Mervyn King recently said “The NICE (Non Inflationary Constant Expansion) decade is behind us”. And those of us with property certainly had the feel good factor when our houses trebled in value over the decade and yet inflation was supposed to be around 2% p.a. Well I am afraid I never believed the figures then, but it is quite obvious now, that massive inflationary pressures were building up and suddenly over the last 12 months inflation has exploded and it appears the government quite understandably is floundering. I never bought into the “best Chancellor since Doomsday” line and whilst I never thought the previous Chancellor necessarily had much to do with the stability of the last ten years, I certainly think the present Chancellor has very limited options.

We are in a global economy and it is global inflationary pressures that are influencing us now. I don’t think any of us believe Gordon Brown can persuade OPEC to release more oil for example (at least King Canute realised the extent of his powers).

So how do we react to all of this? I would suggest we need to do our homework and make out a real case to our customers to try and pass on those increases in costs where we possibly can. We, of course, can always review our own costs to see if there are ways of reducing them. I am afraid unemployment will inevitably increase. But we are gong to have to be very aware of all the changes and remain a step ahead wherever we can and persuade our customers to accept those price increases.

It looks as though running a business in the next 10 years is going to be more demanding than the last ten years.

- Bill Ballard

Budget Views (April 2008)

Most of the new legislation we were all aware of before the budget, so in essence this year’s budget was perhaps not revealing anything new.

The really big worry we had was income shifting which attacked how Director/Shareholders share the profits of their businesses and we are very pleased that the legislation has been delayed. If it had been introduced on the basis proposed, that it depended totally on the Inspector of Taxes’ view of what is “reasonable”, it would have been a nightmare. I also believe it attacks a fairly vulnerable but vital part of the country’s future economy, family run businesses. It is high time that the government really understood how important this group is not only as employers but also as a source of future wealth creation and enterprise. But unfortunately the government still appears to see income shifting as a source of revenue so I am sure it will be back. However, attacking how a working family business shares its profits around the family as well as increasing corporation tax rates for small businesses does seem excessive and not at all helpful.

The new capital allowance scheme whereby the first £50,000 spent on plant and equipment can be written off in the year of purchase sounds generous at first sight but when you consider that for example one truck and trailer can cost £120,000 it can soon be used up so I am not sure it will be that helpful to any but the smallest of businesses. As most of us are aware, Capital Gains is now at a flat rate of 18%, which will favour the“investor” rather that the “trader”. There is some relief for the Entrepreneur, on the first £1million, but it is much more restrictive on which assets will qualify for the relief. So in conclusion, a rather boring budget, which is restricted by global economic conditions and costly political mistakes over the last ten years. It certainly does nothing radical to help businesses grow and develop. As ever we are on our own.

- Bill Ballard

What Is Happening In The Big Wide World? (Feb 2008)

There seems to be a lot of soul searching going on, with everyone talking themselves into an inevitable bear market and as one of my esteemed colleagues reminded me, in a bear market you only listen to bad news.

Now must be the time to look seriously at your marketing strategy. If things are going to be tough in a shrinking market, it is more important than ever that you perform better than your competitors, I don’t mean by this that you need to spend more on advertising but I feel there is a need to review the direction of your business. It is vital to take time to identify your customer base, and direct your marketing accordingly. It will be harder to win sales, so an extra effort will be required.

One of my concerns is that this government seems to be spending more and more of our money in bailing out what must have been unexpected situations. The other concern is that I am not sure they have a sensible economic strategy for UK Plc. They are still trying to contain inflation when it is quite clearly getting out of hand, at the same time there is a fall in economic activity. So how will the Governor of the Bank of England stimulate growth through lower interest rates without fuelling inflation?

I suspect we are going to have to learn to live with inflation again, so don’t forget to increase your prices whenever you can.

I also believe the government is getting itself financially into a mess, so how will it balance its books; I suspect tax hikes must be on the horizon. The current amendment to capital gains tax, smacks more of the old retirement relief provision, so be careful, it will only affect those assets sold at the same time as the main business but it should help us save some tax if we are selling our businesses on the first £1 million of our proceeds.

- Bill Ballard

Pre Budget Special (Nov 2007)

Forgive me for becoming cynical as I get older, but politicians never cease to amaze me with how they would like us to interpret their intentions and actions, for what you initially see is never quite what you get.

When you see a headline, “nil rate band for inheritance tax has doubled”, you assume that to be the case, but when you read the details you find that it is not that at all and as for the new legislation on capital gains tax that is quite a bolt out of the blue, and much of our thinking over the past few years in planning for capital gains tax will now have to be changed.

Whichever way you look at it, removing indexation and taper relief will have a dramatic effect on the capital gains tax liability, and for business assets at the very least it will increase from 10% to 18% the tax due on capital gains, which is significant.

I think using 1982 still as the base value for the cost surely needs updating.

I do feel that the effect of the current amendments to the legislation have not been thought through, whilst they might appear to be attractive to the voting public, they will not help the economy at all.

~Bill Ballard