A perfect storm of unexpected costs, regulatory shifts, and market volatility has emerged, leaving many business leaders feeling anxious and uncertain. This sentiment is particularly strong as the aftermath of the recent Budget unfolds ...
With pressure mounting, businesses now find themselves in a defensive posture once again!
The economic environment proposed by governmental changes can drastically affect how businesses operate, with rising costs being a significant concern. The recent hike in National Insurance contributions, estimated to reach a staggering £25 billion, poses a considerable burden.
"And don't forget the anticipated package of workers' rights projected to add another £5 billion to the tally!"
This combination can severely affect profits, competitiveness, and the overall ability of businesses to invest in their future. With so much on the line, it is crucial for policymakers to strike a careful balance between strengthening workers' rights and safeguarding business interests.
At the heart of the matter lies the critical issue of investment and expansion plans and some of my own clients are now reassessing their strategies, pulling back from initiatives that could foster growth. Many others are following suit.
With the pressure mounting, firms that have weathered recent storms like the pandemic now find themselves in a defensive posture once again, prioritising damage control rather than ambitious development.
"The link between a lack of business confidence and slowed economic growth cannot be overstated!"
Moreover, there's a tension between the government's aspirations for employment and the high costs imposed on businesses to create those very jobs. The goal of bringing one million of the nine million working-age individuals currently outside the employment sphere back into the workforce is admirable, yet it is at odds with the rising barriers to hiring.
The government's contradictory stance, which aims to empower private businesses to generate jobs amidst escalating costs, raises serious questions about future employment stability. It makes me worry that many business owners will simply give up and shut up shop.
Small businesses, in particular, are expressing their concerns about the feasibility of these changes. The Federation of Small Businesses has commented on the inadequacies of the impact assessments surrounding the proposed workers' rights legislation, leading to worries that the increased burden on small employers could lead to job losses.
These small enterprises often serve as the backbone of the economy. Their fragility highlights the pressing need for protective measures from excessive regulation and financial strain.
Recent economic indicators paint a mixed picture. The GDP growth rate slowed to a mere 0.1% in the third quarter, a sharp decline from 0.5% in the preceding quarter. Coupled with rising public sector borrowing and a stagnating private sector workforce, the challenges manifest themselves in weakened business optimism and heightened cost inflation.
This fragility can create a detrimental cycle: diminished investment leads to slower growth and increased borrowing, creating a climate of uncertainty and fear!
Despite these concerns, I remain optimistic about the future. I would argue that growth may rebound in the final quarter and I anticipate a modest increase through the winter months, mostly due to Christmas spending (although bonuses are being eliminated, so that may not help).
Steady, though not spectacular, growth might be on the horizon in 2025, bolstered by gains in real income and consumer spending. These more optimistic assessments hint at the potential for recovery, but underscore that this potential hinges on fostering a supportive environment for businesses.
To protect businesses effectively, it is essential for the government to reconsider the implications of the proposed workers' rights legislation and the accompanying financial burdens.
I feel that the future for many depends on how effectively they can navigate these turbulent waters.
The Business Godparent stands ready to help.
Until next time ...
ROGER EDDOWES Business Godparent
Would you like to know more?
If anything I've written in this blog post resonates with you and you'd like to discover more of my thoughts about the economy, it could be a great idea to call me on 01908 774320 and let's see how I can help.
Don't forget to stay updated with our daily social media posts on Facebook.
Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.
Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.
No unauthorised use, duplication, distribution or modification to any original content contained within this blog is permitted without prior written permission of the author. All other trademarks and registered names are acknowledged.
