The Times - UK (2022-02-16)

36 Wednesday February 16 2022 | the times

Business

The government has relaunched its
much-publicised green savings ac-
counts at twice the interest rate,
apparently having failed to tempt
savers with the “miserly” rate that was
paid previously.
The three-year fixed-rate bonds,
available through National Savings &
Investments, were launched in Octo-
ber, paying 0.65 per cent interest. This
was much lower than the best rate
available from commercial banks,
which was then 1.81 per cent, according
to Savings Champion, the website.
Savers were able to deposit between
£100 and £100,000 and money would
be ring-fenced for environmental
projects such as renewable energy.
After seemingly little take-up, they
were relaunched yesterday with a rate
of 1.3 per cent. John Glen, the Treasury
minister, said that the new rate
reflected “upward movement across
the wider fixed-term market”.
However, data from Savings Cham-
pion found that the highest-paying

the pandemic, the government’s Insol-

vency Service said.

Claire Burden, a partner at Tilney

Smith & Williamson, an accountancy

and professional services group, said

that distress was being caused by infla-

tion, continued supply chain disrup-

tions and raw material and commodity

shortages, and she added that interest

rate increases were expected to put

more pressure on companies in future.

Christina Fitzgerald, vice-president

of R3, the insolvency trade body, said

the figures showed that “the toll the

current business climate is taking on

firms in England and Wales”.

Colin Haig, head of restructuring and

insolvency at Azets, an accountancy

firm, said the “prevalence of liquida-

tions rather than administrations is a

worry. Liquidation usually means that

there is no way forward for the business

and employees.” He said that a modest

rise in personal insolvencies showed

the toll of the pandemic on individuals.

‘Real’ wages higher than before Covid

1,200

1,000

800

600

400

200

0

000s

2019 2020 2021 2022

Average weekly earnings

Annual growth rates

With bonuses Without bonuses

Source: ONS

2019 2020 2021

Productivity

Output per hour worked

Output per worker

110%

105

100

95

90

85

80

75

Pandemic

Number of vacancies in the UK,

seasonally adjusted

Vacancies

8%

6

4

2

0

-2

-4

-6

Jan-Mar Nov-Jan Sep-Nov Jul-Sep

2019 20 21

Just the job

2019 2020 2021

Unemployment rate

5.4%

5.0

4.6

4.2

3.8

3.4

Inflation is soaring but

those in work are better

off than they were

two years ago, writes

Arthi Nachiappan

Wage growth failed to keep pace with
inflation at the end of 2021, but the lat-
est official data also shows that on a
broader view Britons are still consider-
ably better off than they were at the
start of the Covid-19 crisis.
Wages in the UK rose by 4.9 per cent
in the year to December 2021, lagging
the 5.4 per cent annual rise in inflation
recorded in the same month.
However, real wages — pay adjusted
for the impact of inflation — are con-
siderably higher than they were before
the onset of Covid-19. Wages finished
last year almost 4 per cent higher than
they were before the pandemic, accord-
ing to figures from the Office for
National Statistics.
Pay has risen up the agenda for
workers and policymakers as both try
to address the soaring cost of living
brought on by prices increasing at their
fastest pace in more than 30 years.
The governor of the Bank of England
said that it was not concerned about a
wage-price spiral, in which higher wage
demands lead to inflation because
employers increase prices to cover the
higher wages, but later he added that
workers should show “restraint” when
negotiating higher pay to avoid pushing
up consumer prices.
The median monthly wages of pay-
rolled workers increased by 6.3 per cent
in the year to last month, according to
separate payroll data published by the
ONS yesterday. Since February 2020, it
has advanced by 10.3 per cent.
Average weekly earnings including
bonuses reached £596 between Octo-
ber and December, a 4.3 per cent rise
compared with the same quarter in

2020. Adjusting for inflation, total pay
      was down 0.1 per cent in real terms, or
      0.8 per cent when excluding bonuses.
      Simon French, chief economist at
      Panmure Gordon, said that the rise in
      minimum wages, and pay settlements
      that take their cues from the consumer
      prices index, which make up a minority
      of the economy, would be a “driving
      force” for wage rises this year. However,

the rest of the workforce will be left to

negotiate their own pay rises or to move

jobs or companies in search of higher

pay should they look to increase their

wages.

