Anyone even tangentially involved in UK economics will have noticed that the future is not looking bright.
It is all but certain now that there will be some kind of tax rise in the Autumn Budget, but the forecast becomes bleaker by the day.
The latest news surrounding the Chancellor’s borrowing has caused much concern for businesses.
We are going to break it down and try to predict what it could mean for your business and what you can do to prepare for the changes.
How much is the Chancellor borrowing?
In the month of June, borrowing rose to £20.7 billion, which is £6.6 billion higher than in the same month last year and the second-highest June borrowing figure since monthly records began in 1993.
There are a number of factors that are contributing to the rising rate of borrowing.
The general economic uncertainty that has impacted the global markets has caused the UK’s financial power to wane, while the controversial handling of welfare reforms has resulted in a destabilisation of the Government’s financial roadmap.
The Spending Review, now a distant memory, sent shockwaves through the economy as the generous investment promised opened up a significant hole in the finances.
It seems that, for the time being, the Chancellor has elected to fill that hole with excessive borrowing.
What does this mean for your business?
Borrowing is a short-term solution to a long-term problem.
Wherever one elects to lay the blame for the current state of the economy, things are not looking positive.
There is ongoing discussion around a wealth tax that may serve to alleviate the financial concerns while shielding those with less money.
However, there is a fear that such an imposition could cause the wealthy to leave the country rather than contribute more to the society in which they live.
There is a debate as to whether the number of millionaires leaving the country is being inflated as a way to dissuade the Government from pursuing a wealth tax, but such reports could cause a Chancellor to lose their nerve.
As a business owner, there are other concerns to keep in mind when looking at the rocky state of the economy.
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.
As bills rise, businesses may struggle to attract customers who need to be more cautious about how and when they spend their money.
These financial concerns are coupled with rising inflation and increasing food bills meaning that cash flow problems could be more widespread.
If your business deals in non-essential items and services, it is even more important to prepare for the future.
Economic downturn seems inevitable at this point, and the average shopper is unlikely to have renewed spending power anytime soon.
Be cautious in how you invest money in the near future, as there is a risk that revenue may begin to fall.
Eventually, we will get a clearer picture of how the Chancellor plans to fill the hole in the economy.
Whether we end up liking the answer is a different matter entirely.
Keep your business’s finances from falling into an economic black hole. Speak to our team today!
