Loganair relaunches with improved customer service

After almost 25 years of operating as a franchisee, Scottish airline Loganair will commence running flights in its own right from 1 September 2017.

From 1994 to 2007 Loganair operated as a franchisee of British Airways. The carrier then flew under the Flybe brand. In August 2016 Flybe announced it would be terminating the relationship from 2017, citing ‘a failure to agree future operational standards and commercial arrangements.’

The airline operates flights from Scottish cities including Glasgow, Edinburgh, Aberdeen and Dundee as well as routes between the mainland and the islands, including the Highlands and Islands.

Loganair has announced changes to customer services to coincide with the relaunch of the brand. These include online check-in from four days before departure and airport check-in desks opening 90 minutes before departure at all airports, extended from the previous 60-minute period.

Customers will be able to use mobile boarding passes on flights from the Highlands and Islands. Mobile boarding is already in operation from flights departing from major airports including Glasgow, Edinburgh and Aberdeen.

Passengers will no longer be required to show photo ID at boarding gates to board Loganair flights. For security reasons, photo ID will still be a requirement to check in baggage at check-in desks.

Loganair operations director Maurice Boyle said: “We spent a lot of time looking at every aspect of the customer’s journey with Loganair, and working out how we can make travel more convenient and straightforward.

“The ability to check in online earlier, use boarding cards on mobile phones and the removal of ID checks at boarding gates are all designed to make our customers’ journey through the airport much easier than today.”

Investment advisory costs rise 17% in three years

Asset management has become less profitable as investment advisory costs rise while management fees fall, according to a new report from fund research body Fitz Partners.

According to the ‘Investment Advisory Fee Benchmarking Report’, the average advisory fee, which covers services such as asset allocation and stock selection, has risen 17% over the last three years, from 35bps to 41bps. The average management fee reduced 4% in the same period, from 106bps to 102bps.

Increased investment advisory fees mean that the share of fund costs paid for investment advisory services has increased 22%. This is impacting the profitability of fund firms.

Hugues Gillibert, CEO of Fitz Partners said: “We are seeing a further increase in one of the components of fund fees impacting fund profitability. Internal discussions in fund houses are becoming more focused.[…] Fee benchmarking is not only a question of overall level of funds cost for investors, it is also about good business practice and margin preservation.

“When looking at trends in investment advisory fees and management fees for UK and European cross-border funds, we can see clearly that both charges are not moving in the same direction. Over the last three years, management fees overall have gone down slightly while investment advisory fees have increased substantially.”

Gillibert recommended that close monitoring of bundled fees is especially important when advisory services are delivered outside of a fund’s domicile.

The researchers asked 16 cross-border asset management firms about their confidential fee schedules in order to compile the report.

 

Millennials Reject Workplace Pension Opt Out

Millennials have embraced the new automatic enrolment in a workplace pension, according to research by Royal London. A survey found that 71% of Millennials decided not to opt out of the plan. A further 8% initially opted out but then returned to their workplace plan.

The news may ease fears that younger people do not see pension saving as important. Three quarters of Millennials said they would increase their pension payments automatically in line with a pay rise, while 40% plan to increase pension payments next year.

However, almost one third (28%) of Millennials do not know how much is being paid into their pension pot. More than half (57%) say they know they should be saving more towards retirement.

The ratio of contributions made by employees and employers also impacted on Millennials’ willingness to save. Around three quarters (74%) said they would continue to contribute 2% if their employer gave 3%; but if contributions rose to 8% with employees paying 5% and employers paying 3%, that figure dropped to two thirds (62%).

However, if employees and employers both gave 4% then 76% of Millennials would be willing to save on those terms.

Jamie Clark, Pensions Business Development Manager at Royal London said: “Providers, employers and financial advisers all have a duty to ensure employees are engaged in their future pension planning as soon as possible and fully understand the consequences of opting out of their workplace pension.”

The government is in the process of reviewing the automatic enrolment programme, in a bid to increase the number of people saving into a workplace pension. Royal London has recommended that contributions should be more than 8% of salary.

