The Office for Budget Responsibility says that tougher austerity measures and higher taxes are needed if Britain is to achieve long term fiscal sustainability.

The UK has an ageing population that is putting pressure on the long term sustainability of public finances, according to a report published earlier this month from the OBR. Over the next fifty years, the number of people in retirement will increase sharply, whilst the number of working age individuals will decline. Currently we have 4 people working to support one pensioner, but that ratio will soon become 2:1.

Analysts predict that the UK population will reach 75 million by 2060, putting additional pressures on the cost of pensions and health care. Without substantial policy changes, the OBR warns that UK net debt levels will rise above 100% by 2060.

In order to bring the debt level down to 40%, the government will need to find an extra £22 billion. The key to sustainable public finances lies with public health but unless NHS productivity improves the UK’s debt levels could rise dramatically.

The OBR report also showed the financial services industry contributed approximately £40 billion of GDP in tax, in 2007. However, it is thought the sector’s contribution will drop to about £34.6 billion if tax rates remain unchanged. The OBR therefore expects the UK economy will rely less on financial services in future years.

The British Chamber of Commerce’s chief economist, David Kern, said the report suggests that we are unlikely to see a return to the level of public sector spending witnessed before the recession. The UK has to adapt its ambitions to more limited resources and acknowledge that the private sector is responsible for creating wealth through greater productivity and increased growth.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Paracetamol in Blister pack by Sam_catch

The small business sector is crucial to EU growth, according to Helena Walsh, the Brussels regional director for Cicero Consulting.

Ms Walsh said EU member states are looking to small businesses to help their respective economies grow out of the recession. She went on to stress that it is important to have venture capital available for small businesses but at the moment finance support indicators for this form of funding are very poor.

Small businesses continue to struggle as the banks have tightened up their lending criteria and fewer grants up for grabs. Walsh has now urged the respective EU governments to pass urgent reforms to increase small business lending. She did however warn business owners that they were unlikely to see any reforms in the near future.

Earlier this year, the UK government and the major banks agreed SME lending targets through Project Merlin, but the first quarter targets were not met.

Cicero Brussels recently launched a Green Paper entitled ‘Access to venture capital for SMEs’. The paper deals with issues such as allowing venture capital funds to operate across EU borders and reducing the burden of administration on fund managers.

In the UK it’s not only lack of finance that is holding SMEs back. A recent survey from the FSB found that a lot of small business owners say excessive red tape is their biggest obstacle to growth.

Everybody agrees that small business growth is vital to the economic recovery, so when will governments throughout the EU takes steps to ensure that they get the necessary finance to enable them to do so?

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: tiny foot by limaoscarjuliet

Marks Sattin, the accountancy and financial services recruiter, has released details of its research into salaries in the professions.

Professionals in the financial services sector enjoyed average salary increases of nearly 8% in 2010 and many are expecting a bumper 13.5% rise this year. This would bring the average salary to £41,300.

However, Marks Sattin’s MD, Dave Way, said salary increases were below expectations last year as employers looked to restoring their margins after the recession and if that trend is repeated this year, the rise will only be 8.5%. He went on to say that professionals in the sector are optimistic that business will continue to pick up, but they may be being over optimistic in their expectation of a 13.5% rise.

The survey also discovered that the average bonus payment last year was £6,900 equating to nearly 20% of basic salary. Job security in the sector improved last year as the average time spent in a role rose by two months to 31.5 months.

Temporary staff’s pay remained higher than their permanent and contractor counterparts even though their rate only increased by 2%. The average temporary worker earned the equivalent of £45,100 last year, 24% more than those with more stable contracts.

Meanwhile, Powerchex has reported that the two 4 day weekends in April had an adverse affect on recruitment in the financial services sector.

The number of job offers in investment banking dropped by more than 30% last month and stockbroking and hedge funds also reported less recruitment activity. On the other hand, job offers in investment management bucked the trend by rising 19% compared to the previous month.

