Service Sector Growth On The Rise 
The Markit/CIPS service purchasing manager’s index (PMI) rose from 51.3 in October to 52.1 last month. Economists had expected the pace of growth to slow, forecasting a fall on the PMI to 50.5.

However, business confidence in the sector fell from its five-month high and worryingly, employers in the sector shed jobs at the fastest pace in more than a year – worrying because the service sector accounts for almost three quarters of the UK economy.

Job losses were heaviest for hotels, catering and restaurants and for transport, storage and communications and were mainly accounted for via redundancies and natural attrition.

The pick-up in activity in services was driven by a continued inflow of new business, albeit at the slowest rate since December 2010, and by extra advertising and marketing, the purchasing managers' survey showed.

By sub-sectors, activity increased in the business-to-business services sector but declined in IT and computing as well as in the catering and transport categories. The survey does not include retailers or public services.

The survey said that the Euro zone debt crisis was weighing down on confidence in the sector and that growth was being hampered by low bank lending and public sector spending cuts.

Chris Williamson, Markit's chief economist said: "The service sector saw a modest expansion again in November, holding up in the face of growing gloom at the health of the domestic economy and heightened uncertainty regarding the Euro area's debt crisis.

"However, with manufacturing contracting at a steep pace, the weak growth in services means the economy is likely to have stagnated in the fourth quarter," he added.

David Noble, chief executive of Cips said: “Whilst the service sector is still growing, it is doing so at a modest rate and businesses remain under strain. Strong headwinds from the continued Euro zone crisis combined with public-sector pressures are adding to the anxiety levels amongst many businesses in the sector."


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Taxman Needs Training 
A National Audit Office report has found that HM Revenue & Customs (HMRC) spent £96m on skills training in 2010/11 but doesn’t have all the skills it needs to meet its objectives, nor does it know where its skills gaps are.

The report also found that there is an absence of engagement at senior level in staff skills and that there is no specific body that examines the total spending on skills and decides whether it is being made in the right parts of the organisation.

For example, it needs better data and information on where it should take a more strategic approach and gain an early warning of future skills gaps, such as the risk of skills depleting as experienced staff retire. This is of particular concern in the department, as one in five staff in key business areas is over 55.

Many of the points in the report have been raised previously by HMRC’s own reviews but they have not made the changes needed. For example, the total number of training courses has not reduced from 2,000 courses in 2009, when an internal review raised concerns about poor focus in training provision.

Amyas Morse, head of the National Audit Office, said: "At the level of the business as a whole, HMRC has no strategy to manage the £96m it spends each year on skills. Although the department is doing much to make sure it has the skills it requires, it needs a more systematic approach, where spending on skills is linked explicitly to the organisation's overall business objectives and a vision of how it should look in the future.

The report concluded that HMRC must focus on boosting staff skills if it is to meet its targets of shaving 25 per cent from its budget and increasing tax revenue by £7bn.

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King Warns Banks 
Bank of England Governor, Sir Mervyn King has warned the banks against the “extraordinarily serious and threatening” economic situation facing the UK’s banking system.

Sir Mervyn has advised the banks to build up their financial buffers in an effort to withstand the threat from the eurozone crisis and said that the Bank itself was making “contingency plans” in case of a eurozone break-up. He has not revealed, however, what those contingency plans are.

Earlier this week, six central banks, including the Bank of England, took action to encourage lending between banks in order to keep the global economy moving and the President of the European Central Bank, Mario Draghi, told the European parliament that “downside risks” to the eurozone economic outlook had increased.

Sir Mervyn also said that the UK’s banks were amongst the strongest in the world, with tier 1 capital ratios, which are an internationally respected measure of a bank’s strength, at well above 12 per cent.

Speaking of the potential break-up of the eurozone, Sir Mervyn said: "There are many ways in which the future could play out. Maybe it (the eurozone) won't break up, maybe it will continue in various forms, but maybe there will still be questions of default."

The advice given by the Bank’s Financial Policy Advisory Committee (FPC), of which Sir Mervyn is chairman, is that the banks should keep lending but should build up their financial reserves by cutting internal dividends and bonuses

According to economists, it is remarkable for a central banker to deliver such a stark warning, showing the seriousness of the situation. However, Sir Mervyn is confident that the banks can withstand the threats if they set aside more capital.

IN his statement, however, he acknowledged that the financial problems re widespread and beyond the control of any UK authority alone.


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Start-Ups Backed By Angels 
A group of business ‘angels’ has welcomed Chancellor George Osborne’s plan, unveiled in the Autumn Statement, to offer 50 per cent income tax relief on the first £100,000 invested in a new company.

The Seed Enterprise Investment Scheme (SEIS), which will be launched in April 2012, is an extension of the existing Enterprise Investment Scheme (EIS) and will apply to all investors, regardless of the rate at which they pay tax.

And apart from this, any ‘angel investors’ using the scheme will benefit from one-off capital gains tax holiday if they reinvest gains made during the 2012-13 financial year.

The group of 35 investors, all leading entrepreneurs, including such figures as Charles Dunstone, founder of Carphone Warehouse, already fund new businesses and believe that the SEIS will encourage others to invest in start-ups.

"We are some of the UK's leading angel investors and venture capitalists, having funded and nurtured thousands of British start-ups between us, creating new jobs and economic opportunities across the UK,” they said.

"At a time of global economic uncertainty, one thing is clear: it's fast growing start-ups that will deliver the lion's share of the new jobs and economic growth that the UK needs."

Mike Lynch, founder and Chief Executive of Autonomy and a member of the group added: “Very early stage investment is the riskiest of all types of funding, and this new tax incentive will encourage more investors to take the plunge and support new British companies.”

"Taken together, we believe that the Seed Enterprise Investment Scheme and the CGT holiday will attract new investment to British start-ups, and help the next generation of British innovations to become the next generation of great British businesses."

As well as announcing the SEIS, the Chancellor also promised to simplify and refocus the EIS and Venture Capital Trust schemes, which has been welcomed by investors.


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The Autumn Statement For SMEs 
There were several proposals in the Autumn Statement aimed at helping small and medium-sized enterprises (SMEs) but there have been mixed views on how well they will work.

One of the most important was the proposed credit easing for businesses, which will mean that finance should be more freely available than it has been from the traditional sources such as banks.

However, the credit easing plan has already been attacked by Ed Balls, Shadow Chancellor, who said that it was very similar to the small firms guarantee scheme, which “has been around for years.”

And Manos Schizas, senior policy advisor for the Association of Chartered Certified Accountants (ACCA) said that the plans for credit easing “look like a cross between 2008’s failed Working Capital Guarantee and the European Investment Bank guarantees, which have experienced very low uptake in the UK...”

Other policies unveiled in the Statement include the extension of the Small business Rate Relief scheme, the income tax and capital gains relief for those investing in start-ups and the angel investment matching plans.

The small business rate relief scheme had been due to expire in October 2012 but will now run until April 2013, which could be worth over £200m to SMEs.

There was also good news for people who invest in start-up businesses, as they will now be able to gain 50 per cent income tax relief on investments of up to £200,000.

The Federation of Small Businesses welcomed both moves and said that they “will give start-ups and fledgling businesses the chance to bypass the high street banks and find alternative sources of finance.”

While Richard Anton, chairman of the British Venture Capital Association, said: "The Chancellor has today offered an invitation to invest in innovation. This is a rare case of a George coming to the assistance of dragons. Angel investors will be delighted."


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