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  • Writer's pictureEdgar Rayo

Finanze Business Weekly Roundup - 04/12/2022

Here are this week’s highlights in the UK economy.

Heathrow airport strikes will last for three days. The high passenger volume will be affected as about 350 staff at Menzies Aviation who handle ground services for American Airlines and Lufthansa will stage a walkout to push for a pay rise.

Next purchases retailer Joules. The buyout will cost the clothing and housewares retailer £34 million. Joules was not able to secure bridge financing after it was deemed unable to repay a £5 million loan due at the end of last month. Next first attempted to buy a minority stake for £15 million but the talks fell through in early 2022.

Brexit added £210 more to food costs. A typical low-income UK household now pays 6% more on food expenses over the two years through the end of 2021, according to the London School of Economics. Firms passed on their higher costs in the form of customs checks and sanitary requirements passed to customers.

UK firms to raise prices by 5.7% in the next 12 months. According to the Bank of England’s Decision Maker Panel data, the forecast only eased a bit from October’s 6.2% price hike.

UK losing tourists after scrapping tax-free shopping perks. Mulberry CEO Thierry Andretta announced that tourists from the US and Arab countries have shifted to splurging in other European cities such as Paris and Milan after the UK government cancelled VAT-free incentives for international tourists. Mulberry’s revenue dropped 1% in the six months to October.

Finanze Business Foresights:

Sunak has never supported the tax-free shopping for tourists from overseas even before he assumed office. In 2020, when he was still chancellor, Sunak met the ire of retailers who insisted that scrapping the VAT-free incentive can severely inflict damage to the industry. Even hoteliers and airport personnel have joined the call to keep the perk and sustain the demand from affluent shoppers from China, the Middle East and the United States whose financial status where never affected by the pandemic.

But when Sunak assumed leadership, he once again put it on hold after former chancellor Kwarteng planned to re-introduce it. So, there’s no surprise that these shoppers are instead teeming on the streets of Paris and Milan where they can avail of favourable shopping schemes. Kwarteng’s plan would have cost the country £1.27 billion — a figure that Sunak and Jeremy Hunt would never allow to slip from their hands as they move to fill public finances fast.

With the axing of tax-free shopping incentive, jobs are also in peril just as the hospitality and retail industries are starting to recover from the impact of the pandemic. In our opinion, the cost-benefit assessment was never considered when the government reversed Kwarteng’s decision.

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