Autumn Statement: A major shift
Friday November 18, 2022
What does the Autumn Statement mean for business?
2022 has been a bumper year for fiscal statements, with three separate Chancellors’ taking to the despatch box – each with very different approaches.
Just 55 days after Kwasi Kwarteng’s ‘boosterism’ mini-budget created turmoil in the markets and the subsequent downfall of Liz Truss’ administration, the Treasury had prepared the ground for yesterday’s Autumn Statement to be short on good news. With a focus on addressing the UK’s deficit, the package presented to parliament by Jeremy Hunt included significant changes to the tax regime and spending cuts designed to raise £54 billion for the public purse.
With a major focus on taming inflation – which has now topped the forecasted peak of 11% – the changes will ultimately make higher and middle-earning consumers worse off as the UK officially enters into recession.
As well as higher taxes on personal income, business and enterprise has also been asked to pay its fair share of the UK’s debt burden and the challenge of domestic inflation, which has been exacerbated by global factors including the war in Ukraine.
The government has moved to put in additional incentives that apply to specific sectors. For example, it will remove import tariffs on more than 100 goods used by UK business in production processes, which will provide a timely boost for the manufacturing sector and exporters who have had their business models disrupted by Brexit.
Public funding for R&D has also been increased to £20 billion by 2024-2025 as the government targets ‘science superpower’ status – an issue that for many in life sciences and tech hinges on the UK regaining access to the European research network, Horizon.
At the other end of the scale, the Treasury has sought to provide some additional protection for businesses through what is expected to be a difficult winter. While the planned revaluation of business rates is set to go ahead from next April, a package of £13.6 billion support will be provided to limit its impact and reduce the likelihood of more businesses becoming insolvent.
However, there was no additional positive news in relation to business’ energy challenges. The government will continue with the plan of the previous administration to spend £55 billion to support households and businesses with their energy bills through until April. Extended support beyond then will be limited to households unless further detail on the Energy Bill Relief Scheme for businesses is unveiled.
All of the above suggests that business resilience will be key in the coming months, as the UK economy faces the difficult realities of what has been forecast as a long, albeit shallow recession. With this in mind, cashflow will be critical. For this reason, it’s important that business owners build a detailed and accurate understanding of their business’ cash position, and map out how this could change in the weeks, months and years to come, as they seek to build a stable capital base to manage, invest in and grow their business.
Mapping out a rolling 13-week cashflow forecasting model, conducted at as granular a level as possible and updated on a regular basis, is a good starting point, as this can help business owners to understand and anticipate pressure points, and rapidly identify solutions accordingly.
As well as higher taxes on personal income, business and enterprise has also been asked to pay its fair share of the UK’s debt burden.Justin Matthews Restructuring Advisory