UK set for five years of lost economic growth, warns think tank

The UK is set for five years of lost economic growth, according to research from think tank the National Institute for Economic and Social Research (NIESR).

The NIESR said a ‘triple blow’ of Brexit, Covid and Russia’s invasion of Ukraine had ‘badly affected the economy’. It added that the spending power of workers in many parts of the UK will remain below pre-pandemic levels until the end of 2024.

Despite pay increases, high inflation has forced up prices and the rising cost of living has left households throughout the UK feeling squeezed.

The NIESR forecasts that inflation, the rate at which prices rise, will remain continually above the Bank of England’s 2% target until early 2025, meaning the cost of living will also continue to rise. Inflation is currently 7.9%.

Professor Stephen Millard, the NIESR’s Deputy Director for Macroeconomic Modelling and Forecasting, said: ‘The triple supply shocks of Brexit, Covid and the Russian invasion of Ukraine, together with the monetary tightening that has been necessary to bring inflation down, have badly affected the UK economy.

‘As a result, we expect stuttering growth over the next two years and GDP to only recover to its 2019 quarter four level in 2024 quarter three. The need to address the UK’s poor growth performance remains the key challenge facing policymakers as we approach the next election.’

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Confidence amongst CFOs has risen at sharpest rate since 2020

Research carried out by Deloitte has revealed that confidence amongst UK Chief Financial Officers (CFOs) has risen at its sharpest rate since 2020.

CFOs’ concerns regarding energy prices and Brexit have eased, the research showed. 25% more CFOs reported feeling better about the future than worse. Deloitte found that there hasn’t been such a significant improvement in confidence since the COVID-19 vaccine rollout.

However, a handful of CFOs polled stated they still harbour uncertainty, with a proportion saying they are seeking to cut costs and build cash reserves.

Commenting on the findings, Ian Stewart, Chief Economist at Deloitte, said: ‘Since the beginning of the year, energy prices have fallen, inflation looks to have peaked, relations with the EU have improved since the Windsor framework and there has been a period of comparative political calm after the turmoil of last year.’

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Plymouth and South Devon freeport gets go ahead

The Plymouth and South Devon freeport has received final government approval.

It will now receive up to £25 million in seed funding to help boost investment and support the growth of regional businesses.

Freeports benefit from a range of measures, including tax reliefs, customs advantages, business rates retention, planning, regeneration and trade and investment support.

Tax incentives include enhanced capital allowances, relief from stamp duty land tax and employer National Insurance contributions for new employees.

Eligible new businesses moving into a freeport tax site, and some existing businesses that expand will also benefit from full business rates relief. 

The approval will help accelerate the formation of advanced manufacturing clusters in marine, defence and space sectors, as well as delivering an estimated 3,500 jobs.

Dehanna Davison, Levelling Up Minister, said: ‘Today is a historic day for Plymouth, South Devon and beyond, as the Plymouth and South Devon freeport gets up and running to drive growth and innovation locally and nationally.

‘The freeport is going to shape the fortunes of the Plymouth and South Devon economies by pumping up to £100 million worth of investment across the region.

‘We are maximising the opportunities of Brexit to drive growth and throw our doors open to the world.’

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IoD survey finds UK businesses anticipate growth in exports

A survey carried out by the Institute of Directors (IoD) has found that 42% of UK businesses that trade internationally expect to see an increase in their exports over the coming year.

The survey also revealed that 47% of businesses are still finding Brexit challenging, and just 33% envisage opportunities materialising as a result of Brexit.

Additionally, 28% of firms reported that supply chain disruption has had a negative impact on their business, and 12% have an exportable product but aren’t currently exporting.

Commenting on the findings, Emma Rowland, Policy Adviser for Trade at the IoD, said: ‘There is no doubt that smaller businesses in particular are finding the current international trading environment challenging. Importers and exporters feel especially constricted by the UK’s new trading relationship with the EU.

