Despite constant uncertainty surrounding Brexit and England not making it to the final of the World Cup (although they did awfully well), the Summer of 2018 seems to be a fairly optimistic one for British businesses.
In a PwC survey earlier in the year, nine out of ten senior executives were confident about the continued growth of the UK and global economy in 2018.
Since then, some sectors have gone through subdued periods of growth. Financial services have struggled, although it stabilised and is set to grow faster in this and the next quarter of 2018, according to the latest CBI/PwC Financial Services Survey.
Everyone has noticed how much retail is struggling right now, with several high profile collapses and reduce deals. And yet, “sales volumes were well above average” for the January until June 2018 period. A combination of good weather, once the snow melted, a Royal Wedding, followed by national and international sporting events have been good for the retail sector, bucking the perception that the sector is going through a difficult period.
More reason for optimism?
According to a BDO quarterly survey, manufacturing is also picking up the pace, “at a faster rate than it has over the long run.” Construction has also performed better in Q2, with the Construction Purchasing Managers’ Index rising to 52.5 in April and May, up from a more pessimistic March.
Overall, we are seeing a lot of positive economic indicators, despite Brexit related uncertainty. Although BDO does suggest the Bank of England may take a “dovish” stance to reduce any risk of inflationary pressures, therefore putting a rate rise back on the cards. Several members of the committee, including governor, Mark Carney, and its chief economist, Andy Haldane have indicated it is time to raise the base rate. Reuters predicts an 80% chance of an increase in August.
However, other members of the nine-strong committee are urging caution now that wages are going up, although not at the sort of rates the Bank of England expected in Q2. If rates do increase, analysts and observers only expect a jump from 0.5% to 0.75%, not any higher.
It seems that an unseasonably warm summer has put businesses across several sectors in a good mood. Consumers and business buyers are responding well. Can we expect more summers like this in the future? For the UK, this is unprecedented since 1976. But with the impact of global warming, maybe we will have more summers where these sort of temperatures are normal.
Governments around the world are committed to combating climate change. One way we are doing that is encouraging the use of electric and hybrid vehicles.
Electric cars: changing what we drive in 2020?
As we approach 2040, when the government has said petrol and diesel cars will be banned from our roads, electric cars are going to be an increasingly attractive option. The government is already taxing the private use of cars for business based on mileage, and more recently on the CO2 emissions of the vehicle.
from April 2020, the income tax (BIK) rates on higher emission vehicles will increase, whilst on electric cars, it will reduce to 2% of list price. Businesses should respond favourably to this, since it makes electric options a more attractive option, saving money on taxes and reducing costs.
Now we need the automotive sector to step up and produce more electric and hybrid cars. Although there are several higher-end models, including the Tesla Roadster and Model S saloon, there still isn't enough budget to mid-range models. Or the infrastructure to support them.
Thankfully, ongoing government commitments to put charging stations in petrol stations and new homes should improve the situation, and alongside Nissan, the Volkswagen e-Up! and Audi E-tron are set to shake up the market and give consumers wanting to go green more choice at a wider range of price points. Although there are currently 17,000 public charging stations in the UK, more are going to be needed if we are going to go green in 2040.
It makes sense for businesses to get behind this market, since it will make an impact on the tax companies could pay for staff and director’s using personal cars, or fleet cars for work.
Disclaimer: We hope you found the information in this article useful and informative. Please remember that this is an article and is no substitute for professional advice on taxes, your business or personal finances.