Key 2017 Budget takeaways for UK SMEs

Currencies Direct November 22nd 2017 - 3 minute read

Chancellor Philip Hammond has delivered his Budget to Parliament. As usual, there’s plenty for analysts and political commentators to digest, but how will the plans impact the UK’s SME population?

Sterling has so far shown little reaction to Hammond’s spending plans, which attempted to walk a careful tightrope between appeasing critic’s demands for additional spending without overly-jeopardising targets to reduce the deficit by 2021, but there were a few interesting points.

 

Will Hammond’s budget help ease GBP exchange rate volatility?

There are positives and negatives from the latest Budget, which explains why the pound hasn’t been moving with a clear direction.

Despite the Chancellor’s comments that the UK will make a success of Brexit and that Britain is heading for a technological revolution, the OBR’s latest forecasts for productivity will be of particular concern.

Weak productivity is one of the things that has held back wage growth and therefore slowed growth in the UK’s consumption-driven economy.

For the first time in 15 Budget events, the OBR have forecast productivity will be below 2% in every year of the projections. The Treasury’s watchdog now predicts productivity growth of:

 

  • 1.5% in 2017, down from earlier expectations of 2%
  • 1.4% in 2018, down from earlier expectations of 1.6%
  • 1.3% in 2019, down from earlier expectations of 1.7%
  • 1.3% in 2020, down from earlier expectations of 1.9%
  • 1.6% in 2021, down from earlier expectations of 2.0%

This is likely to weigh on UK economic forecasts and bodes ill for inflation – as low wage growth suggests weak levels of consumer spending. This, in turn, means that the Bank of England’s (BoE) monetary policy outlook isn’t looking too healthy.

So, low output and low inflation; not a conclusion that the markets want to hear. This means that volatility for GBP exchange rates, and the uncertainty that this can cause for your business without adequate risk management, is likely to continue over the coming few months at least.

 

Are packaging worries part and parcel of this year’s budget?

This Budget was fairly light in terms of policies that directly affect small businesses, and online sellers in particular. One of the most important points wasn’t the announcement of a concrete policy, but the suggestion of policy changes to come.

While he declared nothing concrete, Hammond is intending to investigate ways in which taxes or charges could reduce wastage from single-use plastic packaging items.

This has been inspired by the success of the 5p plastic carrier bag tax, which has successfully reduced carrier bag usage by around 80% since its inception.

This is clearly going to have an impact upon online sellers, whether selling directly to consumers or through marketplaces such as Amazon – which is seemingly failing to get its packaging right after being criticised for both over-packaging and under-packaging deliveries.

It might be wise to start preparing for such taxes or fees now, as they will either inflate your prices or impact your bottom line.

 

Business as usual for online sellers following UK autumn Budget?

Today’s Budget may not have been earth-shattering, but it has highlighted the rocky path ahead for the UK economy. Key challenges, such as weak growth and low productivity, look set to plague businesses for some time to come.

This will have a notable impact upon the pound and could therefore complicate cash flow projections for any business with exposure to the foreign currency markets.

As a result, there is still a reason for businesses to take action following the latest Budget announcements. Risk-management will continue to be vital to protecting your bottom line over the coming years as the UK government attempts to negotiate a split from the EU while guiding the economy through troubled waters.

Talk to an expert in hedging your foreign currency exposure today to help minimise the cost of overseas invoices and increase the value of fund repatriations from abroad.
 
 

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Currencies Direct

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