After many years of financial upheaval in the UK due to the knock-on effects of Brexit and the disastrous Conservative budget from Liz Truss that caused Britain to lose upwards of £30 billion, the new Labour government are hoping to turn things around for business in the coming years.
Traditionally, the Conservatives have been the party seen as a safe pair of hands for the economy, but straight after the Labour landslide victory instead of the financial markets becoming volatile, they responded favourably due to the forecast of more stable times ahead and perceived fiscal prudence.
Overseas investors have already begun to show an interest in undervalued UK assets and analysts are seeing a growing belief among investors that a new chapter for the UK could increase the appeal of UK assets, especially while the USA still undergoes an uncertain future with their upcoming elections in November.
And there has also been rumblings that new Prime Minister Keir Starmer will be trying to repair the UK’s reputation by strengthening ties with European countries and seeking out new trade deals with foreign neighbours in a bid to undo the tensions that rose in the wake of Brexit.
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In his victory speech, Keir Starmer seemed to be addressing small business owners by saying: “Whoever you are, wherever you started in life, if you work hard, if you play by the rules, this country should give you a fair chance to get on.”
In their manifesto, Labour stressed its mission to provide more certainty in business taxation to help companies feel more stable. The good news is that it didn’t propose increasing corporation tax (planning to cap corporation tax at 25% for as long as they are in power) and pledged to enhance the annual investment allowances which will benefit smaller businesses and startups by making capital investments more financially viable.
This will be set out in a business tax “road map” (to be published within six months of the government changeover) to give businesses more certainty about planning investment decisions. This includes a permanent full expensing system for capital investments which allows businesses to deduct the entire cost of capital expenses.
It’s also set to overhaul the business rates system to change the power dynamic between high street businesses and online giants which is currently causing local shop owners to bring down the shutters on their businesses because they can no longer afford the rate prices that in recent years have sky-rocketed. This reform will hopefully have the effect of rejuvenating under-used and flagging high street shopping areas and bolster local economies.
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Labour has also pledged to make life easier for small businesses that export their products by offering guidance to SMEs and by removing some of the barriers that stop small businesses from selling their products in foreign markets, made recently more difficult due to Brexit red-tape.
With regards to business research and development, Labour has not mentioned changing the current R&D reliefs for corporate investment which should be a relief to organisations who want to expand or develop their products. They plan to boost investment for R&D in the coming years and have pitched an idea for a UK wealth fund seeded with £1.5bn government funding a year to boost investment in infrastructure and specific industrial sectors.
The only fly in the ointment for employers is an overhaul of the employment laws which currently favour the employer over the worker. Traditionally a party that has worker’s rights in the forefront of policy, the Labour party are wanting to make changes to employment including ending restrictions on trade union activity, ending “fire and rehire” practices, and banning zero-hours contracts which Labour deem exploitative.
Instead of the current laws where workers don’t have rights to sick or parental leave or unfair dismissal, Labour also aims to introduce “day one rights” which mean that workers will no longer have to wait as long as two years to be able to claim those rights. Although this may mean businesses will have to change their working rules and adjust to new regulations, the flipside to that could be the potential for a happier, more productive workforce.
If you’re interested in setting up a business in the new-look Britain, take a look at our UK company formation page, or get in touch directly from our contact page.