Gender pay gap reporting comes into force in the UK

Thousands of UK companies are now required to publish their gender pay gap figures, as the country becomes one of the first to introduce mandatory gender pay gap reporting. Under new rules that take effect from Thursday, public, private and voluntary sector employers with 250 or more employees must publish data about their pay gap within the next year.

According to the Government Equalities Office, the regulations cover approximately 9,000 employers with over 15 million employees, representing nearly half of the UK’s workforce.

The move is part of efforts to stamp out discrimination in the workplace.

The UK gender pay gap currently stands at a record low of 18.1% for all workers, or 9.4% for full-time staff. It’s hoped that the new requirements will help employers to identify the gaps in their organisations and take action to rectify the issue.

Justine Greening, Minister for Women and Equalities, commented:

“We have more women in work, more women-led businesses than ever before and the highest proportion of women on the boards of our biggest companies. This has helped us to narrow the gender pay gap to a record 18.1% — but we want to eliminate it completely.

“Helping women to reach their full potential isn’t only the right thing to do, it makes good economic sense and is good for British business. I am proud that the UK is championing gender equality and now those employers that are leading the way will clearly stand out with these requirements.”

Under the new rules, employers will be required to publish their median and mean gender pay gap figures and the proportion of men and women in each quartile of the pay structure. They must also publish the gender pay gaps for any bonuses paid out during the year.

Additionally, employers will be encouraged to publish an action plan setting out the steps they will take to close the gender pay gap within their organisation.

The Women’s Equality Party welcomed the new reporting rules but argued that they should go much further, by requiring companies to publish pay data broken down by age, ethnicity and disability, as well as gender. The party also said that the rules should apply to businesses with more than 50 employees within three years.

UK house prices fall for first time in nearly two years

Average house prices across the UK fell by 0.3% from February to March, according to the latest monthly report from Nationwide, published on Friday.

This is the first fall since June 2015, and the largest such decrease for nearly five years. It pushed the annual rate of house price growth down to a 19-month low of 3.5%, which was weaker than expected.

Robert Gardner, Nationwide’s chief economist, noted that there was a mixed picture across the UK during the first quarter, with six regions seeing the pace of house price growth accelerate, another six seeing a deceleration and one recording the same rate as the previous quarter.

“Interestingly, the spread in the annual rate of change between the weakest and strongest performing regions was at its narrowest since 1978 at 6.8 percentage points — the second smallest gap on record,” Gardner added.

Nationwide also highlighted figures from the Department for Communities and Local Government’s latest English Housing Survey which showed a further decline in the home ownership rate to 62.9% in 2016 — the lowest recorded since 1985.

“Over the past decade, there has been a particularly marked decline in the home ownership rate amongst young adults (those aged 25-34), traditionally the segment containing most first time buyers,” Gardner pointed out.

A separate report released on Friday illustrated the barriers facing young people and those on low incomes who want to own their own home.

The National Housing Federation analysed where in the country people in different jobs can afford to rent and buy, revealing that house prices in England more than doubled (+120%) between 2002 and 2016, while salaries only increased by 38% during the same period.

According to the report, there is now only one local authority in the whole of England — Burnley in Lancashire — where a low-paid worker, such as a nursery nurse, could afford an average mortgage without spending more than five times their annual income.

At the same time, there is no area of the country where low-paid workers pay less than 30% of their monthly income on rent. Private rents are particularly high in London and the South East, where rent typically takes up more than 50% of low-income workers’ pay.

Five million low-paid workers across the country have been completely priced out of either renting or buying a home, the report concluded.

“This analysis makes for truly depressing reading,” said David Orr, chief executive of the National Housing Federation. “Low-income workers are left with fewer affordable options than ever even though their jobs are absolutely critical to local economies.”

UK inflation reaches highest rate for more than three years

The fall in the value of the pound is increasing the cost of food and fuel, pushing inflation to the highest rate since September 2013.

The Office for National Statistics (ONS) reported on Tuesday that the UK’s consumer prices index (CPI) reached 2.3% in February, following a 1.8% rise in January.

This takes the rate above the Bank of England’s 2% target for the first time since 2013.

Inflation has been steadily increasing since late 2015. Higher transport costs, particularly fuel prices, contributed most to the overall increase in the rate last month. At the same time, food prices recorded their first annual increase for more than two and a half years — up 0.3% compared to February 2016.

