The UK government made a significant announcement on Wednesday, revealing plans to decrease the social security rate for workers from 12% to 10%, starting 6 January 2024. Moreover, they announced the permanent retention of a tax relief initiative named “full expense”. Originally set to expire in 2026, this program offers tax incentives to British private businesses for investing in IT, plants, or machinery.
Impact of Reduced Social Security Rate and Permanent Tax Breaks
While the reduction in the social security rate is expected to have a moderate impact on incomes, the enduring nature of corporate tax breaks presents a strong, long-term boost for private sector investments. Despite potential delays in some short-term projects, these tax reliefs signify a sustained encouragement for private sector growth and investment.
Japanese Companies Surpass Expectations with Strong Profits
In the third quarter, Japanese companies have outperformed expectations, showcasing substantial profit gains. When setting aside the variable profits of the conglomerate SoftBank, these companies saw a remarkable 16% increase in profits compared to the previous year. This figure surpasses analysts’ predictions by a notable seven percentage points.
Key Factors Behind Japan’s Profit Surge
The impressive profit increase can be attributed to a combination of factors. The devaluation of the yen, more strategic pricing approaches by companies, and a decline in commodity prices all played pivotal roles. Notably, utilities, the automotive sector, and the financial industry were at the forefront of this profit growth, contributing eleven, ten, and six percentage points to the overall increase, respectively.
Eurozone Shows Signs of Economic Optimism
In the Eurozone, the purchasing managers’ indices, which are key indicators of short-term economic trends, have shown a mix of positive and negative developments. Following a decline to the lowest point since November 2020 in October, there’s been a slight improvement in the outlook of both industrial and service sectors recently.