Tag: Press Release

The press release issued by PWC on 18 November 2022.

Commenting on the Office of National Statistics retail sales index for Oct 2022, Lisa Hooker, Industry Leader for Consumer Markets at PwC, said:

While headline retail sales increased slightly in October on both a volume and pound note basis compared with the previous month, this was entirely due to the loss of a trading day in September for the Queen’s funeral.

Worryingly, on an annual basis, the 2.9% increase in overall retail sales excluding petrol was accounted for by the record inflation that was reported earlier this week. On a volume basis, shoppers were actually buying 6.7% less than last October.

Supermarkets were particularly hard hit last month, as shoppers bought less, wasted less and traded down to cheaper alternatives in the face of 16.4% inflation, a 45 year high. But, even apart from groceries, non-food sales continued to fall behind pre-pandemic levels as consumers started to cut back as the impact of higher energy and food bills hit and more is spent on second hand goods.

One saving grace for the high street is the return of shoppers from online into physical stores. The proportion of retail sales online, while higher than before the pandemic, continued to fall back, helped by both the mild weather and a growing preference for physical shopping among younger generations.

With little over a month to go until Christmas, retailers will be hoping that the picture improves. Particularly compared with the disappointment of last year when the Omicron variant cancelled many festive plans at the last minute. We think there is a good chance of one last hurrah before the tax rises announced in the Autumn Statement hit. For example, shoppers already tell us that they’ll be spending £0.5 billion more in the Black Friday sales next week.

However, with the country facing the biggest decline in real disposable income since the end of World War II, and continued cost headwinds in the form of higher energy and input costs and National Living Wage increases, there is no question that the retail sector will face unprecedented challenges in 2023.

The press release issued by PWC on 17 November 2022.

Despite the cost-of-living crisis, interest in Black Friday has held up. PwC unveiled its annual Black Friday research which gives a glimpse of how shoppers are kicking off the festive rush for retail.

Interest has maintained from last year, with 37% of consumers interested and may buy (up 2% from 2021) and 24% of consumers stating they will definitely buy – matching 2021 levels. This is in contrast to 2020 levels where only 16% of consumers planned to purchase in the Black Friday period.

With almost half of under 35s definitely spending (48%), interest from male shoppers sits 10% higher than than females. Amongst men, 29% plan to definitely purchase with 34% interested opposed to 19% of women definitely spending and 35% interested.

Kien Tan, Retail Director at PwC comments:

“With the World Cup approaching and the first opportunity to browse high streets without pandemic restrictions in three years, it may not be a surprise that almost two-thirds of men will be shopping over the Black Friday period, with the majority of them (57%) looking for new tech or electrical products.

By comparison, female shoppers intend to spend half as much as men (£168 vs £310), and are mostly using Black Friday to get a head start on Christmas shopping, with 71% planning to buy for their family.

Meanwhile, interest in Black Friday is highest amongst under 25s: 9 out of 10 Gen Zers say they’ll be looking for a bargain, and three-quarters of them are planning to buy a treat for themselves.”

PwC estimates the average spend per consumer to be around £238 which will add £0.5billion extra to the retail economy this year taking the overall spend on Black Friday bargains to £7.5billion.

Shoppers will predominantly be shopping for electricals (51%), fashion (32%) and Christmas stocking fillers (28%). Interest in homewares (25%) and beauty (24%) have increased slightly from 2021. Shoppers are also showing a renewed interest in shopping in store for a bargain rather than online, with 19% planning to hit the high street and 12% planning to click & collect – a 2% increase in both arenas from 2021. 69% plan to shop online – a 4% decrease from 2021.

Lisa Hooker, Industry Leader for Consumer Markets at PwC comments:

“There has been a lot of commentary that shoppers are less interested in Black Friday this year, but that is not what consumers are telling us, with expected spend estimated to be £0.5bn higher than last year as people look for treats and bargains or try to spread the cost of Christmas over a longer time period.

