the times | Monday December 6 2021 35
Business
Louisa Clarence-Smith
Economists have cut their growth
forecasts for next year because of
concerns about rising costs, shortages
and the possibility of more Covid
restrictions.
The CBI said that short-term head-
winds, such as supply chain disruptions
and inflation, had intensified since its
last forecast in June.
Its economists are predicting 6.9 per
cent growth in GDP this year and
5.1 per cent next, down from its June
forecasts of 8.2 per cent and 6.1 per cent,
respectively.
KPMG’s economists said that GDP
growth could more than halve next
year if restrictions were introduced.
Their growth forecast for 2022 has been
cut from 5.4 per cent six months ago to
between 1.8 per cent and 4.3 per cent.
The spread of the Omicron variant
has stoked fears of more supply disrup-
tions and prolonged higher inflation.
Companies fear a tough end to 2021,
with 80 per cent of the 500 mid-sized
businesses questioned last month by
BDO, the accountancy firm, saying
that they expected their performance
to be hit by rising fuel prices, disrupted
supplies or higher energy costs. As a
result of inflation, almost a third
planned to cut the number of products
or services they offered and 31 per cent
planned to put up prices.
Ed Dwan, a partner at BDO, said:
“Many businesses will have been
hoping for a strong finish to 2021 and a
fresh start for 2022. The harsh reality is
that continued supply chain issues,
rising energy prices and increasing
costs mean that many are taking
further drastic measures to stay afloat.
These issues could also be exacerbated
by the new Covid-19 variant.”
Last year the economy recorded its
worst economic performance since
- A recovery in household spending
has helped to drive economic growth
this year. The CBI said that the “foun-
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$70.52 (-2.92)dations” for economic recovery were
firm despite global supply challenges,
with continued employment growth
over the next couple of years support-
ing household spending. However, it
warned said that spending could be cut
by inflation hitting wage packets.
The Organisation for Economic
Co-operation and Development has
lowered its prediction for UK growth
next year to 4.7 per cent, from 5.2 per
cent three months ago. It lifted its infla-
tion forecasts to 4.9 per cent in the first
half of next year.
Yael Selfin, chief economist at
KPMG UK, said that “the potential re-
introduction of social distancing meas-
ures could see output fall this month
and during the first quarter of 2022”.
The CBI is urging the government to
introduce new incentives to boost
business investment. It believes that a
recovery in business investment appe-
tite will be brief, with capital spending
falling from mid-2023 as the super-ded-
uction incentive comes to an end and as
the rise in corporation tax kicks in.
Tony Danker, director-general of the
CBI, said that “pro-investment and
pro-innovation regulation to help build
new markets, a competitive tax regime
that incentivises business investment
across the board and new market-
making interventions, for example on
clean energy” could jump start produc-
tivity. The CBI said that the recovery in
exports was likely to be “lacklustre”,
after disappointing growth this year.
Without government intervention,
poor productivity persists in the CBI’s
forecast, with output per worker re-
maining 17 per cent below its pre-2008
trend at the end of 2023.
Rain Newton-Smith, the CBI’s chief
economist, said: “UK exports are being
outpaced by our global peers, which, if
allowed to continue, will negatively
impact our economy in the long term.”
The chances of the Bank of England
raising interest rates on December 16 is
regarded as less than 50-50.Challenges
on all sides
‘pose threat
to growth’
CATHERINE IVILL/GETTY IMAGESIt’s all kicking off BT, whose football pundits include Rio Ferdinand and Joe Cole, is said to be in talks with Discovery, which
owns the Eurosport network, about a joint venture that could derail the telecoms group’s tie-up with DAZN. Report, page 37An anonymous investor is reducing its
stake in Klarna and offering the shares
to small investors in the UK at a 5 per
cent discount to the $46 billion valua-
tion that the Swedish “buy now, pay
later” credit company achieved six
months ago.
Crowdcube, the online investment
platform, has been taking expressions
of interest from its 1.2 million members
for shares in Klarna, the most valuable
privately owned financial technology
company in Europe. It has been
messaging its members telling them
that it has “secured an exclusive,
limited allocation” of Klarna stock from
a unidentified private seller.
Crowdcube declined to confirm how
many shares it was selling, or for whom.
A spokeswoman said it had been “over-
whelmed” by the interest it had re-
ceived. Klarna declined to comment.
A funding round in June, led byBuy now, pay now for slice of Klarna
Tom Howard SoftBank, the Japanese conglomerate,
valued the Stockholm-based Klarna at
$45.6 billion, almost 50 per cent above
its valuation of $31 billion in March and
quadruple the $11 billion of September
2020.
The shares sale will give retail
investors a rare chance to invest direc-
tly in Klarna. Many smaller investors
have had to gain exposure to the com-
pany by investing in stocks such as
Chrysalis Investments, the London-
listed backer of private companies.
Klarna was founded in 2005 by
Sebastian Siemiatkowski, Niklas
Adalberth and Victor Jacobsson. It
allows consumers to spread out the cost
of online purchases and is used by
90 million people and more than
250,000 retailers worldwide.
Buy now, pay later has exploded in
popularity, with shops scrambling to
offer the service and consumers happy
to opt for what is free credit for those
who meet the payment schedules.Providers include PayPal, Clearpay,
Laybuy and Openpay. The Treasury has
announced plans to regulate the sector.
Klarna claims that 15 million people
in the UK have used its services, which
include “Pay in 3”, in which consumers
pay the purchase price in three equal
interest-free monthly instalments, and
“Pay in 30”, under which they delay
payment for up to 30 days.
Online retailers have been persuad-
ed by Klarna’s claims that it can boost
sales by up to 20 per cent. Klarna’s
investors include Silver Lake, the tech-
nology-focused private equity firm; Ant
Financial, of China; H&M, the fashion
retailer; and Sequoia Capital, the Silicon
Valley venture capital firm that made
billions of dollars as an early investor in
Google and WhatsApp.
There has been much talk about an
initial public offering for Klarna, which
is expected to list on thea stock market
within the next few years, allowing
some early shareholders to cash out.Costs, shortages and Omicron set to take toll