On 9 March 2015, then-Chancellor George Osborne announced that the government was going to pay off £1.9 billion of debt built up during one of the UK’s wars.
“This is a moment for Britain to be proud of. We can, at last, pay off the debts Britain incurred… It is a sign of our fiscal credibility and it’s a good deal for this generation of taxpayers.”
Was he talking about the Iraq war? The Falklands? Perhaps even World War II? No – these debts were incurred a full century earlier, during the First World War. It is an astonishing reminder of the long-term impact that major events can have on the economy.
In this generation, we also have a significant event weighing down our economy. According to the House of Commons, estimates of the total cost of the measures taken by the government during COVID range from £310 billion to £410 billion (between £4,600 to £6,100 per person). Most of this huge sum was borrowed and will have to be repaid by our children and grandchildren.
We’re not the only country with this problem, but given that we are the slowest-growing economy in the G7, our economy is very challenging right now.
For many businesses, this is a difficult environment in which to grow. It’s tempting to believe that if our business is “good”, we can thrive no matter the external circumstances – but this is usually not true.
Depending on your industry, your clients may be very price-conscious and reluctant to spend, especially given that the UK’s tax burden is at its highest in 70 years. In this climate, almost every business is thinking about financial sustainability. How do you continue to drive a profit in such a stagnant economy?
While I don’t have any clear-cut answers, I do have one piece of advice: Make sure you pay close attention to what the new Labour government says and does regarding financial matters.
The government’s choices over the coming months are likely to have a significant impact on the trajectory of this economy. Their decisions matter for individuals – and they matter to businesses like yours. Success will be far easier to achieve in a growing, healthy economy than in one that is struggling.
Many of the steps they take can also have a direct impact on your company. For example, their manifesto promised several changes to regulations around employment legislation, including banning zero-hour contracts, making flexible working the default for all workers, and extending statutory maternity and paternity leave. These changes, while desirable and ethical to many, will also involve extra costs for businesses.
Unfortunately, too many business owners pay very little attention to such policy changes.
Many of us established our businesses when the economy was thriving, attributing success solely to our business acumen and overlooking the external factors. Now conditions have shifted, it’s natural to still feel complacent, failing to fully grasp the profound impact that macroeconomic conditions can have on your operations.
Others either don’t care about politics, don’t understand it, or are not interested in the details – particularly nowadays, when there is a widespread feeling that “politics is broken.”
This apathy can be detrimental. Political decisions shape fiscal policies, which in turn influence the macroeconomic environment. Ignoring these factors is like navigating a ship while ignoring weather conditions. It’s a mistake!
You need to stay informed about these changes to anticipate and prepare for their impacts on your business.
If you find it challenging to keep track of these developments yourself, appoint someone in your business who can. Ensure this person is capable of connecting the dots and explaining what these changes mean for your company. Their insights can be invaluable in strategising and adapting to new economic realities.
And if you don’t have such a team member? That’s where we can help.
We act as trusted financial advisors to our clients. Beyond ensuring that you have accurate financial data about your company – and that you understand it – we are here to help you make better financial decisions. This includes understanding the economic environment and what it means for your business.
We keep a close watch on fiscal policies, economic trends, and regulatory changes, so you don’t have to. And we don’t just tell you what’s happening – we help you interpret the potential impact on your company and offer guidance on how to adapt your business plans accordingly.
Ultimately, our goal is to equip you with the knowledge and tools necessary to make informed financial decisions, so you can grow faster and maximise your profitability.
To find out more about how we can support your business, get in touch today. Simply email garry@insightassociates.co.uk or call us on 01279 647 447.
Warmly,
Garry
