Half of SMEs ‘to increase prices’ as result of fall in Sterling, BCC suggests

A survey carried out by the British Chambers of Commerce (BCC) has revealed that 54% of small and medium-sized enterprises (SMEs) expect to have to raise the prices of their products and services in the coming 12 months due to the depreciation of Sterling.

Since the UK’s vote to leave the EU last June, Sterling has fallen by around 16% in comparison to the dollar.

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44% of businesses reported that the devaluation of Sterling is having a negative impact on their domestic sales margins. Meanwhile, 25% of firms revealed a positive impact upon export margins, while 22% reported a negative impact.

The survey, which is based on responses from 1,500 UK businesses, also found that 45% of firms currently do not manage currency risk, with 46% revealing that they don’t expect to manage this in the next six months.

Adam Marshall, Director General of the BCC, commented: ‘The depreciation of Sterling in recent months has been the main tangible impact that firms have had to grapple with since the EU referendum vote.

‘Our research shows that the falling pound has been a double-edged sword for many UK businesses. Nearly as many exporters say the low pound is damaging them as benefiting them.

‘For firms that import, it’s now more expensive, and companies may find themselves locked into contracts with suppliers and unable to be responsive to currency fluctuations.’

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Business groups respond to publication of Brexit White Paper

Business groups have responded to the government’s recent publication of its Brexit White Paper, which outlines its ambition to create a ‘new, positive and constructive’ partnership between the UK and the EU.

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The White Paper sets out the government’s 12 principles as announced by Prime Minister Theresa May in her Brexit speech last month, in which she pledged to ‘take control of our own laws’ and to ‘trade and do business all around the globe’.

Trade, devolution, immigration and protecting workers’ rights are amongst the 12 principles outlined in the White Paper, and these represent some of the areas up for negotiation with the EU.

The Confederation of British Industry (CBI) gave a broadly positive response to the publication of the paper. Carolyn Fairbairn, CBI Director General, stated: ‘We welcome the additional detail that has been given in this White Paper addressing some of our concerns.

‘It is vital that the business voice continues to be heard loud and clear in the UK and across Europe to make a success of Brexit and ensure our future prosperity.’

However, the Trades Union Congress (TUC) gave a decidedly less enthusiastic response. Frances O’Grady, its General Secretary, noted: ‘The White Paper tells us little we did not already know, and still leaves working people exposed to risks to their rights and jobs.

‘The government has set out its aspirations for trade agreements once we’ve left the EU. But there’s little explanation of how jobs and living standards will be kept safe while those deals are negotiated.’

Bank of England raises UK growth forecast

The Bank of England has once again significantly increased its growth forecast for the year. It now expects the UK economy to grow by 2% in 2017 – a major rise from its November forecast of 1.4%.

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That forecast was itself an upgrade from the 0.8% forecast made in August.

The Bank was criticised last year for its overly pessimistic predictions following the June Brexit vote. Announcing the latest forecast, Governor Mark Carney admitted that the Bank had misjudged the strength of consumer confidence following the referendum.

He commented: ‘The thing that we missed is the strength of consumer spending and consumer confidence associated with that.

‘After an initial wobble in terms of consumer surveys… it bounced back pretty quickly.’

However, he warned that the implementation of Brexit could still cause difficulties, saying: ‘The Brexit journey is really just beginning. While the direction of travel is clear, there will be twists and turns along the way. Consumers have not been affected by the uncertainty around Brexit.

‘Uncertainty over future arrangements is weighing on business investment, which has been flat since the end of 2015.’

In the longer term, the Bank still expects the economy to slow down, with growth in 2018 predicted to fall to 1.6% in 2018.

As expected the Bank’s Monetary Policy Committee (MPC) kept interest rates on hold at 0.25%.

Business group criticises new tax digitisation timetable

The Federation of Small Businesses (FSB) has criticised the revisions made by HM Revenue & Customs (HMRC) to the timetable for the successful implementation of Making Tax Digital (MTD).

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The business group called for the introduction of MTD to begin in 2020 rather than in 2018 as planned, and for smaller businesses to be excluded from the scheme altogether. This is despite concessions made by the government following consultation, including providing free software to businesses with the ‘most straightforward’ tax arrangements and continuing to allow businesses to use spreadsheets for their record-keeping.

Mike Cherry, National Chairman of the FSB, said: ‘The timetable laid out by ministers in Autumn Statement 2015 is now a total fantasy. It is unachievable given the latest delays. The programme cannot begin before 2020 without causing considerable disruption to economic growth, investment and employment.

 

‘Small businesses were expecting clarity around how to meet their tax obligations from 2018, and they still do not know what they will face.

‘As small business owners plan their approach to Brexit, rushing in mandatory quarterly tax reporting is a headache they just don’t need.

‘We will be raising this with ministers at every level, bringing together a broad alliance across the business community, accountancy and tax bodies.’

The Chartered Institute of Taxation (CIOT) also called for a delay in implementation and for the mandation threshold for MTD to be raised from the proposed £10,000 turnover to £83,000.

CIOT President, Bill Dodwell, said: ‘Getting this done quickly is less important than getting it done right.

‘Moving the UK to a digital tax system will undoubtedly bring benefits but the scale of the change is so significant that it would benefit from being carefully phased in.

‘A phased introduction would give small and medium-size businesses sufficient time to prepare for the significant administrative, technological and financial implications associated with the shift to digital accounting.’

HMRC publishes Making Tax Digital consultation response

The initiative is intended to create a ‘transparent and accessible tax system fit for the digital age’, and is due to be implemented between 2018 and 2020.

HMRC sought the opinions of businesses, the self-employed and landlords, who are amongst those likely to be the most affected.

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The government published a raft of proposals, taking into account the views of consultation respondents. These include:

  • providing free software to those businesses with the ‘most straightforward’ tax affairs
  • allowing businesses to use spreadsheets for their record-keeping, which can be linked to the software in order to send updates to HMRC
  • excluding charities from the requirement to keep digital records
  • deferring MTD until 2020 for partnerships with turnover exceeding £10 million
  • giving taxpayers at least 12 months to familiarise themselves with the changes before any late submission penalties are applied.

HMRC also stated that it will introduce changes gradually, and that any such changes will be thoroughly piloted with businesses before they are fully implemented.

The government hopes that pilot schemes will help to ensure that the MTD software is ‘user-friendly’, and will give businesses and individuals time to prepare and adapt.

Jim Harra, Director General of Customer Strategy and Tax Design, commented: ‘MTD will help businesses to get their tax right first time; it will help reduce the likelihood of errors, lower the chance of unwelcome compliance checks and give them greater certainty that they are getting things right.’

The government’s response to the consultation feedback can be viewed here.