It’s been a very long week at least on the domestic political scene. It seems longer than just a week ago when we saw the resignation of Sajid Javid followed very quickly by the then Chancellor Rishi Sunak causing a chain reaction eventually leading to the Prime Minister’s (PM’s) resignation. So here we are a week later facing a summer of uncertainty and wondering what these turbulent times in politics could mean for your business.
Political Outlook
The United Kingdom has been facing a series of serious economic challenges in recent years ever since Brexit. Added to that were the pressures from the Covid pandemic, the cost-of-living crisis, war in Europe and now the resignation of what feels like the entire previous cabinet although this is not quite correct.
The leadership contest which began yesterday requires each candidate to have the support of a minimum of 20 Tory Members of Parliament. At the time of writing there are now 10 candidates which seems like a very crowded space.
Some experts are already predicting Rishi Sunak as the next PM but as we know from previous experience, politics is an unpredictable game. It is simply too early to guess any outcomes. The days and weeks ahead will reveal what happens next. What matters is that we will have a new Prime Minister on 5th September 2022.
What’s the Economic Outlook
Each candidate apart from the former Chancellor is promising tax cuts. These are tax cuts to VAT, Fuel Duty, Corporation Tax, reversing the recent National Insurance increase and cutting Income Tax. That’s a lot of tax cuts to digest.
Can you imagine if we had said to you just six months ago that in 2022, we were going to potentially have five tax cuts! You would simply not have believed us. However, the political landscape has changed and for the moment the politics of reducing public debt will be much slower.
The BBC has done a useful summary of what tax cuts each of the candidates are proposing and you can read more about it here. Rishi Sunak on the other hand wants to tackle inflation first but does not rule out tax cuts in due course.
We are likely to see more public spending and more tax cuts causing many pundits (agreeing with Rishi Sunak) to worry about inflation.
The Office of Budget Responsibility (OBR) estimates that our government debt will rise over the next few years due to lower-than-expected tax receipts and higher spending. This higher spending is likely to add to our existing inflationary pressures.
Rising inflation eventually means higher interest rates even without any economic growth often referred to as stagflation.
From a day-to-day perspective, you may already have seen these rising costs and may even have experienced wage pressures as many employees are pushing for these just to make ends meet.
Uncertain political times no doubt leads to uncertainty in economic activities as businesses are not sure what’s coming next. Decision making becomes that much harder if you are in business.
What should you do as a business owner during turbulent times in politics?
Your number one priority is to maintain a healthy cashflow. Do everything you can to make sure the money is coming in and your bills and tax liabilities are being paid on time. If your business is showing a healthy profit that is brilliant but make sure your customers are paying you on time and you are not carrying unnecessarily high debtors.
Does your business have outstanding debts such as business loans? If so, now might be a good idea to refinance. Get in touch as we can put you in the right direction. There are other options in addition to your current bank.
As we have always said you should also review your business strategy and make sure you are on top of this. When economic and trading conditions change, you may need to make small adjustments.
It would also be beneficial to others in your team if you knew what they are going through. Whilst you may be feeling overwhelmed and anxious at times just because of what is going on out there, chances are your team will also be feeling something similar. Things are hard right now for a lot of us and you can show support by creating trust in the workplace
Remember we are here and ready to help. We can be the business partner you didn’t know you could have.
These turbulent times in politics will cause uncertainly at many levels. There will be times when all you need is someone to listen to your woes (if it comes to that) or just get a second opinion. Call us or email us because unlike the PM we are still in control and ready to help.