Only seven weeks since we were discussing the last new Prime Minister, the rapidly shifting situation in Downing Street continues as this week, the UK’s youngest PM for 200 years has swiftly been appointed. Rishi Sunak is also notably UK’s first British Asian Prime Minister.
Sunak gained much attention as the Chancellor of the Exchequer during the pandemic, launching various support schemes which would have been previously unheard of for a Conversative government. However, during his closing days as Chancellor before he resigned, he had started to announce a higher tax regime and had succeeded in reducing the levels of government debt.
Following the short-lived policy announcements in the Mini-Budget of Chancellor Kwarteng, the new Chancellor Jeremy Hunt has since been required to go even further than Sunak was proposing, including ruling out reducing income tax for the foreseeable future. This stance reflects renewed efforts to stabilise the markets and the value of sterling, which it appears to have done, although the value of the pound has still not yet fully recovered.
The overall aim of the new government will be to bring back some global confidence and credibility in the UK’s ability to manage its fiscal policies. The Bank of England will be also pleased to hear that and the current expectation is that the base rate of interest will now not need to rise above a peak in 2023 of 4.75%.
The Medium Term Fiscal Plan, previously known as an Autumn Statement, is still expected on Monday 31st October and the UK’s small business community is likely to hear talk of short-term cost cutting, followed by some medium-term relaxation if these, combined with tax revenues, begin to pay down that burden of the national debt.
Any support around energy costs is expected to be more restrained and targeted at both the general population and businesses who are those most in need. Wholesale gas prices have fallen in the past month, which will be welcomed by those across the country. This is due to lower demand, thanks to a mild start to early winter, and a higher than expected supply as storage containers are full. However, the government will still need to resolve the structural energy issues in the UK market, as the high energy prices are likely to return in winter of 2023 when storage levels will be depleted.
Kirsty McGregor, accountant-in-residence at capitalise, offered this advice to business owners: “There are expected to be very few incentives, tax breaks or direct monetary support mechanisms announced by this new government in the coming months and even years.
“However, entrepreneurs have chosen their route through life precisely because of their creativity, resilience and determination to succeed through their own merits. These are the qualities which all management teams can now rely on, to dig deep and continue to pursue growth, despite the current challenges of higher costs and more difficult supply constraints.
“Use your accountant to advise on any tax measures which may benefit your company and to also support your strategic ideas, to ensure your business can remain adaptable and secure for the long term.”
As the UK braces itself for a new Prime Minister and economic shift, all eyes will be on how Rishi Sunak will be supporting small businesses through this changing time.