Suren Thiru, head of economics at the British Chambers of Commerce (BCC), said the latest CPI report confirms that UK prices are “on an upward trajectory”.

“The decline in the value of sterling, together with rising oil and other commodity prices, is likely to maintain the upward pressure on consumer prices in the coming months,” Thiru added.

The BCC forecasts that inflation will remain above 2% for some time, peaking at close to 3% in the second half of 2018.

Thiru warned that rising inflation is a threat to the UK’s growth prospects.

“Businesses continue to report that the rising cost of raw materials are squeezing margins, forcing many firms to raise their prices. Higher inflation is also likely to materially squeeze consumer spending in the coming months as price growth increasingly outpaces earnings growth,” he said.

“While government has little direct influence on currency movements or global commodity prices, it must do more to ease the burden of up-front costs and taxes faced by businesses, which is weighing heavily on investment decisions and growth.”

Another business group, the CBI, noted that although inflation has overtaken the Bank of England’s 2% target, “it is still relatively low by historical comparison”.

Anna Leach, head of economic intelligence at the CBI, also cited data pointing to rising costs for businesses, with input prices up 19% year-on-year.

Still, there was good news in the latest CBI Industrial Trends Survey, also released on Tuesday, which showed that export order books have risen to the highest level in over three years.

What’s more, expectations for growth have climbed to the highest level for more than 20 years.

In all, 45% of the 423 manufacturers surveyed expect output to grow over the next three months, while 10% expect a fall. This leaves a rounded balance of +36% — the highest since February 1995.

Asda offers higher pay rate for flexible contract

Asda is offering its staff a new flexible contract paying £1 per hour over the Government’s National Living Wage increase which takes effect next month.

The UK’s third-biggest supermarket chain said on Monday that moving to the new contract, with a base rate of £8.50 per hour, is voluntary, and stressed that it is not a zero hours contract — staff will retain guaranteed minimum hours.

The new deal aims to increase staffing flexibility in stores. Staff who choose to move to the new contract will have greater levels of flexibility in their work patterns to make sure more colleagues are in the right place, at the right times of day to meet customers’ needs.

This means that they could be asked to work in different parts of their store, or work different days or hours depending on when customers shop in the store most, Asda explained.

As well as an increased rate of pay and agreement to flexible working, the contract offer includes:

– Agreement to work bank holidays if required, or take the time as annual leave.

– 28 days annual leave, including bank holidays.

– An increase in the night shift pay premium for working unsociable hours, but a decrease in the hours it will apply — from the current 10.00pm to 6.00am, to between midnight and 5.00am.

– A move to all breaks being unpaid.

Asda claims that 95% of its current workforce will be better off if they choose to move to the new contract — some by over £1,000 a year.

Asda’s senior vice-president of people, Hayley Tatum, said: “Our current employment contracts have evolved over decades. They mean we have different colleagues on different terms and they don’t give our colleagues the level of flexibility our customers need to meet their changing needs. Our customers shop in different ways at different times and they expect us to deliver them the same great level of service whenever they visit us.

“This new contract will also mean that colleagues can gain a broader level of experience across their store, which will in turn give them better opportunities to progress and develop their career in retail.”

The contract has been welcomed by the GMB union, whose general secretary, Tim Roache, commented: “These new flexible contracts will help to ensure job security, ensure those accepting them are on the same terms and — best of all — ensure that people will earn more money as a result. The new contract offer involves quite a few changes, but as it’s voluntary, this allows colleagues to choose whatever suits their circumstances best.”

UK Chancellor raises NI rate for self-employed

 

A rise in Class 4 national insurance contributions (NICs) paid by self-employed people was amongst the measures announced by Chancellor Philip Hammond in the Budget on Wednesday.

Hammond said that the rate for Class 4 NICS would rise from 9% to 10% in April 2018. It will go up again, to 11%, in 2019. Employees currently pay national insurance at a rate of 12%.

In his Budget speech, Hammond pointed out that an employee who earns £32,000 a year will pay £6,170 in NICs, while a self-employed worker on the same salary pays just £2,300.

He claimed that “such dramatically different treatment of two people earning essentially the same undermines the fairness of our tax system”.

