Working out what the general election outcome could mean for your business.
If you run a business, you’ll know the price of uncertainty all too well.
Since 2016, the business and investment environment in the UK has been nothing if not uncertain. Moreover, the latest data shows that the UK has just suffered the biggest monthly drop in business activity since the referendum. The IHT Markit composite purchasing managers’ index pools data from across services and manufacturing; it fell to 48.5, down from 50.0 in October (where 50.0 represents neither contraction nor expansion).(1)
Chris Williamson, the chief business economist at IHT Markit, said the figures suggested the UK economy would shrink in the final quarter of 2019, having grown in the third quarter.
Could the next government make things even harder? Or should you expect a helping hand?
Both main political parties have now published their manifestos, and elicited some reaction from business groups.
On Labour’s side, some small business groups have welcomed the party’s proposed reforms on business rates, late payment and Universal Credit, as far as they went. At a broader level, however, raising corporation tax, scrapping tax breaks on business sales, and a new levy on financial transactions left a sour taste for many, even if larger businesses may be the primary target of the measures.(2)
On the Conservative side, the pledges to cut the Jobs Tax and Business Rates were welcomed, as was the pledge not to raise National Insurance for the self-employed; concerns were raised, however, over the potential changes to Entrepreneurs’ Relief and over the need to give small businesses a realistic time period in which to prepare for the UK’s departure from the EU.(3)
Sit on your hands?
While the polls may point towards a decisive Conservative victory, polls have a mixed record and things can shift quickly during election season.(4) But whoever wins, there could be implications for your business planning. On that basis, it’s worth at least being ready for possible changes. There are a couple of steps you might want to take:
- Cut yourself some slack. Potential changes to Entrepreneurs’ Relief, tax on pension contributions and Inheritance Tax relief mean it’s wise to prepare for a more onerous tax regime, and work out what that could mean both for your retirement and for selling your business. At the very least, leave yourself some financial wiggle room.
- Check over your business plan. There is little point trying to predict the future, whether that is how Brexit will work or whether the UK economy will grow, but you can at least factor in existing trends and expected policy shifts to your planning, such as the continued opportunity provided by emerging markets, and the declining access UK businesses are likely to have to EU workers. You cannot cover every eventuality, but you can think about where your business is too inflexible, and begin to make changes accordingly.
No business wants the level of uncertainty the UK has been experiencing in recent years. All the same, businesses that plan for different eventualities and move quickly to adapt to changing circumstances can develop a competitive advantage over their peers. Indeed, taking a few basic steps can equip you to thrive in a shifting business environment.
The levels and bases of taxation, and reliefs from taxation, can change at any time. Tax reliefs are dependent on individual circumstances.
Where the opinions of third parties are offered, these may not necessarily reflect those of St. James’s Place.
Frederick Charles Wealth Management Limited.
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