Paul Surtees, CEO of Capitalise has given his reaction to the Chancellor’s Autumn Statement:
Regardless of which Parliamentary party you favour, I am sure that most would agree that the Autumn Statement felt calmer and more considered with the benefit of the OBR’s opinions, than the chaos of the last fiscal statement, the mini-budget of the Truss/Kwarteng administration.
Hunt was aiming to deliver three key themes, Stability, Growth and protecting Public Services.
On the topic of stability, perhaps the key adjudicator of that are the financial markets. Thankfully, unlike the reaction on 23rd September, today’s markets have barely moved. GBP/USD is a little lower than pre-statement. This is equally true for the FTSE.
It seems that the markets are giving credibility to the Government that they will be able to reduce the ratio of debt to GDP over the medium (5yr) term. So long as that confidence prevails in the face of global and domestic inflation, we shall see a lower risk premium on interest rates than we have recently experienced and forecasted.
The relationship between HMT and BOE seems to have been restored with both now seemingly on the same page in tackling inflation through monetary and fiscal means.
Whilst today’s measures will mean that the UK tax take as a percentage of GDP will increase by 1%, the implications will likely mean the Bank of England will not need to raise rates as high as was previously feared.
The question will now be - will peak base rates reach 5%, rather than the 6% the markets were pricing in after the mini-budget. The combination of reducing risk premium and lower base rates will be beneficial for everyone including any businesses with leverage.
Of course, this will be particularly beneficial for the residential variable mortgage holders and all fixed mortgage holders coming close to term - ensuring the damage done to disposable income is a little less impactful.
Accountant-in-residence, Kirsty McGregor, adds:
By delaying this statement a few extra weeks, accountants were able to take a breath and consider the changes in the mini-budget, followed by several reversals and eventually now these measures.
There is no doubt that tax advisers will remain busy for months and years to come, with all these planned changes to thresholds, rates and allowances.
But, whilst fiscal events inevitably shine a light on tax, accountants with other areas of expertise are also now front and centre.
When the economy is looking tough, costs increasing and recessions pending, business owners need some moral support, as well as practical guidance. Much as at the start of the pandemic, there can be crises on the horizon for some businesses.
In 2020, accountants generally had clients which were more resilient than the general business economy, and with CBILS, Bounce Back loans and various grants, they got through that period. However, after over two years of continual challenges, business owners are weary. As weary as accountants. And balance sheets are weaker too.
Some sectors are struggling with demand, but many sectors are booming, order books are full. Either way, access to working capital and cashflow will be critical over this coming year.
And accountants will step up as always. It’s your time to shine and create success story after success story. We’re here to help and also to listen. And I can’t wait to hear those stories!
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