Accountants discuss their clients’ business sentiment

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Has the general election changed business sentiment about the economy and future prospects?

The past fourteen years have been rather turbulent, marred by four general elections, two hung parliaments, Brexit, Covid-19 and ongoing economic uncertainty. So it’s no surprise that businesses aren’t necessarily feeling particularly optimistic at the prospect of a new government.

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New research from Eden McCallum suggests that the mood among many British businesses about the national economic outlook is rather downcast:

  • 4% of British businesses said they feel ‘very optimistic’ about the UK economy
  • 47% of British businesses said they feeling either ‘somewhat pessimistic’ or ‘very pessimistic’.

We asked UK accountants to share how their clients are feeling about the future of their business. How hopeful do they feel about future business success?

Clients have exciting plans but are cautious

Damon Brain, Chief Executive Officer, Duncan & Toplis

There are mixed feelings. Many clients have some exciting plans but they’re cautious to implement them during times of wage inflation, labour shortages, supply chain issues and government uncertainty.

Whilst many are supportive of the sentiment of the national living wage, it has caused wage inflation issues throughout the labour markets, increasing by nearly 10% at a time when the Bank of England is striving to bring inflation down to 2%. This then leads to higher interest rates and delays the ability to invest in growth.

Government support has also been found wanting and some clients feel that even a change of government will not improve things. Some clients are scaling back capital investment.

For a new government to have any impact, there are many things that need to be changed or revisited. Bringing in meaningful trade deals, bringing certainty over tax rates and incentives for investment and growth and ensuring that the country does not become over-regulated are all on the list of needs for businesses that we work with.

Accountants have a key role in guiding clients through change to achieve their goals. We aim to unlock the optimism, despite the economic and political uncertainties. Engaging with clients to explore new opportunities and innovation is vital to unlock economic growth and support their ambitions, whilst also mitigating risk.

Verdict: Clients have exciting plans but labour shortages, wage inflation, supply chain issues and government uncertainty are leaving them cautious.

Clients are anxious but many are taking a wait-and-see approach

Kevin Fitzgerald, chartered accountant and UK MD, Employment Hero

There’s a fair bit of anxiety among our clients who are predominantly SMEs. It’s natural to feel anxiety when there’s a change in government because a lot of businesses are going to be thinking: what’s going to happen next? How will policy change impact me? What will the financial cost be to my business? It could be a policy change, regulatory change or a withdrawal of funding or investment.

Cash flow is the lifeblood of SMEs in particular, so any changes are likely to cause a lot of stress, particularly when regulatory and legal changes can be so complex and difficult to interpret.

We recently surveyed our clients who typically employ between 20-500 staff. One-third said they were worried about the upcoming general election, a bigger number said they feared new policies would disrupt business models, and 26% are concerned about regulatory hurdles and complexities.

Despite these concerns, SMEs remain objective when it comes to the next government fixing or addressing issues. They know it’s going to take time before any economic improvements are felt, so it’s more about when can the government fix these things rather than if they can.

There’s a hope, too, among many of our SME clients that the government will provide more funding opportunities for small businesses as that’s desperately needed.

So for many, it’s going to be a wait and see approach.

Verdict: Clients are anxious about the outlook and potential changes but many are taking a wait and see approach.

Short-term optimism runs alongside long-term apathy

Jamie Skelding, Director, Prime Accountants

Among our clients, the mood is reasonably optimistic in the short term ability to trade well, but much more pessimistic in the long term.

The feeling is generally that whoever wins the election is going to have a huge job on their hands. There’s apathy about the problems which need sorting out and a feeling they run too deep to be solved quickly.

Inflation coming down has been helpful, and the energy price cap is a big factor for businesses. There is the looming tax burden some fear if Labour win, however we are expecting that to be capital tax based, which is offsetting the longer-term pessimism.

The main concerns we’re hearing are mainly around the lack of certainty. Interest rates seem to be going the right way, but there are elections across the world at the moment so the uncertainty is wider than the UK alone.

However, in professional services, change is always an opportunity. People will seek out more advice in an environment of change than they will when there’s a fairly straight road ahead. It’s a good opportunity to help clients navigate their way through it.

Verdict: There’s short-term optimism but long-term apathy about business and economic challenges – many feel they run too deeply to be solved quickly.

Learn about advanced group accounting

AAT is running a mastercourse to clarify the complex area of group accounting, don’t miss out.

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Would you like to contribute to future articles like this one? If so, please get in touch with Annie Makoff-Clark at [email protected].

Annie Makoff is a freelance journalist and editor.

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