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Reeves’ tax hikes to prompt sharp rise in inflation – Daily Business

6 hours ago admin

Pay-wage-slip — *April’s hikes in National Insurance contributions will emerge in inflation data*

The first effects of Rachel Reeves’ tax policies will be felt this week as inflation is expected to make its biggest leap in more than two years.

Price pressures will be particularly evident in the retail, leisure and hospitality sectors as businesses pass on the £25 billion rise in employers’ national insurance contributions (NICs) that took effect on 6 April and the 6.7% jump in the minimum wage.

City analysts believe data published on Wednesday by the Office for National Statistics (ONS) will reveal that inflation climbed in April to at least 3% and possibly as high as 3.6% from 2.6% in March.

This would be the steepest rate since January 2024 and would represent the largest month-on-month percentage point increase since October 2022.

It will be in line with Bank of England forecasts for inflation to rise to 3.7% by September because of continuing strong wage growth, rises in payroll taxes and higher energy bills.

Analysts forecast an interest rate hold in June, followed by cuts in August and again in November – after inflation is projected to peak.

Marks & Spencer full-year results

Marks & Spencer Gyle Edinburgh — *Analysts hope for more details on the Marks & Spencer attack*

Marks & Spencer may want to focus on its improved performance over the last year but it is likely to be overlooked by the recent disruption caused by a cyberattack.

Analysts will look to chief executive Stuart Machin and the board for a steer on when M&S’ online shopping and stock management systems will be resume full operations.

Russ Mould, investment manager at AJ Bell, says: “The FTSE 100 index constituent is unlikely to rush, as it will not want to be re-open for business only to find the hackers have something buried deep in the system waiting to wreak more havoc.

“But the costs will be piling up – some analysts have quantified the potential hit to profits at £15 million per week, with Food taking the brunt of it, thanks to the complexity of supply chains and the risk of wastage, although the company does reportedly have cyber-attack insurance cover.

“Whether Mr Machin and chief financial officer Jeremy Townsend feel able to offer any guidance for the year to March 2026 is open to doubt, and Mr Townsend is due to retire this month as he makes way for Alison Dolan.”

Before the cyberattack, analysts had expected a hefty hike in the final dividend to 3.8p a share from 2p in fiscal 2024, to take the full-year total up to 4.8p from 3p.

M&S has not run a buyback scheme of any magnitude since 2015 and before that in 2007 and it seems unlikely to launch one now, says Mould.

BT full-year results

Shares in BT are rising and stand near a one-year high. Chief executive Allison Kirkby is pushing through her own turnaround plan as she focuses on its UK operations, looks to review and optimise its international portfolio, and reduce costs.

Cash flow is expected to help BT pay an unchanged dividend of 8p a share, after last year’s surprise increase from 7.7p, but the need to service a net debt pile of around £15 billion and a near £4 billion pension deficit means there is no share buyback in operation.

Calnex Solutions full-year results

The Linlithgow-based telecoms testing company Calnex Solutions said in last month’s trading update that it has returned to profit and revenue growth in line with market expectations, despite ongoing challenges.

The AIM-quoted company has seen 12% growth in revenues to about £18.3m (FY24: £16.3m) and an improved gross margin, reflecting the increased revenue volumes and product mix in the year.

Cost control measures taken through the year have also contributed to the group’s return to profit.

The balance sheet remains robust, with cash as at 31 March of £10.9m. This is £2.3m ahead of the cash position at the half year, reflecting a strong second half of cash generation.

DIARY

Monday 19 May

Trading statement from Diageo
Rightmove UK house price index
Chinese retail sales, industrial production and tangible fixed asset investment monthly growth
EU inflation
In Europe, quarterly results from Ryanair

Tuesday 20 May