French said it was unlikely that wage

rises in these portions of the workforce

would keep pace with inflation. “Em-

ployers going into negotiations will

look at this over a one-to-five-year view

rather than have the conversation in

isolation based on this year’s inflation

rate,” he said. “Employers may well say

they gave you a nominal pay rise last

year when inflation was near zero or

kept you on and topped up your fur-

lough.” As such, the majority of wage

agreements may take some cue from

the level of inflation but not pass it

through to wages in its entirety.

January was a crucial month for pay

settlements, with many workers repre-

sented by trade unions or working in

the public sector agreeing their pay

packages for the year. The outcome of

settlements made in January and the

next significant round of negotiations

at the start of the financial year in April

will give a clearer picture of what

impact rising prices will have on wages

this year, according to Samuel Tombs,

chief UK economist at the Pantheon

Macroeconomics consultancy.

Tombs said that the answer to the rise

in real wages since the onset of the

pandemic lay in a rise in productivity.

“Now we’ve got GDP basically back to

peak levels, but the overall measure of

employment is still about 1 per cent

below where it was pre-Covid,” he said,

“so workers have become around 1 per

cent more productive and that should

be reflected in real wages.”

Productivity exceeded pre-pandem-

ic levels for the first time at the end of

last year, despite a jump in the number

of people working from home following

the Omicron guidance, but there are

concerns that it may not last.

Bart van Ark, professor of produc-

tivity studies at the University of Man-

chester, said it was too soon to tell

whether the shift to working from

home and hybrid models of working

had increased productivity because the

impact of a shift to hybrid working —

operating both from home and in the

workplace — was still unclear.

“If anything, I would say we have

learnt how to work from home in a way

that avoids significant productivity

losses, but that’s as far as I would go,” he

said. “Now that we see this sort of im-

provement in the fourth quarter over

the third quarter, it seems to suggest

that the move back to work from home

didn’t really impact productivity much,

so that’s a good piece of news.”

Insolvencies on the rise as

pandemic protection ends

James Hurley

Green bonds relaunched at the double

three-year fixed-rate bond had risen

from 1.81 per cent on October 22, when

the bonds were launched, to 1.85 per

cent now, a rise of 0.04 percentage

points. The average rate has increased

from 1.07 per cent to 1.19 per cent.

Andrew Hagger, of MoneyComms, a

personal finance site, described the old

rate as miserly and “so out of touch with

the market there was never going to be

a rush to sign up. I think the fact that

NS&I has doubled the rate rather than

making a tweak speaks volumes.”

The state-owned savings bank has

refused to disclose how many bonds

have been sold, publishing data on indi-

vidual accounts only once a year in its

annual report. It said that the Treasury

would publish sales data in the spring

statement next month and of projects

the bonds had been used to finance in

September.

The green bonds were launched

alongside green gilts, which attracted

significant demand from investors. In

two issuances in September and Octo-

ber last year, they brought in £16 billion.

The move comes a week after NS&I

raised rates on its Direct Saver and

Income Bonds for the second time in

three months, by 0.15 percentage points

to 0.5 per cent.

It has been struggling to meet its

fundraising target, set by the Treasury,

of £6 billion for 2021-22. By Dec-

ember 31, it had raised £2.1 billion,

according to Bank of England data.

However, because NS&I has been

given £3 billion leeway on the £6 billion

target, James Blower, of Moneyfacts,

the financial data site, said that he did

not expect further rate rises until

NS&I’s target for 2022-23 was released.

“If the target is £6 billion or more next

year, they are likely to come under

competitive pressure to increase rates

to get that growth,” he said.

George Nixon Money Reporter

Corporate insolvencies in England and

Wales began to return last month to

levels last seen before the pandemic as

more businesses failed over debts.

The number of companies going bust

reached 1,560, more than double the

figure of a year ago and similar to that

of January 2020, before the onset of

Covid-19.

Businesses were protected from

certain forms of creditor action during

the pandemic, resulting in a significant

drop in insolvency levels.

The rises in the January levels were

driven by greater levels of creditor vol-

untary liquidations, which were 34 per

cent higher than 2020. In a creditor

voluntary liquidation, the directors of a

distressed company volunteer to put

their company into liquidation.

Numbers for other types of company

insolvencies, such as compulsory liqui-

dations, remained lower than before

1.3%

The interest rate offered on the newly

relaunched gren savings account

Source: Treasury