So, the first budget of the UK Coalition Government UK will have been delivered by the time this blog is published. I can only speculate on what might be included. It’s clear that the options open to George Osborne in his first budget are limited. He has to make cuts in government spending plans and he will probably have to raise additional money by way of taxation. A VAT rate increase has been much speculated. The recent indicators are simply highlighting what needs to be done.
The Telegraph reported on 11th June that “consumer price inflation hit a 17-month high of 3.7pc last month, almost double the central bank’s 2pc target.” They reported in the same article that UK manufacturing output fell unexpectedly in April, “raising fears that the fragile recovery may be running out of steam. Industrial production fell 0.4pc compared with a forecast rise of 0.5pc.”
The Telegraph then goes on to quote ‘experts’ who apparently believe that “price pressures should ease later this year when the economy feels the effects of what economists expect to be the sharpest austerity drive in modern British history. Britain’s coalition administration has warned of “painful times ahead”, with budget cuts of up to 20pc expected in some departments as it tries to reduce a deficit running at nearly 11pc of GDP.”1
Financial Advice.co.uk reported on 14th June that the Office of Budget Responsibility had reduced UK Growth projections for 2011 from 3.25% to 2.2%. This, they suggest, “will have a major impact upon government income and will indeed lead to higher taxes and more budget cuts.2
Businesses in the UK, they report, “are now calling upon the office for budget responsibility to issue a detailed report regarding the amount of cuts we can expect in the future and indeed where they will come from. Businesses need to invest for the future and look forward within this cloud of mystery although very few business leaders will be even tempted to invest for the future at this point in time. The UK economy is treading water at the moment and we need focus, direction and more information as soon as possible.”
I heartily agree. Businesses need leadership and they need it from a number of sources –
From the Government, they need certainty about taxation and support services (which may be much reduced by cost savings), a reduction in unnecessary regulation and clarity over the potential for growth.
From the banks they need a resumption of lending at reasonable rates, reasonable charges and proactive support and advice in areas where the bank can provide real expertise and add value.
They also need Business Representative Groups to continue lobbying for business interests, perhaps working together to keep government policy on track and supportive of business – especially the most important small business sector.
Of course, leadership will also be required from the Board and from the entire business in order to come out of ‘austerity’ in good shape. We hear ‘bad news’ every day – but the action and reaction you have to that news determines your future, not the news in itself.
Change your thoughts to believe that the future has massive opportunities and you will ACHIEVE them.
Last week I shared with an audience of Business Leaders 18 actions to do today and to repeat everyday… read more on www.chiefexecutive.com
Whatever you do, do it with energy. Your workforce and your customers will be looking for confidence and certainty. The more you can demonstrate these qualities, the better your business will trade.
Brian Chernett is founder of The Academy for Chief Executives (ACE) – He has 43 years’ experience as managing director of private and public companies, including subsidiaries of Booker Bros McConnell, the Landmark Group, and several other major companies. Find out more about membership here >>
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1 UK inflation expectations hit 2-year high – The Telegraph 11/6/10 – http://www.telegraph.co.uk/finance/economics/interestrates/7820803/UK-inflation-expectations-hit-2-year-high.html
2 Office for Budget Responsibility is open for business – Financial Advice.co.uk 14/6/10 – http://www.financialadvice.co.uk/news/tax/88973-office-for-budget-responsibility-is-open-for-business.html