Consumers have been closely monitoring their favourite brands in anticipation of big ticket electronics, more pricey winter wear or Christmas stocking fillers being discounted, and they’re in search of bargains more than ever given rising inflation.

Despite the consumer spending headwinds, many retailers have held their nerve this year, with the lower levels of promotional activity we saw last Autumn continuing into 2022. However, many retailers will still see Black Friday as an opportunity to engage with their customers, clear excess stock, and offer value for money, so we are expecting the usual ramp-up in sales and discounts as we approach the end of November.”

The press release issued by PWC on 17 November 2022.

Raj Mody, global head of pensions at PwC comments on the triple lock and state pension:

“The Chancellor’s decision to retain the triple lock will ensure the state pension does not lose value in real terms. Based on September’s inflation rate of 10.1%, it will take the basic rate from £142 to £156 and the new state pension up from £185 to £204 a week. For the 12.5 million pensioners who fully rely on the state pension this will be welcome news.

“Looking forward, if the triple lock continues, then it’s likely that the state pension will catch up with the tax-free Personal Allowance by the end of the 5-year period that the Personal Allowance has been frozen for. That will create an interesting policy situation for future Governments, which may be better tackled earlier than later. To end up in the situation where the state pension itself is taxed seems odd, for the Government to give out with one hand and then take back with another.”

Roshni Patel, DC pensions and benefits lead at PwC comments on the lifetime allowance:

“There was no further news on the Lifetime Allowance or Annual Allowance, suggesting they will continue to remain frozen for two more years. People’s pensions savings will start catching up with the frozen Allowance. It equates to £53,000 per annum for a Defined Benefit (‘DB’) scheme member, and would deliver less than that for a Defined Contribution (‘DC’) member, maybe around £45,000 depending on the going rate for annuities at the time of retirement. Apart from the disparity between DB and DC savers, these amounts might seem a lot but won’t feel like that in real terms at the end of the frozen period.

“With the reduction in dividend and capital gains tax allowances, it does make saving into a pension or ISA more desirable, instead of holding investments directly.”

The press release issued by PWC on 17 November 2022.

Phil Vernon, head of ratings at PwC, says:

“The Chancellor has correctly identified that one of the core issues with business rates is that the tax rate is too high and so freezing the rates multiplier in 2023/4 and the introduction of a package to reduce the burden will be welcomed by many businesses. However, these announcements will have to dovetail with the effects of the revaluation next year, and so properties facing an increase in their rateable value will still see an increase in their rates bills.

“This package continues the focus on retail, leisure and hospitality businesses relief, upping the relief to 75% of rates payable. But with the relief being capped at £110,000 per business, larger retailers and other sectors will be facing full business rates bills.

“Confirmation that the rates revaluation will proceed alongside a transitional relief scheme that will focus only on those rate bills that are increasing, will provide some reassurance that the highest rises in business rates will be curtailed. But as with all revaluations we will see winners and losers. The new rateable values for 2023 are due to be released imminently and so we should soon have a much clearer idea of the effect on business from next year.”

The press release issued by PWC on 17 November 2022.

Colin Smith, Energy and Infrastructure Tax Partner at PwC UK said:

“The Chancellor has made changes to the Energy Profits Levy, both by extending its duration to March 2028 and raising the rate from 25% to 35%. Today’s announcements increase the overall tax rate on the UK’s oil & gas producers to 75%. The cash benefit of the investment allowance remains broadly unchanged for most expenditure.

“A new 45% Electricity Generator Levy will apply where UK nuclear, renewable and biomass sourced electricity generators sell electricity at prices over £75MWh from 2023 to 2028. The overall headline corporate income tax burden on these businesses will therefore be 70%. This levy, which is charged on revenue rather than profit, replaces the cost-plus revenue cap proposed in the Energy Prices Act.

“These tax increases are forecast to raise £34 billion between 2023 and 2028. The amount of revenue raised will depend on volatile energy prices and may be adversely impacted if higher tax rates and the uncertainty caused by frequent tax law changes reduce activity and investment in the UK’s energy sector.

