Monthly Round-Up – May 2023

We’ve reached the end of May already—and what a busy month it has been for the United Kingdom!

With summer about to get into full swing, here is the latest business and tax news from May.

Coronation Provides a Revenue Boost

The Coronation of King Charles III on 6 May 2023 provided the economy with a significant boost, according to data collected by SumUp.

Although official figures had yet to be released, SumUp’s data suggested that entertainment venues experienced a 65.5% increase in revenue. Fast-food restaurants received a 17.1% boost, while food trucks recorded an increase of 37.3%.

Bars and clubs experienced a 36.4% rise in revenue, while revenue at restaurants and cafés increased by 21.2%.

Following a challenging winter, official figures were expected to show a more positive outlook for many businesses—particularly those in London—as a result of the Coronation and the accompanying bank holiday weekend.

IMF Says Britain No Longer Faces a Recession

The International Monetary Fund reported that Britain was no longer expected to enter a recession during 2023.

It predicted that gross domestic product would grow by 0.4%, supported by the government’s efforts to tackle inflation.

Inflation was forecast to fall to 5% by the end of 2023, with the target rate of 2% still expected to be reached during 2025. The economy was also forecast to grow over the following two years.

Help for Households Payments

Through the government’s Help for Households scheme, one million families receiving tax credits were issued with a cost-of-living payment for the 2023/24 tax year.

Eligible families automatically received £301 between 2 and 9 May. This was the first of three payments worth up to £900 in total.

John Glen, Chief Secretary to the Treasury, said: “Higher prices make life difficult for everyone, which is why our priority is to halve inflation this year.

“But we are also going further to support those struggling most, with a total package of support worth an average of £3,300 per household this year and next—including up to £900 in direct cash payments for families receiving tax credits.”

Number of Higher-Rate Taxpayers Expected to Increase

The Institute for Fiscal Studies predicted that by 2027, one in five taxpayers would be paying income tax at a rate of 40% or more. It also estimated that one in four teachers would become higher-rate taxpayers.

This would represent an almost fourfold increase in the proportion of adults paying higher-rate tax compared with the early 1990s. The six-year freeze on income tax thresholds, introduced in April 2022, was expected to play a significant role.

This would result in higher rates of income tax affecting a much larger proportion of the population, rather than primarily affecting the country’s highest earners.

Isaac Delestre, Research Economist at the Institute for Fiscal Studies, said: “The freeze to thresholds is pulling an additional 2.5 million people into paying rates of 40% or more by 2027/28.

“Whether or not the scope of these higher rates should be expanded is a political choice as much as an economic one, but achieving it with a freeze leaves the income tax system hostage to the vagaries of inflation—the higher inflation turns out to be, the bigger the impact the freeze will have.”

Inflation Falls

The UK’s inflation rate fell to 8.7%, marking the first time it had been in single figures since August 2022.

However, this did not mean that prices—particularly food prices—would fall quickly. Instead, it meant they would continue to rise at a slower rate.

Food prices remained 19.1% higher than the previous year, with eggs, olive oil and spices recording some of the largest annual price increases.

Core inflation also rose to a 31-year high of 6.8%.

Eurovision Provides Liverpool with a Major Tourism Boost

The Eurovision Song Contest came to Liverpool during May, concluding with the Grand Final on 13 May.

However, Liverpool’s tourism boost was not limited to Eurovision week. During the two weeks leading up to the contest, approximately 500,000 people travelled to the city centre—400,000 more than initially predicted.

NatWest forecast that businesses in the city centre could benefit from up to £200 million in revenue. Further forecasts suggested that day visitors could spend as much as £12 million, while overseas visitors could contribute £28 million.

Based on data from previous contests, people attending Eurovision were expected to spend approximately £400 each.

Liverpool ONE recorded average growth of 32% compared with May 2022, with increases reaching as high as 53% on certain days. Approximately 680,000 people reportedly visited Liverpool ONE during the Eurovision period.

Consumer and location intelligence specialist CACI calculated that visitors spent £19.9 million at Liverpool ONE during Eurovision. Restaurants experienced a 78% increase in sales, rising to 87% on the day of the Grand Final.

Looking Ahead

That is all the news from May 2023. As we look towards summer, remember to follow the latest developments affecting the world of business and tax.

Have a great June!