Business after Brexit
According to the last Bank of England monetary policy report issued in January 2020, business growth had slowed down in the UK in 2019 and inflation remained at under 2%. The UK Gross Domestic Product (GDP) was very modest in 2019 and Q4 was estimated to be around zero. Growth in the UK was dampened by uncertainties posed by Brexit.
The projections for the UK GDP for 2020 are a slight pickup although most pundits would say it is too early in the year for predictions. Global business confidence has generally picked up and there is an increased sense of confidence in the UK business and housing market owing partly to us having left the European Union (EU) on 31st January 2020, alleviating the unpredictability around Brexit.
There has been an overall drop in Business investment since the referendum plus consumer spending has been not been strong. Although not many companies have increased their investment plans solidly in the New Year, most surveys would suggest Q1 2020 will generate a small growth.
There is now an expectation that the UK will secure a free trade agreement (FTA) with the EU. During the Implementation Period which ends on 31 December 2020, various forecasts now assume the move to the new trading arrangements from January 2021 will be a smoother and well planned.
Of course there may still be some restrictions to the UK-EU trade transactions soon after the implementation period and this may put some pressures on the business growth, but the Bank of England remains hopeful the that medium term uncertainty will fade away as more details emerge about our trading relationship with the EU.
The removal of the uncertainties due to Brexit related factors may mean Businesses can go back to planning for investment purposes as opposed to putting time and effort into the planning of Brexit. A rise in productivity is to be expected as a result of this. But on the other hand, having to deal with trade barriers and extra compliance as we leave the EU will add a drag on productivity growth.
In the near future the UK is predicted to have weaker growth and this in turn reduces the returns companies will gain by investing. In the medium term however partly fuelled by global growth, UK demand growth is set to increase albeit in small measures. These factors contribute to the Bank of England predicting a recovery in the annual business investment growth from 0% in 2019 to around 3.5% by 2022.
Now is the time for Businesses to consolidate their position and some would say be decisive about investment decision. Effort should be put into meeting with the oversees customers and suppliers to ensure continuity of an established relationship which for some may go back years.
Now more than ever there due to the advancement of technology in finance and accounting there is the availability of real time data enabling faster and better business performance review. Therefore, with the right tools and the appropriate finance support response time can be speeded up to combat any downward trends.
Improving the health of the business will ensure that your business with grow should there be leaner times ahead. Centre of this policy should be critical thinking and investment in technology where AI can assist with some routine tasks because recruitment options are likely to be restricted as more controls are introduced to the immigration policy. Continuing to nurture existing relationships within the EU will also feature as an important step.
Change does not have to mean a downturn. Change can mean getting your house in order with new solutions.
Talk to us if you would like to discuss any aspects of your business after Brexit including delivering efficiencies via technology.
E-mail Priya at PriyaR@myersclark.co.uk or give the office a ring on 01923 224411.