Our Director Jeremy Frosts 2024 Budget Review

Following on from last Week’s budget, I have had some time to review what was said and done before, the event itself and what has been said since to answer the question: “Will the budget generate growth?”

I am using this metric as this was the one Ms Reeves used as the mechanism that would allow her to fund better public services:

The spiteful, dogmatic and likely self-defeating pre-budget announcements concerning winter fuel payments to pensioners along with VAT and Business Rates on public school fees, complete with the various statements of doom that have emanated from the new government led many clients of ours to vote with their feet. Over the three months ending 31 October, we returned £57m of capital to business owners.  This compared to £17m over the same period last year. Too wide a period? OK then, in October we distributed over £50m which compared to £4.8 million last year. Everyone we spoke to mentioned the budget as a significant driver for their actions. So, to be clear, this is £57m of funds removed from businesses since the election and placed into personal bank accounts. We are one small family run Insolvency Practitioners, an industry of over a thousand appointment takers in the UK. The total reduction of activity in this key driver of UK growth cannot bode well.

In the budget we had changes to Capital Gains Tax, Inheritance Tax, National Insurance, and Regulation, all of which are further drivers to business owners on the cusp of deciding to stop, to bring forward that decision. The pension and Inheritance tax changes fall into the spiteful and dogmatic category but, one suspects, because of the effect it would have on older doctors providing hours to the NHS, the payments into pension pots are not affected.

Joining up the dots, Frost Group are expecting another period of higher activity towards April 2024 and April 2025. Thanks Racheal!

It is reported that the Treasury are working on the assumptions that the Small Business Community will just suck up the increases in costs placed upon them and go back to investing in relative short order. I posted recently a very good presentation as to just how wrong that assessment might be, see here. However, the only small business that I feel comfortable about discussing in terms of its development is Frost Group Limited; So “Will this budget cause Frost Group Limited to invest more in growth and employment?

In terms of growing our referral and instruction place, we think we know what to say, where to aim our energies and how. If we are successful, we are aware of the life we want to lead and the benefits of ensuring that a decent slug of profit is utilised to fund Directors pensions. So, we are going to employee more staff?; Err, possibly but unlikely. Many of our developments revolve around following others in our market by reducing the number of hours we need per case required for our team in the UK thereby allowing turnover and profits to rise without making a similar increase in employment costs.

Will we succeed? Since the Budget on Wednesday, our enquires for Members Liquidation are above the level we were anticipating. We have also received a number on insolvency enquiries, most notably in respect of two café/restaurants and one Pub, all of whom have never recovered from COVID. And finally, we also received confirmation of a repossession order for the property of a bankrupt who’s “crime “ was being the Great-Great grandson of a property developer in Surrey. They struggled with the machinations of dealing with HMRC and organising probate (Cost was likely an issue) in respect of both their mother and brother who passed in short order and who had always lived in the relevant properties.

Some of our citizens just do not get the magnitude of what is required to resolve the estates of deceased forebears. Whether this is fair or not is something for our democracy to determine; but if you have only ever lived hand to mouth, the concept of finding £0.4m to pay your taxes from a property portfolio not invested in for twenty years will be overwhelming. Does this make them bad or excessively wealthy? Clearly not, but this will be an area of our society that was increasing before Wednesday and, after the Budget they will increase. I am not even considering Farmers or the increase in the rate of interest that HMRC can now charge for late payments.  In this case my experience of HMRC is that the delays were as much to do with them as it was to do with the Bankrupt. A failing organisation earning more by increasing to fail? Not sure that is a good look.    

There will undoubtedly be a drift back of the capital exiting the sector as the country settles down and successful business owners decide it is time to go again. One suspects that the spite and dogma that the Govt has shown to those groups it does not like or understand will hold back that drift. If they are prepared to let pensioners freezer and have a pre-disposition to impose additional costs on the private sector thereby imposing significant competitive advantages on Govt organisations, where will those funds be safe to direct? And with HMRC in her ear constantly about the small businesses tax gap it is difficult to see why the small business community would trust much of the present govt’s statements.  

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