The UK’s general election is just months away, with this years political battle set to be one of the most closely contested in recent history. However, the build-up to the election creates political volatility and uncertainty nationwide with business confidence being negatively impacted as a result.
This has been confirmed by two recent surveys, which highlighted political upheaval and geopolitical tensions as the two main concerns for business owners in 2015. The general election is causing particular concern, with Deloitte’s most recent quarterly poll revealing that the prospect of a hung parliament is preventing entrepreneurs from committing to long-term business expansion.
How will a Conservative Victory Impact on your Business?
While the prospect of a single political party earning a big enough majority to take full control of the House of Commons is increasingly unlikely, David Cameron’s Conservatives have a distinct edge according to recent polls. After trailing behind Labour during autumn of 2014, the latest polls reveal that the Conservatives now hold a one seat advantage as we reach the end of the campaign trail.
With the Conservatives likely to extend their advantage in the coming weeks, they may well be the dominant partner in any coalition government that is formed in the wake of the election. It is, therefore, worth considering the impact that this will have on business owners so that entrepreneurs can make tentative plans for their immediate future: -
A More Stable and Progressive Economy
On a fundamental level, the Conservative party has done an excellent job of fostering economic growth in the last eighteen months. So, although last years’ third quarter expansion of 2.6% was lower than initially forecast, it remained significantly higher than the corresponding figures from 2013. The economy is currently growing at its fastest rate in seven years, meaning that David Cameron has overcome criticism of his party’s strict austerity measures and managed to oversee sustained and consistent growth.
The Outcome: If re-elected, the Conservatives have a viable and proven strategy for continuing recent economic growth. Their re-election would also provide much needed continuity for business owners and negate any volatility that would arise as a result of a political handover. This should increase business confidence and boost small and medium sized ventures.
An Uncertain Stance on Immigration
While the topic of immigrant workers remains an unnecessary sensitive and controversial talking point, it drives considerable political debate in the UK. The Conservatives are the latest to cause controversy in this market, after adopting increasingly aggressive stance on immigration as a response to the challenge of popular fringe party, UKIP. Given the prominence of immigrant workers across multiple industries in the UK, however, the Tories’ changeable ethos could impact negatively on business owners and reduce their access to affordable talent.
The Outcome: If the Conservative party were to be victorious and implement a tough stance on immigration, small and medium sized businesses may well struggle to maintain their existing workforce and recruit new talent. There is a suggestion that David Cameron may soften his approach should the Tories be re-elected however, and that his recent rhetoric has been designed to target UKIP’s largely undecided audience.
More Favourable Tax Levies
While the Tories stance of immigration remains unclear, however, it has a clearly defined ethos on taxation. Under a series of bold and expansive plans, David Cameron has pledged to continue the modification of taxation brackets and thresholds if he is re-elected in May. This would ultimately mean that no single employee will pay tax on the first £12,500 of their income by the year 2020, while so-called middle earners will benefit from a raised income threshold at which they are required to pay 40% in levies.
The Outcome: If upheld, this policy would drive higher levels of consumer spending and encourage aspiration. With more disposable income and higher levels of confidence, businesses would have an opportunity to boost their levels of turnover and achieve higher profit margins. Higher levels of aspiration would also encourage more people to seek work and advance their existing careers, potentially minimising the skills gap that exists in some industries.
The Bottom Line
With these points in mind, it is fair to say that a Conservative-led government would largely benefit small and medium sized business owners in the UK. The strong prospect of a hung parliament complicates the issue considerably, however, as the impact that the Conservatives are likely to have will depend on their majority and the political parties that they forge a coalition with.