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Weekly Media Briefing

Dec 02, 2021

This week’s topics: 

  • Tax administration Day: more interesting than the name suggests... 
  • ...with details on changes to R&D credits to tackle abuse in the R&D market
  • Cautious optimism for UK economy despite Omicron risks 
  • More than US$5.5 trillion tied up in working capital 


HMRC issues 250 pages of tax consultation and responses 

On 30 November HMRC published additional resources, consultations and updates on tax administration and maintenance. 

Jon Richardson, head of tax policy at PwC, said:

  • “By using the term Tax Administration and Maintenance Day the government was clearly managing expectations about what would be announced. 

  • “A key focus was on tax simplification and there is more than a hint of irony in the fact that the government issued almost 250 pages of consultation and responses yesterday on the subject. Despite the name there were also some important announcements on key tax policy areas such as R&D.”


Rachel Moore, innovation incentives partner at PwC, added:

  • “Following years of discussion on how to tackle abuse in the R&D market, several changes have been proposed to tighten up the process for making R&D claims. The balancing act for HMT will be how to implement the proposed changes to documentation and claim process without too much additional red tape for the taxpayer.  

  • “Other previously trailed changes will result in winners and losers. The winners will be those spending on data and cloud for R&D with the losers being the overseas R&D spenders.  

  • “The proposals to prevent overseas costs are widely drawn with a proposed exclusion on all overseas labour costs. While the policy intentions behind this are well understood, this could have significant consequences for key R&D industries such as the pharmaceutical sector where overseas clinical trials are often critical to drug and vaccine development. 

  • “There is still time to debate these issues and helpfully the consultation document indicates there may be potential for some, albeit narrow, exceptions to the new rules”.


Cautious optimism for UK economy despite Omicron risks

The UK economy continued its recovery in Q3 2021 and GDP growth is expected to remain strong in 2022, at around 4.5-5.1%, according to PwC’s latest UK Economic Outlook.

There are concerns that the potential introduction of new social distancing measures to curb new variants of concern such as omicron would have an effect on the rate of recovery. Yet PwC economists believe the impact of such measures on growth could be moderated by other structural factors.

Hoa Duong, economist at PwC, said:

  • “While the prospect of new variants of concern such as omicron create a risk of further social distancing measures, there are reasons for cautious optimism that the UK economy can still maintain its growth into 2022.

  • "In the medium term the other 3 factors, e.g. fiscal policy, supply-side (e.g trade and easing of supply chain bottlenecks) and inflation, are equally important and could drive GDP growth slightly toward the 'accelerated growth' scenario.

  • "Clearly, however, this depends on the level of health risk associated with a new variant and how any global policy responses impact on areas such as tourism, trade and the supply chain."

In addition, the Outlook argues that three factors have the potential to pave the way for a consumer splurge next year: a strong labour market, combined with a large stock of excess savings, and a desire to move on from the pandemic could create the right recipe for household spending to propel growth.

Yet Hoa Duong adds that there will be polarisation across consumer spending, which reflects deeper disparities across the UK economy:

  • “More people have been going out to eat, going on holiday, and going to see their GP in person - and this normalisation of everyday activity is driving growth.

  • “But the triple consumer splurge will likely be concentrated on higher income households, while lower income households could be hit by a triple consumer squeeze. 

  • “There are three factors that have the potential to moderate this splurge, especially for lower income households. These households will feel the pinch from a combination of rising inflation, higher interest rates, and fiscal changes, especially the increase to national insurance contributions over 2022/23.”

You can find a full overview of the latest Economic Outlook and analysis from PwC’s economists via the PwC Media Centre


More than US$5.5 trillion tied up in working capital- latest PwC study finds

In PwC’s latest Working Capital Study 21/22 the firm analysed the cash and inventory position of over 20,000 companies global finding:

  • More than US$5.5 trillion was tied up in working capital- the cash businesses need to run day-to-day operations by the start of 2021 as logistics, supply chain and inventory issues beset global markets

  • As customers delayed payments, the length of time taken for invoices to be paid- the Day Sales Outstanding-  reached a five-year high, increasing to almost eight weeks (54.1 days)

  • Days Payable Outstanding, the length of time it took companies to pay their creditors increased by seven percent to more than 10 weeks.

  • The time inventory remained on shelves before being sold increased by five percent to more than eight weeks (59.5 days).

  • The analysis also shows 10 out of 17 sectors saw a deterioration in Nominal Working Capital days between 2019 and 2020 with four sectors- aerospace & defence, hospitality & leisure, automotive and energy & utilities seeing a double digit deterioration. 

Daniel Windaus, business restructuring services partner at PwC, said: 

  • “With ongoing instability in the global supply chain, including port closures, limited shipping lane availability, lack of HGV drivers, and shortage of raw materials, managing inventory is a key focus. The risk of excess is just as prevalent as the potential for insufficient stocking. 

  • “The deterioration in working capital performance reflects the exceptional volatility experienced by many companies. The pandemic also exposed the slow reaction of supply chains to external shocks. Lead times and replenishment strategies are being stretched even for regional supply chains, meaning safety, stock and inventory policies need to be adapted regularly.”


Something to read:

Walk in, in a festive wonderland. Click and Collect continues to grow in popularity this Christmas, predicted to make up 8% of all consumer spend. Craig Skelton, South East Private Business Leaders at PwC, discusses the opportunities for smaller businesses to establish their own click and collect offering.


Something to watch:

A-Z of tech podcast: T for Television

‘T for Television’, the latest episode in PwC UK’s A-Z of Tech podcast series, peeps inside the magic box in the corner of the living room to see how the technology of moving pictures is changing and what we can expect next from content providers and manufacturers. Listen here


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Felix Ampofo

Felix Ampofo

Manager, Media relations, PwC United Kingdom

Tel: +44 (0)7841 468245

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