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Private-sector hiring intentions reach 19-month high
BDO’s Employment Index has hit a 19-month high, indicating a resurgence in private-sector hiring intentions, according to the latest Business Trends report by accountants and business advisers BDO LLP. The index, which measures businesses’ hiring intentions over the next two quarters, reached 96.0 in March, the highest since August 2011. This is the third consecutive month that the index has been at or above the crucial 95.0 level that indicates employment growth. This suggests that businesses will help to offset the effects of expected public-sector job cuts, providing a timely boost for our ailing economy.
Despite this, businesses still do not anticipate economic growth in the next two quarters. BDO’s Output and Optimism indices – which predict short-run turnover expectations and business performance a quarter and two quarters ahead – sit at just 93.0 and 92.2 respectively. These figures remain well below 95.0 (the level that indicates growth) which suggests economic conditions will remain tough until at least mid-2013.
More encouragingly, service sector confidence moved up substantially, with optimism increasing to 93.2 from 89.6 in February and output rising to 93.2 from 91.5 last month. While these March indices are still below the 95.0 mark, these increases are a welcome sign as the
services sector makes up roughly three quarters of the economy. Optimism in the sector is now at its highest point since October 2012.
By contrast, the manufacturing sector’s data continued to decline. Optimism for manufacturers plummeted from a reading of 94.5 in February to 88.2 this month, while the BDO Output Index also fell, from a reading of 94.1 to 92.4. The depreciating value of sterling coupled with weak demand from domestic consumers and struggling eurozone import partners is likely to be weighing on manufacturers’ confidence.
Malcolm Thixton, lead partner, BDO Southampton, commented: “It is encouraging to see improvement in businesses’ hiring intentions, particularly in light of the imminent public sector payroll cuts which will add pressure to the unemployment rate.
“However, the plunging confidence of manufacturers is a particular cause for concern. A fundamental part of the Coalition Government’s ’rebalancing’ strategy is the encouragement of manufacturing. So, it was disappointing to see little action taken in last month’s Budget to help this beleaguered sector. In particular, a time-limited increase in capital allowances would have been a good step to take in order to encourage the manufacturing industry to invest and grow.“
Does CGT hamper housing supply?
Dorset’s biggest landlord has expressed disappointment that the chancellor failed in his Budget to announce a tax break to encourage house building.
DWP Housing Partnership had wanted a reduction in the 28% tax that landlords pay on the sale of properties if the money were to be invested in new developments.
The call was supported by the National Landlords Association (NLA), which said such a change would assist housing supply at a time of huge demand.
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Steve Wells, managing director of DWP Housing Partnership, is keen to develop more homes in and around Bournemouth, but the system at present does not encourage it. He believes the 28% rate should be lowered, as long as the money from sales is used to build more homes.
The company’s development off Cardigan Road at Winton is exactly the type of new-build homes that are in such demand. However, the system at present means developing these types of properties is costly and time consuming and although the Government has suggested planning laws may be relaxed, the tax system still makes progress difficult.
DWP Housing Partnership, which employs nearly 100 staff and houses more than 3,000 residents, is frustrated with the lack of help from George Osborne. Wells said: “We are building new homes for people on low incomes, but could be doing much more with a little encouragement from the tax system. The Government is apparently looking to relax planning laws, which will help, but it could have given more assistance in the Budget.
“It is clear that the chancellor wants the housing market to boost the wider economy because he has pledged so much money for the Help to Buy mortgage scheme. A stamp duty reduction and a lowering of the tax landlords pay if the money were to be reinvested in building property would have had a much more effective result.“
David Cox, senior policy officer at the NLA, added: “Upon the sale of a private-residential property, a landlord will pay either 18% or 28% capital gains tax (CGT) according to their income tax bracket, as it is seen as unearned income for taxation purposes. However, if a landlord were to be classed as a business, rollover relief would allow them to reinvest the capital gain into a new property, assisting with housing supply at a time of record demand.“
THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – MAY 2013
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