“Improvement in R&D credits for large companies will be welcome, particularly for those investing in new technology and innovations to support energy transition projects.”

The press release issued by PWC on 17 November 2022.

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

“The shift to zero emission vehicles is well underway and through one lens today’s announcement can be seen as a way of leveling the playing field by ensuring those drivers pay their fair share of road taxes.  However the balance is that we need to encourage this transition to be more rapid and therefore we hope this is not a disincentive to change.

“Indeed, despite the existing challenges in the UK market around EV adoption, demand remains strong, with UK consumers ranking third in likelihood to invest in an EV. In fact our research showed that in July of this year 5% of consumers already own an electric vehicle, and a significant 31% plan to buy one in the next two years.

“Today’s change may dampen appetite, however, an opportunity may emerge for the private sector to offer more incentives to reduce  consumers’ initial outlay and answer customers’ needs  for vehicles  that take in price and ease of use.”

The press release issued by PWC on 17 November 2022.

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

“The Government is clearly dealing with a range of economic challenges, so it’s encouraging to see the Chancellor reaffirm his commitment to the importance of financial services. A dynamic financial services sector is a prerequisite for the success of the other growth industries identified by the Chancellor.

“The plan set out by the Government today for Solvency II will see the release of capital, which underpins the government’s desire to encourage growth, something that will no doubt be welcomed by the sector. However, the rest of the industry will have to wait to hear what other areas of regulation the Government will seek to change. It is of course right that the Government ensures the UK’s regulatory framework is fit for purpose, but providing certainty and stability as soon as possible will also be important.

“Finally, as one the most innovative and digitally enabled sectors in the economy, transformation is being driven through the deployment of technologies such as Cloud and artificial intelligence. With future opportunities from technologies such as distributed ledger technology and quantum computing, the announcement that Sir Patrick Vallance is to lead work to consider how the UK can better regulate emerging technologies makes good sense.”

The press release issued by PWC on 17 November 2022.

Barret Kupelian, senior economist at PwC, comments on the Autumn Statement:

“We knew it wouldn’t be pretty, but today’s Autumn Statement demonstrates just how challenging the UK economic situation is, with the policies announced marking a return to Treasury orthodoxy. The Chancellor today announced a large fiscal consolidation to the tune of £55 billion, but it is his specific choices about both the form and the timing of when his policies will be delivered that didn’t make his statement.

“First, he decided to shoulder c.55% of the fiscal consolidation on spending cuts. The philosophy adopted by the Chancellor was similar but not as extreme to what George Osborne had followed in the Emergency Budget in 2010 where he chose to focus around three quarters of the policy decisions on spending cuts. Despite focusing on spending, the OBR estimates the tax revenue to GDP ratio will be at its highest sustained level since World War II, to almost 45% by FY 2027/28. Second, the overwhelming large proportion of the spending decisions come into effect in FY 2025/26, which is after the life of the current Parliament (see chart).

“The fiscal implications of the policy choices made in the Autumn Statement depend on how the economy fares in the future. On this, our high-level observation on the economic backdrop assumed by the OBR is that it is gloomy in the short-term but brighter in the medium-term. Specifically, the OBR assumes that there will be a recession next year, coupled with inflation. In practical terms this means economic output will return to pre-pandemic levels by the end of 2024, which is a significantly worse performance compared to all other G7 economies. The impact on the labour market is for unemployment to increase by half a million, followed by a gradual decrease in the subsequent years.

“Soberingly, this means that the combined impact on households will be to erode real household disposable incomes by a cumulative 6.5% relative to 2021 levels. This type of contraction has never been recorded in Britain’s post war history.

“On a more hopeful note, the OBR assumes financial markets’ forecasts on the path of interest rates, which are higher than those of professional forecasters. If the view of professional forecasters prevails, then this could mean lower debt repayments than those forecast by the OBR”.