By Robert Blair, Partner
With June’s borrowing hitting £20.7 billion, the second‑highest ever for the month, UK public finances are creaking under pressure.
With a range of ideas being thrown around on how to address the ever-increasing hole in the public purse, it may be your business that gets caught in the crossfire.
We are going to take a look at how the Government’s questionable financial strategies could come back to bite your business and what you can do about it.
Why is borrowing so high?
Global uncertainty and volatile markets have chipped away at the pound’s strength, while the contentious debate around welfare reform and the generous Spending Review promises have left a gaping hole in the Treasury’s budget.
To plug it, the Chancellor borrowed £6.6 billion more than last June, leaning on debt as a stopgap solution.
As a business owner, you know that borrowing is only a short-term solution and that tougher measures will inevitably follow a budget balanced by borrowing.
There is an ongoing discussion around how the Government will eventually address the financial challenges facing the country.
A wealth tax is being debated, but there are mixed reports on whether this will cause an exodus of the rich and powerful.
Even if these reports are exaggerated, they could be enough to unsettle the Government into dropping the plan.
That will leave those less well-off to pick up the bill.
Will my business face more taxes?
Increased Corporation Tax is certainly one way that Labour could raise more money while sticking to their campaign pledge of not placing the cost on working people.
However, the impact of the excessive borrowing is likely to be more far-reaching than simply having your business pay the difference.
This excessive borrowing is a sign of financial hardship and an indicator that it may not lift anytime soon.
The average person has less spending power than they did before, as rising food prices contribute to increasing inflation.
The monthly cost of renting a home has risen by £221 in three years, and inflation is causing mortgage rates to be similarly punishing.
This will have a massive impact on all businesses, but those that provide goods and services that are not considered essential may face the biggest blow.
As customers become increasingly less willing to part with their hard-earned cash, businesses may begin to see cash flow issues come up more frequently than would typically be expected.
This is paired with the tumultuous global economy that has caused major supply chain, import, and export issues for many businesses.
In these trying times, having a clear vision of the future is imperative for businesses to survive.
We are on hand to help you plan for the future and adjust your business’s financial trajectory to help you stay afloat in increasingly troubled waters.
Don’t let the Government’s badly balanced budget be the end of your business. Speak to our team today!