One group that has seen a marked increase in recruitment activity is IT contractors. There were 75% more vacancies for their skills last month compared to this time last year as companies look to improve data security.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Oak Leaf Cutting Board – Simple by prettydreamer.workshop

Umbrella company contractors may be about to witness the biggest drop in household incomes for 30 years, according to the Institute for Fiscal Studies.

A recent study from the think tank found that median take-home incomes increased during the credit crisis but it was entirely possible that they decreased by 3% in the last financial year. If that were the case, income levels would be back where they were in 2005.

Wenchao Jin, a research economist at the IFS, pointed out that average living standards rose during the economic crisis, largely due to benefit and tax credit increases. But this growth cannot be sustained and we now face a bleak outlook for incomes as the long term effects of the recession have just delayed, rather than avoided, a drop in living standards.

This will not come as good news to the 35% of adults in the UK who are neglecting their personal finances. The Priorities of Life Index from Scottish Widows has revealed that a total of 17 million British adults avoid thinking about their finances.

Just over 20% of these said they had too much debt to be able to feel financially secure and 32% claimed they were not paid enough to be able to put money aside. An additional 25% of people said they push thoughts of their personal finances to the back of their mind on a day to day basis.

Iain McGowan, a savings expert at Scottish widows, said we are struggling to prioritise the things that really matter to achieve financial stability and as a result our savings and financial security are suffering. Everyone knows it’s important to save and take the time to sort out financial worries but more than a third of us do not take the time to prioritise our financial affairs, he concluded.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Cyan by formatbrain

Figures released last Wednesday showed a 0.5% increase in GDP in the first quarter of 2011. This balanced out the drop of 0.5% in the final quarter of last year, which was blamed on the abnormal weather we saw in December.

However, as labour leader Ed Miliband was quick to point out in the House of Commons, this means that GDP is now at the level it was in the quarter 3 last year.

Some sectors fared a lot better than others in Q1. Manufacturing output contributed the most to growth with an increase of 1.1%, whilst construction output dropped by 4.7%, mainly due to the large drop in public sector projects such as schools and hospitals. Total services output increased in the quarter, as did distribution, hotels and restaurants and transport, storage and communication.

Contractors may be concerned to hear the views of Michael Baxter, the editor of InvestmentandBusinessNews.co.uk, who believes that the UK’s economic recovery has reached a temporary peak.

He said Q1’s rise cancelled out the deficit from the previous quarter to put us back where we started from. He had been expecting a slightly better set of figures for the first quarter of this year because the Purchasing Managers Index looked more promising.

He went on to say that this was as good as it’s going to get for a while, but on the bright side, we are extremely unlikely to see another contraction, or a recession, later this year or at the start of 2012.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Recycled Cars by JD Hancock

The chances of companies collapsing are increasing by the month, according to a new study from RSM Tenon.

Is your contractor umbrella company one of them?

The company discovered that firms at high risk of collapsing increased by 3% each month, compared to the previous quarter’s figures.

RSM Tenon’s head of recovery, Carl Jackson, said that although we are no longer in recession, high oil prices, inflation and the government austerity measures are all affecting UK businesses.

Worst hit on the Traffic Light report are property companies. This month, the sector has seen a 17% month on month increase in firms at high risk of insolvency.

Meanwhile, UK enterprises rely more heavily on debt finance than nearly every other European country.

Creditreform, a German credit rating agency, analysed the financial statements of over four million European firms and found that only businesses in Italy and Ireland had more exposure to loans and external creditors than the UK. In fact, 31.4% of companies in the UK had an equity ratio under 10% in the 2009 financial year. 23% of German companies had an equity ratio less than 10%, whilst only 14% of Swedish firms were in a similar situation.

Creditreform concluded that the increased risk of insolvency is directly linked to weak capitalisation and financing problems are particularly prominent in nations where a lot of firms have an equity ratio less than 10%.

