Business & Economy
The big question…
November 3, 2022
Just how detrimental has the recent political flip flopping been for the UK’s economy, its businesses and personal finances? And do you believe the Government can salvage its reputation and the confidence of the financial community?
North East-based national chair, Federation of Small Businesses
The recent political turmoil and flip-flopping needs to be brought to an end to help turn the tide of plunging small business confidence and to focus on addressing the acute cost of doing business crisis.
Stability includes the Government delivering swiftly on its promises to help small firms with energy bills, and to reverse the hike in National Insurance.
Beyond that, there must be clarity as soon as possible on what happens to the energy support package beyond its initial six months.
It’s not so much about political parties and which people are in which jobs, more the actual policies.
While the new Chancellor has initially focused on reassuring the markets, with recessionary pressures causing real problems for small firms, this will need to be combined with pro-growth measures.
I’d like to see more small firms taken out of the archaic business rates system, which sees entrepreneurs slapped with bills before they’ve made a penny.
Action to tackle the anti-growth late payment culture – in which small firms suffer late payment of invoices, often by bigger business customers – would also be positive, and wouldn’t incur additional cost to taxpayers.
With the right support through this cost crisis, small businesses can drive growth and economic recovery.
Chief executive, Entrepreneurs’ Forum
The actions from the Government following the mini-budget and the subsequent backlash have added to existing, significant levels of uncertainty for our region’s entrepreneurs.
Our most recent survey, which was completed just prior to the mini-budget, found 78 per cent of members were either not very confident or unsure in the economy for the year ahead.
In these challenging times, we need consistent leadership, something which has been sadly lacking in recent weeks.
Despite this, it’s not all doom and gloom.
The majority of our members remain optimistic about their own business prospects for the coming 12 months, provided they can overcome their most pressing concern: how to attract and retain the staff they need to achieve their growth ambitions.
We welcome measures from the Government which support job creation including tax cuts, reduction in red tape and incentives to encourage people to come and live and work for North East businesses.
Above all, we urgently need transparency on the economic plan without which we risk ongoing and worsening volatility, prolonging the agony for our members who just want to get on with business.
Research fellow – North East, IPPR North
Long before the U-turn, it was already clear that 15 years of corporation tax cuts had failed to boost private sector investment and encourage growth.
UK private sector investment is far below average – among the lowest in the OECD.
The mini-budget simply created uncertainty for business; while the former Prime Minister’s U-turn on corporation tax was welcome, the overall political instability has created a turbulent economic environment which weakens confidence.
Even with the further U-turn on the billions in borrowing, which super-charged inflation, the Government still looks set to borrow around £720 billion over the next five years.
This deficit will limit the investment our economy needs – in tackling poverty, fixing public services, levelling-up and meeting net-zero targets with good green jobs.
It will be challenging to rebuild confidence in this context.
The Government’s approach remains rooted in the long-disproven idea that economic growth automatically benefits everyone.
Growth needs to be equitable, working in the interests of our communities across the North.
Reheating failed policies of deregulation and unfunded tax cuts simply increases inequality and weakens public services.
What the North needs now is urgent injections for public services and cost of living support.
Longer-term, to unlock fair and sustained economic growth, the Government must deliver on its promise to level up: investing in digital and physical infrastructure across the North, good jobs and skills, good quality housing and devolution.
When governments actively set clear missions like this, businesses have a better idea of future growth opportunities, and confidence can be rebuilt.
Head of wealth management , Tier One Capital
Realising the fiscal gap that has been created must close either through cuts, probably to working age benefits or by backing down on tax cuts, it is unlikely the independent Office of Budget Responsibility will put much weight by the Government’s claim that its plan will spur growth and solve the problem that way.
This is not because it is bound to fail, but just because there is too much uncertainty around it.
Unfortunately, the biggest losers from this process are borrowers.
They have seen interest rates rise significantly and the obvious real-world effect of this is there for all to see.
However, we should remember that Britain’s institutions were able to restore order quickly and we can hope that once it is clear that the market is demanding a more prudent path, confidence can be rebuilt.
This should allow inflation to fall and interest rates may never get to the six per cent level that is currently feared.
The primary issue for the market is to balance the books, although it is the electorate that is likely to reject plans to do this through swingeing cuts to benefits.
Without these spending cuts or an abandonment of tax cuts, the sums simply don’t add up.
So, for the markets, the Government must change course.
At this point, the problem is political rather than market driven.