‘It is therefore encouraging that, in spite of these barriers, businesses are anticipating an increase in exports over the coming months. There are opportunities that give traders reason to be optimistic.’

For more information, visit our website at www.nhllp.com

Business Planning 2022-23

Whether you have a 31 March accounting year end or any other month in the year, it is imperative that you have a plan. This alert is an offer to support your business by helping you create a business financial forecast for 2022-23, transfer it to your accounting software and produce periodic reports to monitor progress.

If we have learnt anything from the trials and tribulations of the past two and a half years, it is that ‘normality’ has become a fluid state of affairs.

Business challenges for 2022-23

The following bullet points set out some of the external challenges we will need to deal with this year:

• Inflation – rising and set to peak at 10%.
• Supply chain delays and price rises – the price of many commodities is on the rise due to the war in Ukraine, Brexit issues, and transport difficulties continue to create delivery delays.
• Staffing – shortage of skilled and unskilled labour.
• Rising taxes – recent NIC increases, the forthcoming increase in corporation tax and static personal tax allowances will combine to reduce our personal and business post-tax earnings.

Your business plans

Wading blindly into these challenges is like driving on a motorway with your eyes closed.

At a minimum, you should examine:

• The security of your sales forecasts and the likelihood of growing sales.
• The maintenance of supply lines and factoring-in price increases.
• The cost of labour – will you need to consider pay increase to keep your team together?
• Overhead costs.
• Investment in new plant or other equipment.
• Your own drawings/salary/dividends.
• Cash flow implications.
• The need to raise more capital or other funding for your business.
• Solvency.

We would suggest, at a minimum, a forecast of profitability, cash flow and solvency to cover these challenges. Call now to discuss your planning needs for 2022-23

If you have not yet considered your business plans for 2022-23, please call.

For more information, visit our website at www.nhllp.com

UK economic growth to halve this year, warns BCC

UK economic growth is expected to halve this year amid soaring inflation, major tax rises, and global shocks including Russia’s invasion of Ukraine, warns the British Chambers of Commerce (BCC).

The BCC has downgraded its expectations for UK GDP growth in 2022 to 3.6% from 4.2% in its previous forecast in December 2021. This would be less than half the growth of 7.5% recorded last year.

It says business investment is forecast to grow at 3.5% in 2022, down from the previous forecast of 5.1%.

The BCC says that rising raw material costs, the increase in the energy price cap, the reversal of the hospitality VAT cut and upward pressure on energy and commodity prices from the impact of Russia’s invasion of Ukraine will lift inflation.

The business group forecasts inflation reaching a peak of 8% in Q2 2022, the highest rate since July 1991. The BCC also projects that UK interest rates will double over the course of this year, from 0.5% to 1%.

Suren Thiru, Head of Economics at the BCC, said: ‘Our latest outlook suggests a legacy of COVID and Brexit is an increasingly unbalanced economy with a growing reliance on household spending to drive growth. Such economic imbalances leave the UK more exposed to economic shocks and reduces our productive potential.’

For more information, visit our website at www.nhllp.com

Schemes create one stop shop for VAT on EU trade

Three schemes will be launched on 1 July to deal with VAT on business-to-consumer supplies of goods and services to EU customers.

They are known as the ‘Union’, ‘non-Union’ and ‘import’ schemes. The schemes are designed to facilitate the collection of VAT by one EU member state, which is then passed on to the member state in which the supply is deemed to take place.

The ‘Union scheme’ covers intra-EU supplies of goods and services for businesses with their place of business or a fixed establishment within the EU.

The Union scheme will also allow a UK business to hold stock within the EU (for example, the Netherlands) and pay VAT for all EU sales to the relevant tax authorities.

The ‘non-Union scheme’ covers supplies of services to EU customers by businesses with no establishment within the EU.

The ‘import scheme’ covers the distance sale of goods below €150 fulfilled from stock held outside the EU.

If businesses register for VAT using one of these schemes, they will complete one return for all EU sales, rather than being required to register for VAT in all member states in which their customers are based. These schemes will allow businesses to declare sales across all EU member states.

