A Brave New World
I don’t think many people would have predicted that, 18 months past the first lockdown, we would quite be in the economic position that we are now. I certainly didn’t. I expect however that most business owners would have taken this position with both hands had they been offered it at the time.
by David Scrivener, Managing Partner
I don’t think many people would have predicted that, 18 months past the first lockdown, we would be in the economic position that we are now. I certainly didn’t. I expect however that most business owners would have taken this position with both hands, had they been offered it at the time. That has to be a good thing for sure – things could certainly have been a lot worse – but I can’t help but think that we are in somewhat of a bubble and there are clearly some critical issues facing businesses that are already threatening to burst it.
High levels of inflation in wages, supplies and distribution costs are probably the most obvious at present. How businesses manage this and react in terms of passing on these additional costs, will not only determine their financial success but, with ever increasing costs of consumer products, will ultimately hit us all in the pocket.
Another issue to look out for is how cash and working capital is managed as business grows back and beyond pre-pandemic levels. This is exaggerated because most world economies are experiencing the same impact on a macro-economic scale. Working capital tends to come under greatest strain when businesses and economies grow, so we need to be on the look-out for “over trading” signals. Some practical tips for businesses to prevent issues include preparing rolling quarterly cash flow forecasts and staying on top of regular management accounts – that way you can see where you are going as well as where you are right now.
With my financial health warning out of the way, I will now focus on some positives.
Our Corporate Finance team continue to see very high levels of activity with lots of business sales and acquisitions either already complete or due to complete before 2021 ends. This is inevitably being fuelled by high levels of liquidity, strong appetite to fund good deals and business owners taking this time to address their own personal financial goals. There has been a lot of discussion about how employees want different work-life balances post-pandemic, but the same applies to business owners too.
We have also recently had a pretty positive Budget from the Government which included a significant commitment to public spending and investment. There weren’t many obvious references to taxation, it felt more like an Autumn Statement, but there are certainly some issues to be aware of.
In this issue, we pick up on some of those including Katie Varney’s article covering the new Residential Developer Tax, changes to R&D reliefs and the Annual Investment Allowance extension to name a few. Yvonne Graham also highlights the hidden tax cost for us all in her piece on “fiscal drag” – it doesn’t grab many headlines (which is almost certainly why it is popular with the Treasury) but not increasing annual allowances and thresholds for the effects of inflation has a huge impact on the amount of tax we pay over a prolonged period. Continuing the tax theme, but not Budget related, Helen Carey picks up on some common questions and issues to look out for in terms of VAT post-Brexit.
It has been great to cautiously and safely recommence our “in person” events again recently. Our ever popular Budget Breakfast seminars saw over 180 guests attend across multiple locations and the atmosphere was excellent. We also welcomed many of you at the recent opening of our new Ipswich office – we were blessed with a near perfect evening with which to show off our new roof terrace before the sun went down. Our new office provides a great environment for our Ipswich team and clients to return post-Covid, and is a significant upgrade on the previous property. We are now looking to roll out similar schemes across the firm with the next location on the horizon being Cambridge, where we have recently committed to a much larger and modern office space to enable us to service the growth that we have and continue to see there.
Whilst we are making use of technology wherever we can to improve efficiency, lessen environmental impact and enhance our client service, we are fully committed to being a firm that is people focused. Having great places to train, work and meet with clients is part of that commitment.