Anyone keeping an eye on the UK economy, which realistically means all of us, cannot ignore the mounting unease.
It now appears almost certain that, come Autumn Budget time, tax increases will be on the agenda.
The outlook darkens with each new report and many business owners are becoming increasingly worried about the future.
We are going to look at why the Government is borrowing so much and how it might impact your business going forward.
June’s borrowing soared to £20.7 billion – up £6.6 billion from June last year.
That makes it the second-highest figure borrowed in June since records started in 1993.
There is no one main cause behind such a huge borrowing bill, as a number of factors are weaving together to cause the chaos.
Global market volatility has eroded the UK’s fiscal standing, while the hastily altered welfare reforms have disrupted the budget trajectory.
This is all in the wake of the ambitious Spending Review pledges which have gouged a substantial hole in the budget.
For now, the Chancellor’s answer to this crisis is to kick the can down the road and increase debt.
As all business owners know, tapping into borrowing might smooth short-term bumps, but it does not solve the underlying fiscal fractures.
Regardless of who is at fault for the current downturn, indicators point to tough times ahead.
A wealth tax is under discussion as a means to bolster revenues while sparing lower-income earners, but fears persist that it could prompt high-net-worth individuals to relocate overseas instead of contributing more.
Some argue the “millionaire exodus” narrative is overstated to deter such a levy, yet even murmurings of capital flight could still derail the plan.
There are a host of smaller impacts that could be felt from the Government’s excessive borrowing.
Consumers’ purchasing power is waning under the weight of rising food costs and creeping inflation.
In just three years, average monthly rents have climbed by £221, while mortgage rates continue to bite.
With household budgets stretched, winning new customers and retaining existing ones will become ever more challenging.
Inflation-driven price rises and escalating everyday expenses threaten to intensify cash-flow strains across industries.
This will be more harshly felt by those operating in sectors considered non-essential.
It is crucial to anticipate a potential dip in consumer spend.
Exercise caution with expansion plans and other investments as revenue streams may soon reduce.
In time, the Chancellor will unveil her plan to mend the fiscal gap.
Whether that actually ends up helping businesses remains to be seen.
Don’t let your business struggle under the weight of Government borrowing. Speak to our team today!