Martin Williams from the credit agency Graydon, says this research shows that businesses in the UK had followed the pattern of individuals are relied too heavily on debt. Because of the high level of indebtedness, we were not prepared for the recession and businesses found it very hard to get hold of more finance.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Cliff by Oneras

Low-income households and the elderly have been badly hit by the recession, according to research conducted by the BBC and the Institute for Fiscal Studies.

Although everybody in the UK has been affected, the country’s poorest households have seen their income decrease by 2.1% in the last three years.

Stephanie Flanders, the BBC News economic editor, pointed out that so far the recovery has put more pressure on household budgets than the recession did. Already struggling families have been hit by a drop in income of £182 a year instead of the £428 increase they would have enjoyed if economic uncertainty were not present.

Pensioners have suffered even more, seeing a loss in income of £456 a year plus a cut in their winter fuel allowance.

Tax and benefit changes introduced between 2008 and 2011 have reduced the real income of the very rich and the very poor, she concluded.

Meanwhile, the National Institute of Economic and Social Research recently said that the pensions and healthcare costs of ‘baby boomers’ will cost tax payers between £80bn and £90bn extra every year in the future.

The report discovered that the over 40s, who have been benefiting from state pay-as-you-go benefits, have created a multi-trillion pound commitment that needs to be met by future generations. A typical 65 year old has received £223,183 more in net state subsidy than the tax paid and a newborn will have to pay £159,668 in taxes during their lifetime to compensate.

The research assumes the government needs to balance the books in the long-term and is based on current projections and policies. The projected shortfall is primarily driven by the increasing pressure on health and pensions rather than a rise in the fiscal deficit caused by the economic crisis.

In order for public finances to get back on a sustainable footing, taxes, including income tax, would need to increase by an additional 6% of GDP. This would provide the Treasury with an extra £88 billion or 16% of total tax receipts.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: All For One by jeff_golden

Confidence amongst IT contractors working in financial services has increased dramatically over the last year as banks carry on ploughing money into IT investment, new research shows.

This time in 2010, 22% of IT contractors thought the financial services sector would create the most IT opportunities. That figure has now risen to 36.7%. As you would expect, confidence in the public sector’s ability to create opportunities for IT contractors has fallen to an all time low of just 4.5%.

The big banks are starting to kick-start projects that were put on the back burner during the recession. One reason for this huge IT investment is the intense regulatory pressure that now faces the financial services sector. Transactions need to be more transparent and risk monitoring improved to comply with the new government regulations.

We’ve heard a lot about skills shortages in recent months and a lot of companies have been bringing in Indian IT staff to fill vacancies in this country. But that may be about to change as the Asian country is now experiencing its own talent shortfall for IT engineers.

Data from the Indian government predicts that the country needs half a million IT engineers to support growth in the sector. Multi-nationals are investing there; many companies rely on India for back office support and new product development is ongoing.

But India is struggling to retain its key talent and recruiters are now attempting to repatriate those people; a task that is proving challenging. However, if they succeed, that will leave more opportunities open to IT umbrella company contractors in the UK and maybe we will then see a zero unemployment rate in the IT sector.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Beauty in Simplicity by BrentOzar

59% of and umbrella company IT contractors and professionals are not loyal to their employment, according to a recent survey from The IT Job Board.

The most common reason, cited by 53% of the respondents, for disloyalty was put down to management not listening whilst 46% said the company they worked for cut corners. The banking and finance sectors have the highest movement amongst IT workers at 34%.

Now that the recession is over, 85% of IT workers are thinking of changing their job and 80% hope to achieve this aim next year.

Of those who plan to leave their current position, 53% said it was because they feel they are not valued and 48% say their current salary or rate is poor. Improved corporate communication could be the key to improved loyalty according to 58% of the respondents.

Of those who remain loyal to their employer, 45% said it was due to the exciting nature of the projects they were working on and another 45% said they liked the teams they worked with.

The MD of The IT Job Board, Alex Farrell, said employers should be worried about the high level of dissatisfaction expressed by IT professionals. With 80% planning to look for new jobs next year, employers could be in for a tough time recruiting replacement staff.

