spending now, taxing later.” The government’s bill to tackle the crisis has been set at £407billion, with the economy still set to shrink by 3% in five years. “The amount we borrowed is only comparable to the amount we borrowed during the two world wars,” Sunak said. “It will be the job of many governments, for many decades, to repay it.”

A jump in corporate tax from 19% to 25% from 2023 will be of great interest to international investors. Assuming the US raises rates as President Joe Biden promised, Britain’s overall rate will still be the lowest in the G7, Sunak said, but the amount the UK collects from businesses in terms of share of GDP will be higher than many of its peers.

In the short term, companies will be entitled to a “super deduction” for tax purposes in the hope that they will present investment plans. Sunak also announced the location of eight “free ports” with relaxed tax and planning regimes.

Several emergency pandemic measures – such as the furloughed jobs support scheme and business rate assistance – will be extended while new business support includes restart grants and “recovery loans” until ‘at £10m as they are allowed to reopen.

Despite the success of its vaccination programme, the UK has been hit proportionately harder by the pandemic, both in financial terms and in terms of the Covid-19 death rate, a point raised by Labor leader Keir Starmer in response to the speech. “Whatever spin the Chancellor tries to put on the numbers today, as a result of his decisions, we have suffered deeper economic damage and far worse outcomes,” he said.

Join FT experts Thursdays at 11am UK time for a discussion on how the budget will affect businesses.

Key links

Mondial economy

The Senate debate over Biden american revival proposals are due to begin today, but passage is still far from certain, with all Republicans opposed to the bill. Also in the United States, our Big Read examines the effect of the pandemic on the real estate market. Creditors continue to be patient with assets they believe will recover once the crisis subsides.

australia Treasurer Josh Frydenberg told the FT that global stimulus efforts risked causing financial instability, especially once interest rates started to rise again. The country will be one of the first advanced economies to start withdrawing stimulus when it winds down its wage subsidy program this month. Chief economic commentator Martin Wolf says central banks are right to focus on inflation targeting.

Our Brussels Briefing newsletter reports EU plans for its “unique social and economic model” as it prepares to extend the emergency suspension of its pandemic fiscal rules. Disappointing employment and retail data point to the likelihood of a double-dip recession in the Eurozone.

Business

Proposals for digital health passports have sparked debates about exclusion, discrimination and privacy, writes editor Peggy Hollinger, but anything that helps an economy get back on its feet should be welcome, she says. The question is how the idea will be implemented: companies need a unified approach.

An additional $15 billion in government aid and the extension of a job support program through October may still not be enough to American airlines operating on autopilot, reports Chicago correspondent Claire Bushey. Passenger traffic in the United States is still at a third of 2019 levels and the global recovery is not expected before 2024. Ryanair Chief Michael O’Leary has become much more optimistic about Europe’s recovery, predicting passenger numbers will reach more than two-thirds of normal levels by this summer.

High capital investment Leaders such as Blackstone’s Stephen Schwarzman and Apollo’s Leon Black were huge beneficiaries of central bank stimulus to support the struggling US economy last year, receiving $625 million and at least $225 million. Many are entitled to “carried interest”, giving them a share of the profits on successful investments, in addition to exceptional dividends when they are also shareholders.

Markets

The recent turmoil of US Treasuries and the drying up of liquidity reinforces calls for regulators to fix the problems of the world’s largest debt market. “For the so-called risk-free asset of the world – the asset that is supposed to be the one that protects us every time – it should be horrifying for this to happen,” said one academic.

Gold is losing some of its luster as the improving economic outlook means investors feel less need to hold the safe-haven asset. It also faces competition from cryptocurrencies which some see as a hedge against inflation.

Citi’s David Lubin warned of the dangers of the “copier economy” in Emerging Markets. Their lack of monetary credibility meant aping fiscal expansion in advanced economies and central bank support was fraught with pitfalls, he said.

Essential

Browse our collection of features to enhance your Mental Health — from meditation to motivation and better breathing.

Have your say

Urbanfox Comments on Employers aiming for hybrid working after Covid-19 pandemic:

As a Big Four consultant, about 50% of the people I work with want to work 100% from home. . . about 30 percent want a hybrid and 20 percent want to return to the office full-time. . . def a huge shift in mindset needed on the part of employers. People love working from home a lot more than they think, and the option to work 100% from home will become a key recruiting tool in a very tight market. . . winners (most like tech companies) will realize this quickly

final thought

Global crises will never defeat our primal urge to dance, writes Will Coldwell. “When we can’t dance together, we miss more than just a night out and a hangover, but something that goes to the heart of what it is to be human.”

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