Ed Rimmer, Time Finance’s Chief Executive Officer on the key takeaways for businesses in the government’s fiscal plan.
“It’s no doubt that Rishi Sunak’s Government had quite the task on its hands in this year’s Autumn Statement; facing what is predicted to be the longest recession on record, eye-watering energy price hikes and a previously uncosted £45 billion mini-budget which saw the British pound fall, inflation rise and the markets in disarray.
“Following this backdrop, some tough decisions were certainly in order. In a bid to steady the economy and curb ever-increasing inflation, we’ve now seen billions cut in public spending and billions more in tax hikes across the board. While action is needed, it’s vital that we learn from previous rounds of austerity; these measures alone don’t create conditions for businesses to grow. The Chancellor’s announcement will no doubt have planted a seed of worry for businesses – many of whom will take the brunt of these rising taxes and an inevitable drop in consumer spending.
Autumn Statement 2022
“Thursday’s tax hikes will see the household income reduce even further, which the Office for Budget Responsibility predicts will decrease by 7% over the next two years. This will bring some necessary tightening of the consumer purse strings, but for the steps laid out in the Autumn Statement to be truly effective, they must be accompanied by measures to support and stimulate both business and consumer spending. That’s a tall order when inflation now stands at 11.1% but the health of businesses, and the economy, depend on it.
“With a worsening cost of living crisis, a drop in consumer spending is something of an inevitability. In a recent Office for National Statistics report, we saw Q2 household spending growth decrease by negative -2.7% in comparison to Q2 of the pre-pandemic year 2019. What the economy so desperately needs now, to flatten and shorten the recession, is for consumer spending to continue to flow and help support businesses. With one hand the Government has served tax increases for all, but with the other they desperately need to help spark and stimulate consumer spending – either through special initiatives or properly financed support schemes – so that businesses have the capabilities to spark growth and remain agile in a turbulent economy.
“Evident in Chancellor Jeremy Hunt’s new measurements was a lack of direct and targeted support for businesses. Whilst spending cuts feel a vital move for a country in financial woe, the back pockets of businesses will certainly feel the strain – particularly as the energy price caps raise from £2.5k to £3k further worsening the load.
“What’s certain is that businesses will need the vital support of alternative lending to get them through the coming months and year. In times of financial hardship, the big Banks and traditional lenders tend to start closing their doors to supporting businesses, tightening the belt and putting in much stricter lending criteria. It is therefore vital that alternative lending remains open for business. We work with some 10,000 business owners already, and while they navigate the current landscape, we know that they – and many more – need our services now more than ever.
“This fiscal plan serves as a stark reminder of the continued hardship UK’s SMEs are to face, but with the support of the alternative finance market, and flexible lenders, businesses can rest assured that they have a lender by their side who can take a holistic approach to finance, putting them back in the driving seat.”