Employers must look to improving communications with their employees and making them feel valued. The best talent will be snapped up quickly due to the skills shortages that exist within the IT sector and employers will need to sell themselves to candidates if they want to attract high calibre workers.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: No Work by cell105

On Monday, George Osborne and Vince Cable announced a fundamental review of the steps all areas of Government are taking to promote the best conditions to encourage growth in the private sector.

Businesses are encouraged to take part in the review which is designed to challenge all departments within the Government on the measures they are taking to bring down barriers to growth.

An initial report, based on the evidence obtained from businesses and umbrella companies, will be presented no later than next year’s Budget day. By that date, all government departments will have to have submitted an action plan laying out the contributions they are going to make.

The first two priority areas are the reformation of structural barriers including corporate governance and access to finance and the removal of barriers in the sectors where obvious growth opportunities already exist.

Sectors such as business services, construction, digital and creative, health and life sciences, manufacturing and retail have already been identified as priority areas for improvement. However, all sectors will be subject to a forensic review.

Also on Monday, the OBR released its Economic and fiscal outlook in which it upgraded its prediction for GDP growth this year to 1.8% but reduced its forecast for next year to 2.1%.

In June, the OBR had forecast growth of 1.3% for this year, but firms rebuilt their stocks faster than expected. Growth in construction has been unsustainably strong over the last 6 months but this will unwind and lead to weaker growth in the short-term, OBR forecasters said.

It is also expected that the UK economy will continue its recovery from the recession, but more slowly than witnessed in the 1970s, 80s and 90s.

The sluggish medium-term outlook is in some ways attributed to the VAT increase in January which is predicted to reduce quarter to quarter growth to 0.3% in the first quarter of next year.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: 182; I’m Here!! by Sara. Nel

Freelancers and other self-employed people are being urged to invest in a financial safety net to protect their families in case they cannot work.

The call has been made by Scottish Provident after the results of its survey discovered that 58% of people in Britain have no protection in place.

Of these, 31% said that their standard of living would be severely curtailed if the main household breadwinner was unable to work over a prolonged period. Scottish Provident also pointed out that while 35% of adults have life insurance, only 13% have taken out critical illness insurance and only 9% have income protection cover.

The main reason for not taking out protection is the cost, according to 39% of the survey’s respondents. This result shows that many contractors do not understand the range and cost of available products, the insurer said.

Britons are taking a major risk with their own livelihood and that of their families, the head of marketing at Scottish Provident said.

However, maybe we are becoming more aware of the benefits that come from insurance products. A separate piece of research from Unbiased.co.uk showed an increase of 39% in the number of online searches for products such as critical illness cover and life insurance in the first 8 months of the year.

Income protection cover is classed as the hardest product to sell, according to Ben Heffer from Defaqto. This is mainly because a lot of individuals believe they will never require it, but in the aftermath of the recession, people should realise that redundancy can happen to anyone.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Mr. Bump by Thomas Rockstar

Umbrella company IT contractors might be interested to read that Gartner predicts enterprise IT spending looks as if it will grow next year.

Research by the company shows that spending in EMEA (Europe, Middle East and Africa) next year will increase by 1.3% to £493 billion. Senior VP and global head of research at Gartner, Peter Sondergaard, pointed out the EMEA region was the only one to record a drop in IT spending in 2009 and 2010.

The industry analyst expects Western Europe to record a drop of 3.3% this year and then recover with the slowest long-term growth rate of just 0.8% until 2014. By 2011 however, all areas except education and transportation should experience growth.

Greythorn, the recruitment firm, recently carried out research that shows an expected 1.5 million IT positions will be available by the end of this year; the highest amount since before the credit crunch.

Paul Winchester, Greythorn’s managing director said that public sector contractors who have seen positions diminish should easily be able to find contracts in the private sector. West Yorkshire, and in particular Leeds, are already benefiting from banks moving their back office functions away from London.

The 2nd quarter of 2010 saw a 7% increase in UK IT vacancies compared to last year, whilst quarter 3 showed a 12% increase.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Joy by alancleaver_2000