2023 proved to be just as challenging as expected. An unstable political landscape led to a turbulent economic climate, and businesses across Northern Ireland were not immune to rising energy costs, ongoing inflation increases, and reduced consumer spend. The Chancellor’s Autumn Statement was a case of the good, the bad and the ugly, rather than a magic wand, and unfortunately many business owners decided they were no longer able to weather the storm, writes Ross Boyd of RBCA
With that in mind, this quarter is more important than ever before for us chartered accountants as we horizon scan the year ahead on behalf of our clients. It’s crucial we can support Northern Ireland’s community of owner-managed businesses to arm themselves with as much knowledge as possible to ensure they make sound decisions.
And the main event on all of our lips? The upcoming budget.
First things first, we need to remember it’s an election year, which will cloud nearly all major outcomes for the year ahead. March 6th will be yet another chance for the Conservatives to portray optimism and secure voters. After all, consumer expenditure has held up better than expected, and it’s hard to argue with slowing inflation. That said, the Chancellor doesn’t have a lot of fiscal wiggle room to please business owners, having used most of it up in his November 2023 announcements. It’s my view that businesses should prepare to get less attention from the Chancellor this time around.
The taxation changes announced in the autumn are a good example of the political game-playing we can expect in March. And it’s important businesses continue to read between the lines. The Conservative government implemented a range of taxation changes that are anti small business, specifically by increasing rate of corporation tax and dividend tax rates, with both especially challenging for businesses in the service industry, the fallout of which may yet remain to be seen.
Reducing the national contribution rate, and offering full expensing until 2026, have been dwarfed by the fiscal drag of unchanged allowances. However, these changes did demonstrate that Hunt, like Sunak, is a chancellor of long tax talk while delivering a high tax reality. He may have realised that this isn’t a good look. Speaking at the World Economic Forum in Davos earlier this month, he hinted the Budget may bring tax cuts. Is caution likely to be cast aside in return for votes?
A change in tax policy would show real leadership – something we haven’t had for a while. It would be transformational for almost everyone. If changes don’t come about in March, election debates will have to put tax concerns centre-stage. It’s the only way we can avoid more of the same. As Warren Buffett famously said, “value is not what you pay, but what you get”, yet we continue to pay in only to receive inadequate services. With taxes intrinsically linked to public services, change in this arena, could be good news for businesses. It would force the modernisation of public services to be fast-tracked creating opportunities.
Since George Osborne, chancellors have treated SMEs like something unpleasant they’ve stepped in. The spotlight continues to be on London, and the opportunities in technology and high-growth capital. There’s an ongoing failure to address regional inequality and the important contribution NI’s owner-managed businesses continue to make. The team at RBCA waits in hope that this will be addressed in 2024, starting with continued pressure from Heaton Harris for a Stormont restoration.
We must remember that change brings opportunity. Even in times of conflict and volatility. After all, periods of geopolitical change have historically driven important changes in economic outcomes. And the relentless advance of technology is likely to continue to charge ahead once the elections are over and there is a longer term leadership outlook. In the meantime, we remain on-hand to ensure our clients are informed, and crucially, primed to take advantages of any emerging changes.