The Times - UK - 04.12.2021

54 2GM Saturday December 4 2021 | the times

Business

5

Growth in Britain’s mainstay services
sector slowed last month as inflation-
ary pressures hit levels not seen for at
least a quarter of a century, a closely
watched survey has found.
The IHS Markit/CIPS UK services
purchasing managers’ index fell to 58.5
last month, from 59.1 in October. This
was slightly lower than a preliminary
reading of 58.6 and suggests that rising
input costs are holding back services
companies.
The composite PMI, which combines
the services and manufacturing sec-
tors, eased to 57.6 last month from 57.8
in October. The services index re-
mained above the 50 mark that sepa-
rates growth from contraction and IHS
Markit predicted that the economy
would grow more rapidly in the fourth
quarter than in the third. New orders
rose at the fastest pace in five months
and export sales grew at their fastest
clip in more than four and a half years,
it said.
However, the report warned that the
new Omicron variant of Covid-19 could
derail the recovery and heap further
pressure on already-constrained global
supply chains.
IHS Markit said that the hospitality
industry had been one of the best-
performing sectors in recent months,
adding that many services firms had
enjoyed a boost in overseas orders after
the government loosened travel
restrictions.
It found that businesses were under
pressure from rising costs after strug-
gling to hire staff and secure supplies.
Companies also had endured a further
“round of rapid cost inflation” because
of soaring fuel, wage and utility bills. In-
put costs had increased at the fastest
rate since the survey began in 1996.
Moreover, the survey’s gauges of
costs paid by services companies and
the prices they charged to customers
hit their highest levels since at least
1998, which may bolster the case for an
interest rate rise when the Bank of
England makes its next policy decision
on December 16. Optimism fell to a
one-year low, even before news of the
new virus strain had become known to
the companies surveyed by IHS.
Tim Moore, economics director at
IHS Markit, said that so far “surging
price pressures” had failed to dent
business and consumer spending. He
noted that order growth was at its
highest level in five months, job crea-
tion was strong and that services com-

panies had backlogs of work to keep

them busy over the coming months.

Nevertheless, he warned that

Omicron had the “potential to derail

near-term growth prospects and add to

international supply chain disruption”.

Exporters and hospitality companies

had the most to lose from the new

variant. “Worryingly, the fastest-grow-

ing parts of the services sector are also

the most exposed to the return of tight-

er pandemic restrictions, especially as

we approach the crucial festive spend-

ing period,” he said.

Martin Beck, chief economic adviser

to the EY Item Club, the forecasting

body, said that the services sector

would “lose some momentum in

December” because of the new Covid-

19 variant. “Though the government

has introduced relatively minor restric-

tions so far, consumers may adopt a

more cautious approach, particularly

to social consumption activities, such

as going out to eat,” he said.

He said that the Bank of England’s

monetary policy committee could take

a cautious stance as it considers whe-

ther to raise rates for the first time since

2018. “Unless the potential impact of
      the Omicron variant becomes clearer
      in the next two weeks, we expect the
      MPC to err on the side of caution and
      wait for the February meeting before
      raising the Bank Rate,” he said.

A business model linked with a series of
scandals including the collapse of
Greensill Capital is causing a “high
level of harm” and tighter rules are
needed, the City regulator has said.
The Financial Conduct Authority
has proposed a public consultation to
apply lessons from Greensill, the supply
chain finance lender that collapsed in
March leaving investors with losses of
£1 billion, and after broader criticism of
the “appointed representative” regime.
The system, which allows unregu-

Regulator to end ‘harm’ of regime linked to Greensill failure

James Hurley lated firms to act as agents for regulated
entities, has let companies such as
Greensill that were not authorised by
the FCA to conduct activities without a
licence because they outsource super-
vision to a third-party “principal” — an
authorised firm. The principal assumes
responsibility for the regulated activi-
ties that their “appointed representa-
tive”, such as Greensill, carries out.
The regime has been linked with
other scandals, including widespread
mis-selling by insurers that appointed
representatives failed to spot.
The regulator said that it was seeing

a “wide range of harm across all sectors

where firms have appointed repre-

sentatives. This harm often occurs

because principals don’t perform

enough due diligence before appoint-

ing an appointed representative, or

from inadequate oversight and control

after an appointed representative has

been appointed.”

The FCA proposes rules to make

principals improve oversight and give

more information to it on appointed

representatives, making risks easier to

spot for the authority.

Sheldon Mills, executive director for

consumers and competition at the

FCA, said that the appointed represent-

ative model helped to bring choices to

consumers, but added: “There are real

risks of consumers being misled and

mis-sold with little scope for recourse.

“We have already started work look-

ing at high-risk representatives and

these proposals build on that work. We

want to ensure that principals are

properly overseeing their appointed

representatives, ensuring they are

competent, financially stable and deliv-

ering fair outcomes for consumers.”

The intervention comes after the

Treasury select committee said in July

that the watchdog must reform the

system in the wake of the failure of

Greensill Capital, where David

Cameron, the former prime minister,

worked as an adviser.

