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PwC Media Briefing: Spring Statement, lambs, LIBOR, and the sector that’s second only to football for its gender pay gap.

This week’s topics: 

 

  • What can we expect from Rishi Sunak’s Spring Statement this afternoon?

  • Our Good Growth For Cities Index reveals a sweeping change of view over what factors improve prosperity, opportunity, and wellbeing

  • New research shows football is the only UK sector with a larger gender pay gap than financial services in the UK

  • Lambs, LIBOR, and more

 

Businesses need a roadmap from the Spring Statement

The Chancellor of the Exchequer Rishi Sunak will make his Spring Statement this afternoon. While the Spring Statement isn’t a budget, it does provide the Chancellor with the opportunity to set his plan and vision for the economy, and as such we should expect some degree of a roadmap on how he plans to encourage innovation, investment and productivity. 

Jon Richardson, head of tax policy at PwC UK, comments:

  • For businesses, with the continued change in the economic and tax landscape, it is proving challenging to plan effectively with a reasonable degree of certainty.

  • As the super deduction ends next April, businesses would benefit from a signal on what the investment landscape, through for example capital allowance and incentives, will look like post April 2023. 

  • The failure to introduce accelerated reliefs will impact the UK’s international competitiveness on new business investment. For businesses to plan investments and growth, the more certainty that can be given now the better.

Rachel Moore, R&D specialist at PwC UK, comments

  • Businesses are expecting the Spring Statement to bring further announcements on the reform of R&D credits. The Chancellor has a difficult balancing act to achieve in enhancing R&D incentives to encourage more innovation in the UK while introducing measures to combat abuse, particularly in the SME market. R&D credits provide important funding to many businesses, but the value of these incentives diminish as the admin burden increases. 

  • R&D credits for large businesses are less competitive than we see from our neighbours in France and Ireland, and businesses have for some time been pushing for an increase in rate, particularly given the benefits will reduce with the increasing corporation tax rate from next year.

Barret Kupelian, senior economist at PwC UK, comments:

  • The good news is that the Chancellor’s starting fiscal position is around £30 billion above the OBR's expectation in October last year. The Spring Statement will therefore give the opportunity to reveal his cards on his choices whether to either relax the government’s fiscal stance temporarily or continue with the original plan. 

  • If he chooses the former, then he could opt to delay or tweak some of the planned tax rises announced previously which will kick in as early as next month when inflation is running significantly ahead of wage growth. He may also increase spending on vulnerable households and shore up spending on emerging areas of priority, including on defence.

  • Alternatively, he may keep his cards close to his chest and save any potential giveaways for later on in this Parliament’s term.

See more of our Spring Statement predictions on the economic context, skills and the apprenticeship levy and support for private businesses here

 

High streets and safety - new entries in public priorities for good growth 

The latest Demos-PwC Good Growth for Cities report examines how well positioned 50 of the UK’s largest cities are for economic recovery and offers an agenda for action by Government, businesses, and local leaders to deliver good growth for all. 

Karen Finlayson, regional lead for government and health industries at PwC, said:

  • It’s clear there’s a public mandate for a sustainable UK recovery that benefits everyone, everywhere - what this research highlights is the measures the public will use to determine the success or failure of that project, and how their priorities have shifted.

  • Economic success comprises so much more than traditional measures like GDP and GVA, and - as the Government’s Levelling Up White Paper recognises - redressing regional inequality hinges on more than infrastructure and transport. While it remains to be seen whether this is a long-term trend, focus groups and polling reveal a marked shift in what people across the UK value as markers of prosperity, opportunity, and wellbeing at a local and national level. 

  • The public’s rising emphasis on the importance of low crime rates, having a safe neighbourhood, and the role of a vibrant local hub for eating, entertainment, shopping and socialising are captured in two new measures of economic wellbeing: safety and high streets. 

  • Various data suggest a creeping but patchy revival of high streets - an uptick in independent retailers moving into vacant premises, for example - but an inclusive, resilient return will rely on more than retail. Some cities have a paucity of shop choice, while residents in others might prefer pedestrianised or green space over new commercial development. 

