What does the ‘mini budget’ mean for your business?
The noise created by the recent so-called ‘mini Budget’ from new Chancellor Kwasi Kwarteng continues to reverberate, both across the UK and internationally.
To summarise: critics say it caused the pound to tank, spooked the bond market leading directly to rises in interest rates for government debt and prompted the Bank of England to spend £65 billion propping up the pensions industry. Mortgages suddenly became much more expensive, as lenders scrambled to take products off the market.
The big question is this: what will all this mean for your business?
There’s never been a more important time for you to re-evaluate how your business operates day-to-day, and reassess your strategies and goals.
The old days of revisiting your business plan once or twice a year are long gone – you should be doing so far more frequently, as the economic and political situation constantly changes and evolves.
Where to start
Resilience is the key word here. What ‘coping mechanisms’ do you have in place to ride out the storm? What safety nets? Is there a way you could adapt your business to the current circumstances, to make it more stable?
The best way to do this is to invest time in scenario planning. It’s an age-old way of making sure that you’re prepared for every eventuality. Try to think of a number of possible scenarios when doing this.
For example, experts are widely predicting that the Bank of England will act by raising interest rates – some City analysts think UK rates will climb to 6% in 2023. How will your business cope with this?
When we work through scenario planning with clients, we use a process called The Kitchen Table Guide – so called because we metaphorically unpack every part of their business onto ‘the kitchen table’ to see what works and what doesn’t.
By the end of this process, it’s possible to see multiple different ways for your business to evolve into one that can potentially ride out the economic storm.
Is your business already insolvent?
As you’re taking stock of your business, there are some red flags to watch out for that show your business might be approaching an insolvent position. Signs like having to pay your suppliers late, worries about meeting your tax commitments or your company directors putting their own money into the business.
These are signs you need to act on immediately.
If you approach a licensed insolvency practitioner as soon as you’re concerned for your business’ position, then there could be a solution to your challenges. For example, there are situations in which an insolvency process such as a Company Voluntary Arrangement (CVA) could put your debts ‘on pause’ while you work out how to repay them and keep your business open.
Even if your circumstances are more serious and you need to consider a company liquidation, it might not mean the end of the road for your business. In some cases, a Start Afresh Liquidation can be used to address your company’s debts and restart your business under a new company.
As with all insolvency procedures, these both need to be overseen by a licensed insolvency practitioner. If you’ve identified with the situations mentioned in this article, or your company is facing financial difficulties caused by the current economic climate, you could benefit from our advice and guidance.