"There remains no meaningful basis on which to predict the outcome of the current negotiations over the relationship between the UK and the EU after Brexit”. This stark statement was issued by the Office for Budget Responsibility (the independent government economic forecaster) alongside the Budget today, explaining that they are unable to provide any meaningful forecast of the economic impact of Brexit. In the Budget, the Chancellor took short-term measures to ride through whatever happens over the next 6 months; these reflect what our clients are doing to plan for Brexit.
Many businesses I work with are developing and implementing No Deal contingency plans. These include: steps to ensure products can continue to get to customers in March in the event of delays at borders, new customs processes and new regulatory requirements for British hauliers; ensuring their products or services are still legal and have necessary regulatory approvals to sell in EU markets; and taking steps to retain EU workers and avoid increasing labour shortages next year. In the Budget, the Chancellor signalled that Government is doing the same: he topped up the existing £3.7 billion Brexit preparation funding for government departments, increasing it to £4.2 billion.
Many businesses are also taking action now to ensure they are ‘match fit’ for Brexit: looking at how they can be as lean and agile as possible, strengthening financial resilience over the coming year in the face of uncertainty. In the same way, the Chancellor’s spending commitments were mostly short-term measures to defuse potential crises over the next year – making government better able to focus on the challenges of Brexit. The Chancellor provided additional short-term funding to stem emergencies in public services over the next year: social care, universal credit, high street shops, local government funding and even potholes in roads. These should ensure that government is not fighting on numerous fronts; and they enable government to delay longer-term, radical reform that would be distracting for a government stretched by Brexit.
The increased spending in Budget is on these short-term fixes plus some popular tax measures (raising the personal tax allowance early, in April 2019 not 2020; and freezing duty on beer, whisky and fuel). These are measures that could provide a small fiscal stimulus and help bolster consumer confidence or could help the government if they need to call a snap election in the face of parliamentary deadlock on Brexit.
What was lacking in the Budget was a long-term investment plan. The Chancellor indicated that this will come next year – if there is a Brexit deal, there will be more public spending available and a 5 year government Spending Review later in 2019 to identify priorities. Again, this mirrors business behaviour. After a spree of M&A deals and IPOs, we are now seeing a lull and long-term investment is being delayed as business holds back until the Brexit landscape is clearer.
This was a short term Budget to tide government over for the next 6 months and wait to see how Brexit pans out. It was a shame that the Budget did not include any financial support for businesses to plan for Brexit, unlike Ireland (where there are grants for Brexit readiness planning and loans for investing in new business processes needed for Brexit). The Budget does give moral support to those businesses already planning for all eventualities, including No Deal: the Government is doing the same…
If you haven't started planning for Brexit or need some help developing your plan, it's not too late and we can assist: Brexit Room planning
In the Budget, the Chancellor took short-term measures to ride through whatever happens over the next 6 months; these reflect what our clients are doing to plan for Brexit.