  • There’s scope for action from central government, local leaders, and business to meet the emerging public priorities of safety and high streets. This could include anything from targeted funding to address socioeconomic risk factors for crime or hyper-local use of technology in prevention, to building intra-region circular economies that incentivise green growth and shopping locally. 

  • More broadly, efforts to join up physical, cultural, social, and environmental development in Belfast or the private sector partnerships, job creation and sector focus in Cardiff are among examples showing how thoughtful, tailored regeneration investments can set cities on the right course to draw in communities and level up regions.

  • The shift in public priorities is also reflected in the downrating of jobs and skills - two of the most important variables last year, likely to be due to the current low unemployment rates - while the environment and income distribution have seen significant increases. (See Figure 1 below.) 

 

 

Financial services has among the highest, and most persistent, gender pay gaps of all UK sectors

PwC UK’s new Gender Pay Gap & Diversity in Financial Services report shows gender pay gaps have remained persistently high in the financial services sector, and proposes ways the sector can transform to close their pay gaps at a faster rate. 

  • Median average pay gap for financial services (FS) in 2020 was more than double the average of all UK sectors at 26.6%, compared to 12.1% across all other UK sectors. Financial services is only outstripped by football as the sector with the largest pay gap by industry in the UK.

  • The gender pay gap in FS has only decreased by 3% over the last four years, with other sectors making more and quicker progress over time.

  • Five FS sub-sectors hold the five worst gender pay gaps: building societies, banking, real estate, investment, and insurance. See graph below.

  • Banking had the highest pay gaps in FS in 2020 at 30.5%, whilst the mean pay gap at building societies has increased from 31.2% to 31.9%.

  • The FS sub-sector demonstrating the greatest absolute reduction in mean pay gap is real estate; decreasing from 33.2% to 28.1%. Metrics focused on diversity and inclusion, and workplace fairness are increasingly making up part of the ESG measure in executive pay decisions, with PwC research showing 60% of FS companies in the FTSE 100 include an ESG measure in executive pay. 

 

 

Katy Bennett, Diversity and Inclusion Consulting Director at PwC UK, comments:

  • Contributing to the ‘S’ in ESG, gender pay gap data and other associated diversity metrics continue to be an issue of concern for investors, talent and consumers. In the context of the great resignation, financial services firms need to be doing everything they can to keep talent engaged and a large, persistent gender pay gap will impact a company’s reputation. 

  • In this context, we expect to see more pressure on the financial services sector to be transparent and take action on diversity.

  • While the gender pay gap figures are stark, there is a massive opportunity here for leading financial service organisations to be more proactive, to analyse where the issues are coming from, drive positive change on workforce fairness and build a culture of inclusion. 

  • Not taking action, however, will leave financial services further exposed as an outlier compared to other industries when it comes to diversity issues and pay gaps.

  • Broken down, each sub sector of Financial Services also had minimal movement, as the below graph illustrates.

 



Something to read:

Last summer, PwC launched Empowered Flexibility for its 23,000 UK people, enabling them to spend 40-60% of their time working from home. For many this has provided the opportunity to more easily manage caring responsibilities, stay fit, or pursue hobbies with reduced commuting time. However, Henry Scott, who is based in London, has spent the last few weeks using this flexibility to help deliver lambs while delivering tax advice. 

 

Something to listen to: 

At the end of 2021, most LIBOR settings were published for the final time. In this final episode of our podcast series on the subject, it is time to reflect on the achievements and take a stock-take on what is left to do around synthetic LIBOR, US transition, legislative solution and the use of CSRs and term rates.

Something to watch:

In the latest episode of our IWD #BreakTheBias series, our Head of Audit, Hemione Hudson is joined by Jo Salter MBE, the UK’s first female jet pilot. As PwC’s Director of Global Transformative Leadership, Jo discusses her experience in work and life, and the importance of role models and sharing stories to promote gender equality. You can watch it here.

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