A lobbying and financial scandal was

sparked by the unpaid advisory role of

Lex Greensill, the finance firm’s

founder, within Whitehall, where the

Australian promoted the supply chain

finance offered by the company, as well

as by Cameron’s efforts to win state

financial support for the business

before its collapse.

Inflation holds

back growth in

services sector

Simon Duke 6 Activity in China’s services sector

expanded more slowly in November

amid rising inflationary pressures

and continuing small-scale Covid 19

outbreaks, according to a survey.

The Caixin/Markit services

purchasing managers’ index fell to

52.1 in November from 53.8 in

October, but remained above the 50-

point mark that separates growth

from contraction.

The readings in the private survey,

which focuses more on small

companies in coastal regions, tallied

with those of an official survey.

Analysts argue that the services

sector, which has been slower to

recover from the pandemic than

manufacturing, is more vulnerable

to Covid outbreaks and anti-virus

measures, clouding the outlook for

an expected revival in consumption.

Companies’ input prices grew for

the 17th month in a row and at the

fastest pace since May because of

rising labour and raw material costs.

Prices charged rose, but at a slower

pace, pointing to margin pressures.

Conviviality executive inquiry dropped

The accounting watchdog has dropped

its investigation into the former finance

chief of Conviviality, which used to own

the Bargain Booze and Wine Rack

chains that collapsed in 2018.

The Financial Reporting Council

opened its investigation into an un-

named member of the Institute of

Chartered Accountants in England and

Wales for their role in the “preparation

and approval of Conviviality’s financial

statements”.

It is believed that the person at the

centre of the investigation was Andrew

Humphreys, the company’s chief

financial officer. He stepped down in

October 2017 and left with the board’s

“utmost appreciation and thanks”.

Six months after his departure, the

business fell into administration.

Humphreys did not respond to a re-

quest for comment.

The FRC said: “After a detailed

review of the evidence, the executive

counsel has decided that the test for

bringing enforcement action against

that member of the ICAEW is not met.

Accordingly, the case has been closed.”

Conviviality collapsed into adminis-

tration in April 2018. A few weeks

before, it had been valued at more than

£500 million, but it fell from grace after

a profit warning which it said was the

result of a “material error” in its fore-

casting, as well as weakening margins.

Soon after that warning, bosses dis-

covered an unpaid £30 million tax bill

that was due in two weeks’ time, leaving

the company short of cash. It tried to

raise £125 million but there was not

enough appetite among investors.

At the time of its collapse, the

business was led by Diana Hunter, a

former Waitrose executive. KPMG is

under investigation for its audit of

Conviviality’s 2017 accounts.

Tom Howard

A

merica’s

recovery

faltered last

month as job

creation

slowed even before a new

Covid variant heightened

concern about the global

economic outlook

(Callum Jones writes).

Employers in the

United States added

210,000 jobs in

November, falling well

short of forecasts of half a

million. It was the

weakest monthly reading

of the year so far.

Headline unemployment

in the world’s largest

economy fell from 4.6 per

cent to 4.2 per cent,

according to the

government’s figures.

Growth was muted in

the leisure, hospitality

and healthcare sectors.

The retail industry shed

20,000 jobs, led by

general merchandise and

fashion outlets.

Economists warned of a

challenging winter, with

coronavirus cases widely

expected to mount.

The latest figures,

coupled with fears about

the new variant and what

damage it may inflict on

the economy, as well as

inflationary pressures,

pushed indices lower. The

S&P 500 closed down

38.67 points, or 0.8 per

cent at 4,538.43, while the

Dow Jones industrial

average lost 59.71 points,

or 0.2 per cent, to

34,580.08. Technology

stocks were hit

particularly hard and the

Nasdaq slipped by 295.85

points, almost 2 per cent,

to 15,085.47.

The Federal Reserve

has started paring back

its vast support for the

American economy, but

November’s unexpectedly

slow expansion of the

workforce raises

questions over whether

policymakers at the

central bank will

accelerate their stimulus

reduction plan. Officials

including Jerome Powell,

the Fed chairman, have

raised the prospect of

speeding up the tapering

amid surging inflation.

Unemployment has

fallen from its peak at the

onset of the pandemic

last spring, but the

workforce remains

3.9 million shy of where it

was before Covid

emerged. The overall rate

stands at 4.2 per cent,

with joblessness more

prevalent among Black

and Hispanic workers.

While November’s

reading may yet be

revised, there is

mounting concern that

the recently recognised

Omicron variant risks

curtailing employers’

recruitment plans if it

spreads rapidly.

Andrew Hunter, at

Capital Economics, the

consultancy, said: “We

remain sceptical that a

further significant

recovery in the labour

force lies ahead,

particularly given the

worsening virus situation

anda potential federal

vaccine mandate.”

Job numbers

reveal US

slowdown

Retailers shed 20,000 jobs

last month, adding to fears

of a challenging winter

ALEJANDRA VILLA LOARCA/NEWSDAY/GETTY IMAGES