AN AUSTERE AUTUMN AS THE UK IS OFFICIALLY IN RECESSION & WE’LL ALL FOOT THE BILL

It’s now official that the UK is in recession and after the economic turmoil of the last couple of months, it’s clear that everyone – business owner and consumer – will be helping to foot the big bills we face as a society.

The Chancellor Jeremy Hunt set out his autumn statement saying he was trying to be fair in what he’d done and to ensure that the most vulnerable were protected as far as possible.

Therefore pensions will rise in line with inflation (based on the rate in September) as will Universal Credit and other benefits. Support with energy costs will continue in some form after April next year, but it will be reduced so everyone’s energy bills will rise.

There is also a hint that local authorities will be able to put up council tax again even though the Local Government Association has lobbied hard to get more central funding – saying that council tax rises are not the answer as there are local disparities which cannot plug the bigger funding gaps in its services.

A further windfall tax on energy companies was something of a surprise and the Chancellor said this was due to the fact that they had made a financial killing as a result of the energy crisis – and was not part of normal trading conditions.

Then there is the introduction of road tax for electric vehicles from 2025 when far more are expected to be on the road. Will this deter people – and companies – from going down a greener transport route?

Here’s what business owners think:

Mike Lloyd is managing partner at Haines Watts Swindon & Cirencester. He said:

 “Historically the comments we always hear after a budget speech (which in reality this is) are ‘there will be winners and losers’ and ‘the devil is in the detail’.

“For the first time I can remember whilst the latter may well be the case, I can’t really see any winners as even those receiving inflationary increases in pension will be hit by tax and energy hikes.

“The reduction in the level where the 45% tax rate kicks in and the windfall taxes will be more palatable to most than the freezing of tax allowances

“The reality is the government had few options when we have an economy reeling from a combination of Covid19, Brexit, the war in Ukraine and the global energy cost crisis.

“It is difficult to find positives in a combination of overall spending cuts and tax rises. Short term this will be a tough time for both business and families. Whether it is successful in reining in inflation and restoring confidence in our economy, only time will tell.”

Sam Day is co-director of the company hapihemp which sells CBD products and is based in Peterborough.

She said: “They have confirmed that the nation is already in recession and it’s going to be tough for a few years.  It’s great they have made plans to protect the most vulnerable and the living wage has increased but nobody seems to be looking at disposable income.  With all the support they have offered, it still isn’t going to be enough for those people, which means less spending, which is really impacting small businesses like our's. 

“Anyone in between low income and wealthy, who would probably be our main customer demographic, is overlooked and stretched further. There are many people with nice homes and two cars on the drive that may look like they have plenty but have barely any disposable income and it’s just going to get worse as they have increased the cap for energy bills and provide no support.

Because of the impact on disposable income, businesses like our’s are under serious threat and until people have money to spend, there’s a real chance that we are not going to survive the next few years.”

Martin Gurney is tax partner at Haines Watts Swindon & Cirencester. He said:

“As I head off to get my winter flu jab to protect me against the rigors of winter, I cannot help but draw a parallel with today’s announcement from the Government. I use the word ‘announcement’ rather than ‘budget’ because, apparently, it was not a Budget - clearly the Government is keeping someone busy coming up with new words to describe a Budget, but let’s not dwell on that!  The parallel that I draw is that the Government needs to protect the UK economy against the potential UK and global downturns.

This Government has consistently delivered the same message [barring the obvious recent exception] that you cannot reasonably expect to borrow and spend your way out of an economic crisis.  The pandemic threw the Government’s plans off course, and now they are seeking to steady the ship. 

The overall plan is to increase revenue (via taxes) and reduce spending, with the goal of reducing Government borrowings - this appears to be sound commercial strategy. 

“The difficulty is that, with the UK and global economies struggling, inflation escalating, and confidence waning, the Chancellor needs to put measures in place that do not further destabilise the economy.  As a result, tax increases cannot be so significant to deter economic activity, and spending cuts cannot be so severe as to penalise those most in need.

“Learning from recent mistakes, most of what was announced today was neither a shock nor excessively onerous or generous.  Principally high earners will pay more tax (the threshold at which 45% tax starts has been reduced from £150k to £125k) and personal tax allowances have been frozen so that, over time, their value is diminished and everyone will pay a bit more tax. 

“Taking into account the increase in Corporation Tax rates that were previously announced, the tax benefits of Research & Development relief for all sizes of company have been reduced, and individuals paying Capital Gains Tax will pay more tax.

“Overall, a relatively neutral ‘Budget’ designed to start to redress funding deficits without destabilising the economy, with the Government keeping its powder dry in terms of more controversial and wide-ranging tax changes.”

Chris Neuman is the managing director of Taxtful,  a Swindon company based in the Workshed.

He said:

“Beyond the extension of the energy price guarantee, there's not much to like.

“You could (and I am) make the point that the cutting of the dividend allowance is a political ploy, the reality is for most (who tax plan well) the cost is less than £100 per annum. No change really!

“At a time when I'm talking more and more regularly to clients about Electric Vehicle Company Car schemes, it's sad to see Road Tax come into force from 2025 for EVs. I can't help but feel that even conversations I had as recently as yesterday, may now be on the backburner. Beyond making me feel a little sick, not a green move.

“Research and Development has been hailed as a tool for helping the UK bounce back following Covid. By reducing the R&D Tax relief rates for SMEs, are the Government walking back from this position? Or rather admitting that they can't police the number of rogue R&D 'tax' consultancies that have popped in recent years?”

Julianne Ponan, CEO of allergen free snack brand Creative Nature said:
"This autumn statement has made it clear that there is little support for small business and we will all be footing big bills for years to come. Once again, smaller businesses will have to knuckle down to survive as households are squeezed for cash. Many will not survive even though we make up over 99 per cent of all businesses.
"While there are some rises for those on fixed incomes like pensioners, it will be wiped out by tax rises and also energy price rises from next year. This means people will have less money to spend which can impact on a business like mine. 
"With supply chains struggling and energy bills rising, there's nothing in this statement which will ease that pressure. Whatever small business support came with the energy price cap, that will drop away in April next year. While I would argue that we weren't 'all in it together' during the pandemic, we're certainly 'all in it together' when it comes to paying the bills. Good luck to every fellow small business owner, we're going to need it!"

Liz Hutchings, founder of the Total Guide to franchise said:
As expected, the Autumn statement was pretty grim for small businesses and certainly isn't going to instill a growth mindset on us small businesses that have survived the pandemic.
I'm really pleased for many of our clients that will benefit greatly by the support with business rates, but this won't help so many small businesses; the increase in taxes, minimum wage and the lowering of dividend allowances is really going to knock start-ups and small businesses.
Hopefully the plans give the country the stability it needs and us businesses are just going to have to continue to remain upbeat and keep digging deep as we always do.