After a markedly lacklustre Spring Statement, you may find yourself concerned for the economic future of your business.
While the Government continue to uphold the pledge to not directly increase taxes, there are a number of measures that have been introduced that may end up costing your business more.
Effective budgeting can help your business stay competitive whatever the economic climate.
Yet to understand how to budget, it is imperative to understand the impact of inflation and other economic factors on your business.
Impact of inflation
As of February 2025, the UK’s Consumer Price Index (CPI) inflation rate was listed at 2.8 per cent.
While this is an improvement on the three per cent observed the month before, it is still significantly higher than the Bank of England’s desired two per cent inflation rate.
This will result in the cost of items and services remaining high across the board.
Welfare cuts
While it might not be immediately apparent how the recent cutting of welfare benefits will affect your business, it is worth a closer examination.
The Government’s own impact assessment has noted that an additional 250,000 people will be pushed into poverty by these changes.
This would directly correlate to a reduction in disposable income for an increasing number of the population.
When the population has less disposable income, they are less likely to spend money on luxuries and non-essential items.
Even essential items may face additional scrutiny as customers are forced to become savvier with their spending.
If your business typically caters to a customer base consisting of those on lower incomes, it may be worth considering how a potential reduction in revenue will impact you.
National Minimum Wage Increase
By now, you will have discovered whether or not the increase in the National Minimum Wage and the National Living Wage will directly affect your business.
Although the new rates have now been implemented, it is still worth monitoring your payroll processes to ensure that any increased wage costs are considered.
This will be of particular relevance to any employer who hires young people.
When an employee turns 18 or 21, they should be moved to a higher wage.
Failure to accommodate this would render your business non-compliant while failure to account for this may cause you problems later on.
Knowing the ages of your workers can help you to plan for any future increases in wages.
As the rates tend to increase every year, it is particularly important to plan ahead for any worker who ages into a higher bracket towards the end of the tax year.
National Insurance Contributions
While workers have been shielded from increases in Income Tax and National Insurance (NI), employers have not.
The previous rate at which you paid NI was 13.8 per cent on employee’s earnings above the £9,100 threshold.
This new tax year brings with it a significant increase to the amount of NI you will be paying for your employees.
This is due to you now having to pay 15 per cent on employee’s earnings above the new threshold of £5,000.
While you will likely have already made adjustments to accommodate for these changes, it is worth considering how they will impact your business long term.
Unlike with the increased National Minimum Wage, this change will be felt by all business owners.
However, if you are also impacted by the increase in National Minimum Wage, then the elevated employee costs need to be carefully considered to ensure that your business continues to grow.
Tariffs and Trade Wars
Without going too much into the current political climate, it is an inescapable fact that global trade relations are increasingly strained.
If your business is reliant on imports and exports, it is worth considering how tariffs might negatively impact the flow of your commerce.
As the nature of tariffs is continually in flux, it would benefit those who may be impacted to keep a close eye on how things unfold both in the short term and the long term.
If you feel you may be affected by tariffs, a consideration of different suppliers may help alleviate some of the costs.
Importantly though, leaving extra room in your budget for higher import and export costs will allow you to continue to operate with efficiency.
Recession
At present, a full-scale recession is not predicted for the UK.
This is largely based on the economic policies of the Government having the intended impact.
Still, the economy is experiencing notable volatile as external forces drive up prices globally.
Global conflict and natural disasters have both caused some volatility in global economics in recent years.
These factors are harder to account for, but continual, effective budgeting can help your business stay competitive regardless of what comes your way.
Budgeting strategies with Moore Thompson
At Moore Thompson, we have a strong track record of helping business budget effectively.
We can work closely with you to assess your business plans and draw your focus to the likely challenges that may await you in the future.
By reviewing your financial position, we can help you draw up effective strategies to keep costs down and profits up.
Our expert team can also help you secure additional funding, such as through grant applications, which may further help with easing budgeting concerns.
If you want to stay financially agile in an ever-challenging world then contact us today for expert advice and guidance.