The new government can go a long way towards helping businesses by creating an environment in which firms can be confident to plan for the next few years, not just the coming weeks or months.
Businesses need to be able to make big decisions, to drive their enterprises forward, and they can realistically only be expected to do that if they feel the economic environment in the UK is stable.
Uncertainty surrounding taxation, employment rights, investment incentives and other variables make bosses nervous and reluctant to make decisions that will allow their business to grow, with the benefits that brings to supply chains and employees.
An example of how an unstable situation can prevent such long term planning and investment lies in the variation of levels of capital allowances. Less than five years ago, the allowance was £25,000. Today, it is £500,000, 20 times that previous allowance.
How is it possible to plan for the long term when such changes can be made at a Chancellor’s whim? How is it possible for a company here in the Tees Valley know how much they can afford to invest and when to do so?
Businesses that produce or sell products to consumers also need to have a sharp eye on VAT levels. Much has also been made of the potential to raise the 20% rate, with politicians being put on the spot to confirm they will not implement a rise.
The rate in the UK is lower than much of the rest of Europe and VAT is a powerful tool for raising taxation, and places an emphasis on consumer choice; as essential items do not qualify for VAT, people can choose to simply not buy the item, rejecting the tax rise. If VAT is increase on a company’s products and the public reject it, that creates risk for the business.
Whatever the outcome of this “rainbow election”, those who find themselves in government need to act quickly on the economy and put a plan in place that will last, creating that necessary stability to allow businesses to create growth.