Self-employed people have traditionally paid lower NICS than employees because they received fewer state benefits.

But the Chancellor said that the difference in NICs was “no longer justified”, arguing that the self-employed now had equal access to the new state pension.

Commentators noted that the decision goes against the Conservatives’ election manifesto promise, which committed the Government to “no increases in VAT, Income Tax or National Insurance”.

The increase will cost those affected an average of 60p a week.

However, those earning less than £16,250 will be better off because of a planned abolition of of a different class of NICs, Class 2, in April 2018.

Think tank the Resolution Foundation said this week that “the real debate about tax and the self-employed lies not in the National Insurance individuals directly pay but with the fact that firms pay 13.8% employer National Insurance for everyone they employ, but nothing if they use self-employed labour”.

UK faces worst income squeeze for 60 years

With the UK continuing to make slow progress in recovering from the financial crisis, household incomes will not grow at all for the next two years, according to a report published on Thursday.

The Institute for Fiscal Studies (IFS) said that the recession and “tepid” recovery have resulted in a sustained slowdown in income growth which is unprecedented in at least the last 60 years.

The report, funded by the Joseph Rowntree Foundation, predicts that in five years’ time, median household income will be just 4% higher than it is now.

Some households will see a bigger squeeze on their income than others, and inequality is set to rise. For instance, low-income households with children are likely to fare worst, while pensioner incomes will continue to grow faster than those of the rest of the population.

Focusing on incomes after housing costs, the report found that if planned benefit cuts go ahead the poorest 15% of the population are likely to have lower incomes in five years’ time, on average.

Absolute child poverty on the official measure is projected to rise from 27.5% in 2014-15 to its pre-recession level of around 30% in 2021-22, an increase which is said to be “entirely explained by the direct impact of tax and benefit reforms — particularly the cuts to working-age benefits — planned for this parliament”.

Tom Waters, an author of the report and a research economist at the IFS, commented:

“If the Office for Budget Responsibility (OBR)’s forecast for earnings growth is correct, average incomes will not increase at all over the next two years. Even if earnings do much better than expected over the next few years, the long shadow cast by the financial crisis will not have receded — average incomes in 2021-22 are still projected to be £5,000 a year lower than we might have reasonably expected back in 2007-08.”

Campbell Robb, chief executive of the Joseph Rowntree Foundation, added:

“These troubling forecasts show millions of families across the country are teetering on a precipice, with 400,000 pensioners and over one million more children likely to fall into poverty and suffer the very real and awful consequences that brings if things do not change.

“One of the biggest drivers of the rise in child poverty is policy choices, which is why it is essential that the Prime Minister and Chancellor use the upcoming Budget to put in place measures to stop this happening. An excellent start would be to ensure families can keep more of their earnings under the Universal Credit.”

CBI survey shows rebound in UK retail sales

UK retail sales rebounded slightly in the year to February and are expected to continue growing, according to survey results released last week.

The CBI’s latest quarterly Distributive Trades Survey involved 128 firms, of which 64 were retailers. It found that two in five retailers (40%) reported increased sales volumes in February, giving a positive balance of 9%, up from a fall of 8% in the previous survey.

Sales volumes are expected to rise again in the year to March, albeit at a slightly slower pace.

Ben Jones, principal economist at the CBI, commented:

“The rebound in retail sales suggests that some of the recent gloom about a slump in consumer demand at the start of 2017 may be overdone.

“However, retailers remain cautious about their prospects, expecting fairly tepid growth in sales volumes next month against a backdrop of rising inflation that is likely to erode households’ purchasing power through the course of the year.

“As the impact of the weaker pound feeds through supply chains, retailers are trying to absorb some of the increase in their import costs through savings.”

Investment intentions for the year ahead fell for the first time since May 2016, and — for the first time in four-and-a-half years — retailers expect their business situation to deteriorate over the next three months. The biggest factor driving this more pessimistic outlook was rising cost pressures.

In a supplementary question asked this month, 42% of retailers cited rising cost pressures as a factor driving the deterioration in the business situation, while 35% cited uncertainty over Brexit/EU negotiations, 23% pointed to expected weakening in sales volumes and 18% cited an expected weakening in profitability.