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The press release issued by PWC on 24 January 2023.

Commenting on the new code published today by The Department for Business, Energy & Industrial Strategy, Chris Perkins, UK and International Employment Law Partner at PwC, says:

“The plan for a new statutory code proposes strong action against employers who use the controversial dismissal practice of ‘fire and rehire’. This strategy for changing employment terms and conditions is already high risk for employers, with the potential for employees to bring unfair dismissal and other claims against the organisation. Not only can this potentially result in financial claims, but the reputational impact of the ‘fire and rehire’ practice can be detrimental to an organisation as an employer.”

“The code proposes a rigorous process of communicating and consulting on changes to contracts of employment, along the lines of the familiar requirements for undertaking collective redundancies and transfers of undertaking. Employers will need to introduce more formal, and well documented procedures to demonstrate compliance with these new guidelines; as if employers fall foul of the new code, there will be major financial consequences.”

Alastair Woods, Workforce Transformation Partner at PwC, comments: 

“The proposed statutory draft code provides clear guidance for employers that reinforces the need for them to take a strategic and holistic approach to managing their workforce in a tough economic climate. PwC’s recent CEO survey highlights how seriously business leaders are taking the shortage of skilled and talented workers alongside the tough conditions they are operating in. As such, employers need to continue to focus their approach on better workforce planning, upskilling and acting as a responsible employer in a labour market that continues to be tight.”

The press release issued by PWC on 26 January 2023.

• Global GDP set to expand by around 1.6% in market exchange rates in 2023, with G7 economies growing by a marginal 0.1% in annual average terms
• India is expected to be fastest-growing G20 economy (5.4%) followed by China (4.7%) and Indonesia (4.5%) while Ireland (2.3%) and other peripheral economies set to record relatively higher growth rates in the Eurozone
• UK set to see largest contraction (-0.8%) in G7, alongside Germany (-0.5%) and Italy (-0.4%) while US set to slow to 0.2% but potentially avoid a technical recession. The Eurozone economy will flatline.
• Housing market across most advanced economies set to fall or flatline, with Sweden, Australia, New Zealand and Canada facing greatest exposure

The global economy is due to face a slow-down but avoid recession in 2023, as many advanced economies grapple with above-target inflation, energy price pressure and rising interest rates, according to the latest edition of PwC’s Global Economy Watch.

In PwC’s main scenario projections, the UK is set to record the largest contraction (-0.8%) across the G7 closely followed by Germany (-0.5%), Italy (-0.4%) while France may report modest growth of 0.1%. US growth is also expected to slow to 0.2% but will probably avoid a technical recession (defined as two successive quarters of negative growth).

India is set to see the highest growth (5.4%) across the G20, Indonesia (4.4%) will be the fastest growing Southeast Asian economy and Ireland (2.3%) will record the highest growth in the Eurozone. China’s economy is forecast to expand by 4.7%, although this will be highly dependent on the progress of the re-opening of the country from Covid-19 measures.

Barret Kupelian, senior economist at PwC, says:

“The global outlook for 2023 is of slow growth but not recession, as the real economy adjusts to tighter financial conditions. Many advanced economies, particularly the UK and Eurozone, will continue to be heavily impacted by higher prices of natural gas driving above-target inflation and cost of living pressures.

“Nonetheless, we are increasingly becoming more confident that lower spot and future natural gas prices and the weaker US Dollar, particularly when compared to other advanced economies, is likely to reduce import-led inflation and help limit the damage to economic activity, particularly for large energy-importing economies. If this scenario materialises, it will be good news for businesses and consumers across the board and we could see inflation surprise on the downside and growth surprise on the upside.

“The big unknown is the uncertainty around China’s growth rate, given the challenges involved in emerging from strict zero-Covid measures. Tourism is expected to rebound across North America and the Middle East this year, with air passenger levels set to return to 85% of pre-pandemic levels. Chinese tourists made up a tenth of tourism globally pre-2020, so a successful re-opening would have a notable economic impact.”

Housing market set to fall 

Across most advanced economies, house prices will fall or flatline. Risks to the housing market—the pace of increase in mortgage interest rates, the level of household debt and the size and duration of fixed-rate mortgages—are higher in markets such as Sweden, Australia, New Zealand and Canada.

By contrast, risks are lower in peripheral European markets such as Ireland and Spain, where house prices took a more sizeable hit during the 2008/9 crisis and subsequent Eurozone crisis which meant that household debt levels remain relatively low, thus reducing risk.

Jake Finney, economist at PwC says:

“Many advanced economies saw substantial increases in house prices during the pandemic, as buyers took advantage of low interest rates and higher savings accrued during lockdowns. For the countries facing the highest exposure, it is possible that they could see double digit percent falls, reversing most of the pandemic gains. For others the fall is likely to be more modest – but the housing market will be one of most obvious indicators of the new era of higher interest rates globally.”

In addition, PwC expects that crude oil prices will bottom out at around $80 per barrel by the middle of 2023, while half of all electric vehicles on the road globally will be in China by the end of the year.

The press release issued by PWC on 18 January 2023.

Cara Haffey, Automotive Sector Leader at PwC UK, said:

“The government announcement today is an important policy catalyst to accelerate the decarbonisation of road transport.

“Smart charging not only improves the ease for drivers but also addresses the affordability dimension, as consumers can charge when it is cheaper.

“Also enabling EV batteries to power homes will support the evolution of flexible energy systems, as well as aiding energy security. Indeed, many will remember how some Texans powered their homes using EV’s during the energy crisis in 2021.

“This initiative will also help to change how we all think about energy use in general and vehicle charging in particular. It should also help consumers  take more control of how, where and when they charge their cars. Building charging infrastructure and making it flexible will be key to enabling EV adoption.”

