Partner Article

Budget: Firms risking future by only reading headlines

Businesses are being urged to err on the side of caution following a Budget that unveiled one of the biggest rounds of spending in British history.

Chancellor Rishi Sunak has unveiled a £30 billion package to nurse the nation through the coronavirus threat – highlights of which include the temporary abolishment of business rates for those with a rateable value of under £51,000 in the retail, leisure and hospitality industry, a £3,000 grant for small businesses, and a full government refund of 14 days’ worth of sick pay for SMEs with under 250 employees.

Bai Cham, insolvency expert and Partner at CVR Global, is urging businesses to read between the lines of the Budget to inform their medium-term forecasting for the year ahead.

He said: “Businesses really are playing with their futures if they only read the headlines.”

“Yes, it is fantastic to see the government making funding available and supporting the business community through another unpredictable period, but you only have to dig a bit deeper to question if this really goes far enough to keep SMEs afloat.

“A £3,000 grant to a lot of smaller family businesses will initially be music to their ears, but a timely rise in the living wage could soon wipe this out.

“The removal of business rates from April for many businesses will have a lot of business owners celebrating too. This is without doubt a step in the right direction, but if we are to take the Chancellor’s statement that this will save businesses £25,000 during 2020/21, that equates to a £2,500 monthly saving from April until January 2021.

“If I’m running a restaurant, that £2,500 monthly saving equates to perhaps attracting 100 covers through the door, and if I lose that, the benefit of that reduction in business rates has been lost. It is highly likely that with people staying indoors to protect themselves from coronavirus, the loss of 100 customers will be just the tip of the iceberg over the next few months.

“This is why I am urging business owners to look beyond the headlines before ploughing ahead with their future plans, as the unique impact that is being felt by coronavirus means that these handouts by the government may not be enough to stem a sudden fall in turnover.

“With regards to entrepreneurs’ relief, I think the immediate reduction of the gains threshold from £10 million to £1 million is a smart move. It is true that the vast majority of business owners will not benefit from more than £1 million in eligible gains when selling their business – so bearing in mind there was heavy speculation that this was going to be scrapped altogether, I think this move can be considered a victory for business owners, while putting more money in the government’s pocket.

“Overall, businesses should be cautiously pleased with this latest Budget announcement, but should seek professional advice to weave these changes into their next round of forecasting to ensure any decisions they do take don’t end up coming back to haunt them.”

This was posted in Bdaily's Members' News section by Matt Joyce .