For more information, visit our website at www.nhllp.com

FSB urges government to provide greater support for UK exports

The Federation of Small Businesses (FSB) has urged the government to act in order to support small businesses exporting to the EU.

The latest figures published by the Office for National Statistics (ONS) showed that UK GDP and total exports fell by 7.8% and 10.3% respectively in February 2021 when compared to February 2020.

The FSB found that UK exports have ‘tumbled’ since the end of the Brexit transition period, and that a fifth of small exporters have halted sales to the EU. The business group is calling for further action to be taken to help ‘alleviate the new admin facing exporters’.

Mike Cherry, National Chairman of the FSB, said: ‘If you’d asked small business owners at this time last year about COVID-linked disruption they wouldn’t have dreamed it would be continuing so far into the future.

‘These stark figures are a reminder that this lockdown needs to be the last: better to unlock more slowly than to rush and have a repeat of the damaging chaos suffered in the run-up to last year’s critical festive trading season.

‘The government should now turn to its build back better agenda: cutting the non-wage costs of employment to spur hiring, ending a debilitating late payment crisis that has worsened through lockdowns and taking innovative approaches to emergency debt to realise meaningful economic value.’

For more information, as ever, visit our website at http://www.nhllp.com

ICAEW warns SMEs have ‘limited window’ to apply for Brexit grant

The Institute of Chartered Accountants in England and Wales (ICAEW) has warned eligible small and medium-sized enterprises (SMEs) that they have a limited window to apply for a grant under the Brexit Support Fund.

SMEs seeking to make use of the Fund only have until 30 June 2021 to apply, the ICAEW stated. It also said that they may not be successful if the £20 million fund runs out before the deadline. Businesses can make a claim for a training grant, a professional advice grant or both. However, the amount of the grant cannot exceed £2,000.

The Brexit Support Fund aims to help businesses prepare for the implementation of import controls which come into force from April and July 2021.

Businesses who trade only with the EU and are therefore new to importing and exporting processes will be encouraged to apply for grants of up to £2,000 for each trader to pay for practical support to ensure they can continue to trade effectively.

The Brexit Support Fund application portal can be accessed here.

For more information, as ever, visit our website at http://www.nhllp.com

SME Brexit Support Fund

The SME Brexit Support Fund could give you up to £2,000 to help with training or professional advice, if your business has up to 500 employees and no more than £100 million annual turnover.

The UK government has unveiled a £20 million Brexit support package to help small and medium-sized enterprises (SMEs) with changes to trade rules with the EU.

The SME Brexit Support Fund aims to help businesses prepare for the implementation of import controls which come into force from April and July.

What you’ll be able to use the grant for

You can use the grant for training on:

• how to complete customs declarations
• how to manage customs processes and use customs software and systems
• specific import and export related aspects including VAT, excise and rules of origin

It can be used to help you get professional advice so your business can meet its customs, excise, import VAT or safety and security declaration requirements.

Who will be able to apply

Your business must:

• be established in the UK
• have been established in the UK for at least 12 months before submitting the application, or currently hold Authorised Economic Operator status
• not have previously failed to meet its tax or customs obligations
• have no more than 500 employees
• have no more than £100 million turnover
• import or export goods between Great Britain and the EU, or moves goods between Great Britain and Northern Ireland

Your business must also either:

• complete (or intend to complete) import or export declarations internally for its own goods
• use someone else to complete import or export declarations but requires additional capability internally to effectively import or export (such as advice on rules of origin or advice on dealing with a supply chain)

How to apply

PwC is administering the grants for HMRC and you can apply inline through PwC HERE.

PLEASE NOTE: Applications will close on 30 June 2021 or earlier if all funding is allocated before this date.

How we can help

For more information regarding the application process do not hesitate to call a member of our dedicated team on 01753 888211 or email info@nhllp.com

Alternatively, visit our website at www.nhllp.com