Chancellor Rishi Sunak has delivered the 2020 Spending Review, a spending statement that was realistic, if not overly optimistic. In his announcement in the Commons, Chancellor Rishi Sunak focused on the pain of the pandemic, referring to the ‘economic emergency’ that the UK finds itself in.
He described his priorities as, firstly, protecting people’s livelihoods and secondly, providing strong public services.
The Office for Budget Responsibility (OBR) forecast was that the economy would shrink by 11.3 per cent this year and not recover to its pre-Covid level until the fourth quarter of 2022.
And while the Chancellor was keen to announce a raft of public spending to try to protect public services and jobs, from a business point of view that leaves you thinking: there’s a great big bill to pay and everyone is going to have to pay it.
What our clients want to understand is what timescales we are looking at for this. There’s a common theme in all of this and that is certainty. Owner managers are very resilient and good at making decisions once they have the information.
What businesses want is the confidence to make the right decisions, so what would be useful – and I suspect we’re not going to get it – is a clear timeline on how it’s going to affect the economy.
If taxes are going to rise, whether its corporation tax, income tax or capital gains tax, that is going to affect a business’s short-to-medium-term decision-making process.
Ideally what would be useful to businesses is a fiscal plan to deal with the black hole that we all accept that we are in and show how it’s going to get paid back because that way businesses can make plans.
We know what the economic problems are going to be, but what’s the bitter pill that businesses are going to have to swallow to help pay for all of this?”
What we need is a vibrant business community that comes out of this crisis and we also urgently need to rebalance the north and the south.
We heard that there is to be a new UK infrastructure bank headquartered in the North of England which will work with the private sector to finance new investment projects, starting next spring. And as long as it has some resource and power, that sounds as if it’s going to have a positive impact. The Government just needs to give it some teeth and support to make things happen.
As the Chancellor quite rightly points out, we will hopefully find a solution to the medical crisis, but the economic crisis hasn’t yet started.
If we reflect on the financial crash of 2008, clients proved how resilient they were and how good they were at making very quick decisions to move their businesses forward.
This crisis has once again proved that business owners are capable of doing that, so we just want some honesty from the Government and a route plan that reveals how taxes are going to move over the next five years.
While in the short term, there may be some further support from the Government over time, my advice to business owners is:
- Ignore the noise and try and make the right medium to long-term decisions for your business as best you can, given the constraints that we are having to deal with.
- Keep an eye on your efficiencies, your cash flow and the future of the business, don’t get too bogged down in the here and now.
- You need to still plan for the future. So, stay agile and flexible to move the business as and when things happen, so you can quickly react.
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