The news is never short of political updates, particularly of late as we negotiate an exit deal with the EU. This week’s latest instalment, however, comes in the form of the long-anticipated Spring Statement which was announced on Tuesday 13th March at 12:30 pm.
The most shocking fact, which has dominated the headlines of leading newspapers, is the cost of the Brexit divorce bill- totalling an astonishing £37.1bn which will not be paid off until the 2060s. To rub salt in the wound, predictions from the OBR (Office for Budget Responsibility) indicate that economic growth will be poor over the next five years, with very high chances of another recession before the year 2023 which would inevitably bring negative impacts on business profit. Britain, over the last 60 years, has dealt with seven recessions; the last recession was in 2008/09, covering five quarters, and was, by far, the worst recession faced by Britain since the Second World War.
The OBR forecasts, however, contradict the latest survey from the Treasury which indicated that the real GDP would actually increase over the next two years. Despite this, OBR used the financial crisis of 2008 as an example, where despite positive forecast predictions, the reality was a cumulative economic drop of around 5%.
OBR also highlights that any potential gains accrued will be dwarfed by the impact on trade, migrations and tax from Brexit. However, predictions announced by chancellor Phillip Hammond indicated a predicted economic growth of 1.4-1.5% for 2018 and a 1.3% growth for 2019. Inflation is also predicted to fall from its current 3% status back down to 2% by the end of the year. Only time will tell which way the chips will fall.
John McDonnell, a shadow chancellor, has hit back at Hammond’s speech by stating: “The chancellor has proclaimed that there is light at the end of the tunnel. But this shows just how cut off from the real world he is. Last year growth in our economy was among the lowest in the G7 and the slowest since 2012.”
Rain Newton-Smith, chief economist of the Confederation of British Industry cautioned that economic growth in the UK is “lukewarm” at best and has warned that the government needs to address these issues.
Despite these apprehensions, businesses have generally welcomed the chancellor’s decisions, particularly with the focus on reducing environmental impacts through plastic usage. Chancellor Hammond announced the mission to reduce single-use plastic waste through the tax system, with the money raised being fed into the creation of greener products and services to eliminate plastic waste by 2042.
Other key areas of the statement include increases in minimum wages, with under 25’s seeing the biggest increase in 10 years. These rises in wages should be considered by businesses to ensure changes in staffing costs are accounted for in future budgeting.
Digital businesses received strong support in the budget, with funding being fed into business improvements such as faster broadband to improve online business efficiency.
Meanwhile, a surprise came in the form of the announcement that the business property rate revaluation date has been forwarded by one year, from 2022 to 2021. Rental values at and around April 2019 will most likely set the precedent of rateable values which will apply for 2021; something which can offer businesses stability in a time of economic doubt.
But even with the general vote of confidence after his speech, many have expressed their concerns that the chancellor may let political gain get in the way of what Britain really needs. Hammond has also been praised by some of the UK’s influential trade bodies for his commitment to boosting businesses, especially considering the uncertainties brought by Brexit. However, there is still much to be done to support UK businesses during the transitional period; a sentiment echoed in the words of Andy Marshall, director of the British Chambers of Commerce: “Any headroom the chancellor has must be used to leave a lasting mark on the UK’s infrastructure and to attract investment-particularly with the challenges of Brexit ahead.”
Businesses are hoping that the Autumn Budget will be doubled down, with increased expenditure to further improve digital connectivity, travel improvements and energy security. This is still a while off yet, and anything could happen in the world of politics between now and then!
So, we asked four of our experts to give us their opinions on what the spring statement means for the future of British business operations:
“In today’s fast-moving world, businesses should consider every opportunity to tap into better value, faster, and larger capacity connectivity as the ongoing demand for data transmission is undoubtedly going to increase for some while. However, knowing what the actual data demand is, the composition of the data being transmitted (e.g. voice, video, mail, internet, internal systems) together with the peaks and troughs are of prime importance. Businesses should not simply take increased capacity simply because it is available; there is no substitute for a detailed understanding of current and future needs.”
– Nigel Rosehill | Communications Project Specialist
The chancellor’s confirmation of the first £25m in funding to 5G testbeds is positive news for businesses who are increasingly looking for new ways to improve productivity and customer relations through new technologies. The growth and adoption of 4G services in business has already seen the start of a move away from fixed infrastructure, and 5G will accelerate that trend in the future. Thirteen areas across the UK are set to receive £95m of the £190m government funding known as the “Local Full Fibre Challenge Fund”. This is good news for businesses in these areas which will soon be able to connect to gigabit fibre networks. As new technologies enter the market, there can be a cost premium for accessing these; this is where ERA can help with a track record of helping clients improve data connectivity through our tried and tested procurement process. Our knowledge and expertise in the industry to help keep the cost to our clients of doing business down, or perhaps accessing such technology which may have previously seen to be cost prohibitive.
–Pritesh Patel | Communications Project Specialist
“The announcement that the Treasury will review how changes to the tax system might reduce the amount of single-use plastics we waste is likely to be welcomed by environmental campaigners. The effect on business remains unclear at this time, but what is clear in light of this announcement and previous announcements that this government sees plastic waste as an area that needs government intervention in order to curb the damaging impacts of a throw-away culture.”
–Daniel Howells Waste Project Specialist
“The changes announced yesterday by the chancellor bringing the next revaluation forward by one year to 2021 are a big surprise as many were expecting more frequent revaluations from 2022. It could be recognition of the urgent need for change due to the significant issues with the new Check, Challenge, Appeal rating system resulting in extremely low appeal numbers. It will, therefore, be an opportunity to draw a line under the current system which has been beset with issues. The fact the government has decided not to introduce self-assessment or a formula model at this time will, however, provide some more clarity on the basis of the next revaluation. The increasing frequency of revaluations will also create winners and losers; for example, those currently paying static or falling business rates under the current revaluation that are in a location of rapid growth around the antecedent valuation date in April 2019 could see their rates rising earlier than they thought and vice versa. Transitional arrangements will also play their part. However, in this very complex equation, which phases these shifts large shifts in liability. As the detail behind this announcement becomes clearer in the coming months and years, and we look through our crystal ball at the levels of open market rental values in 2019, it’s still too early at this stage to tell if this will be favourable change, but yesterday’s (15th March) curveball tells us to prepare for the unexpected.”
–Paul Giness – Property Project Specialist
To discuss more about your business cost management in light of the spring statement, get in touch with our procurement specialists today. We have experts who specialise in every area of business operations, so you can rest assured the comprehensive advice you are receiving is the most strategic option for your organisation.
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from Expense Reduction Analysts https://www.expense-reduction.co.uk/blog/2018/03/spring-statement/