The press release issued by PWC on 18 January 2023.

The press release issued by PWC on 17 January 2023.

David Kelly, Head of Insolvency at PwC, comments on December’s ONS insolvency data:

“December’s data shows 1,964 company insolvencies this month – a 32% rise year -on- year and a 76% rise on the same month 3 years ago, pre-pandemic. However, there are fewer than the month before (November 2022), where there were 2,029 insolvencies.

“While the slight decline in insolvencies this month is welcome news, it is likely in part due to the respite offered by increased trade during the World Cup, particularly in sectors such as retail and leisure, which may still be under increased pressure from cancellations as a result of recent industrial action. It’s also not uncommon for creditors to give debtors one last chance over the Christmas trading period and kick difficult decisions into the New Year.

“Despite there being fewer insolvencies than November, company directors are under no illusions about the challenges in store this year, ranging from high inflation and rising interest rates to poor consumer sentiment and increasing raw material costs. Many are also exhausted from the last few years having already contended with a pandemic and supply chain issues, so may be raising the white flag for insolvency as a consequence of this fatigue.”

Catherine Atkinson, Director in PwC’s restructuring and insolvency team, added:

“In keeping with the decrease in insolvencies in December, our analysis shows there were only 346 winding up petitions in December – a 27% decrease from November’s 474. As formal applications from creditors to shut down companies, these are a key bellwether of creditor sentiment, and while the lower number is likely to have been impacted by the  holiday period, it remains to be seen whether creditors will take a more lenient, collaborative approach with debtors as we head into the recession.”

The press release issued by PWC on 15 January 2023.

• Study shows that 8.9m UK adults show signs of financial fragility according to research by PwC UK and TotallyMoney
• In addition, the total amount of unsecured debt now exceeds £400bn, meaning that an average UK household is set to owe just over £16k in unsecured debt
• Data also reveals a 50% increase in UK adults who are likely already locked out of mainstream banking services (13.6m 2016 vs 20.2m 2022) and are therefore ‘under-served’

Data from PwC and TotallyMoney has found that 8.9m UK adults show signs of financial fragility which is defined as those who may need to use their overdraft to cover everyday spending such as the food shop. They may also struggle to make repayments on their borrowing in the next year.

In addition, fresh analysis by PwC also shows that the total amount of unsecured debt now exceeds £400bn, which equates to a record high of £16,200 per household. In the past year alone, unsecured household debt has grown by >£1,000, or an annual growth rate of 7.2%. This is a steep increase in comparison to 2016 when UK households were set to owe close to £10,000 in unsecured debt by the end of that year, which was, at that time an all-time high.

The data by PwC and TotallyMoney also shows that over 20 million adults are currently under-served by high street lenders either due to having a  thin credit file / minor adverse credit history, holding a near prime credit card or perceiving themselves to be under-served. On average, the under-served population tends to be younger than those who are not under-served (45 vs. 51 years old) and typically has a lower gross personal income (£27k vs. £34k per annum).

Isabelle Jenkins, Leader of Financial Services at PwC UK, said:

“The results are startling and it’s clear that for UK households struggling with post christmas debt, the outlook may feel challenging.
“For most borrowers, credit performs an important function, smoothing income and expenditure, which, if affordable, can be beneficial. However, unaffordable lending and borrowing can cause real harm to individuals and society, and vulnerable consumers can be disproportionately affected.

“However there are ways in which consumers can get a grip on their finances, for instance, for those finding it difficult to pay their mortgage, credit card or personal loan, your lender should be able to give you support tailored to your circumstances. This support will be available if you’re struggling for the first time or if you’ve already had help.

“Your options could include making reduced payments for a temporary period, changing your mortgage or loan terms to make your payments more affordable  and being directed to sources of free debt advice.

“For consumers who are struggling, they have the option to contact their bank as soon as possible, keeping in mind that talking to your lender will not affect your credit file, and they can support you.”

Simon Westcott, Strategy& UK Financial Services Lead at PwC UK, said:

“There is no doubt that the long tail of the pandemic plus the rising cost of living has put a significant strain on people’s financial health, and after Christmas, the prospect of reflecting on post festive season spending can put a significant strain on families.

“The rising levels of unsecured debt plus UK household’s vulnerability to interest rises, could leave consumers over stretched.

“However, there is an opportunity for lenders to continue to create and develop products and services  that truly meet the needs of consumers in this potentially challenging time.

“In addition, the Consumer Duty, due to be implemented in the new year, will set clearer standards of consumer protection across financial services therefore we expect a major shift which will ideally promote competition and growth based on high standards.”

The press release issued by PWC on 10 January 2023.

Vicky Parker, Sector Leader for Power and Utilities at PwC UK, said:

“A warmer than normal Winter has already helped energy prices to fall in recent months, from historic highs last Autumn, with European gas storage remaining at comparatively high levels. However, gas and power prices are expected to remain volatile and above seasonal average levels (40-60p/therm). As such, businesses will welcome the certainty on how the government will continue to support them with energy prices, although the level of support will be materially lower after March.

“Customers who signed energy contracts at the end of August last year face a greater than 50% cut in government support: from £55.05/MWh to £19.61/MWh for electricity and from £17.64/MWh to £6.97/MWh for gas. Given these substantial reductions, the imperative for businesses to take action to control energy costs is greater than ever. With the outlook for high energy prices continuing, firms need to start thinking about building their longer term energy resilience.

“While the additional support for energy intensive industries will be welcome for those sectors, the new scheme overlooks those other sectors – like hospitality or social care – which may be exposed to high prices and struggle to pass these costs onto their customers or reduce their usage. It remains to be seen how these firms will manage in the coming months.”