Published Thursday 25th July 2019
On Tuesday 23 July, it was announced that Boris Johnson had won the Conservative Party Leadership Contest. As a result of Theresa May’s resignation following a tumultuous few years, Mr Johnson will become the new Prime Minister of the United Kingdom.
Such a change often brings with it a sense of optimism and hope for widespread reforms. Whilst the former has arrived in abundance, questions are being asked about the latter. With the Brexit cloud still looming large, what will this prime-ministerial change mean for UK business owners, both in the short and long-term?
A Fresh Warning Over Brexit
The pivotal issue facing the country, both economically and politically, remains Brexit. In Johnson, the ruling Conservatives have chosen someone with more extreme views than his predecessor. One of the leading faces of the Leave campaign during the 2016 EU Referendum, Boris Johnson appears determined to complete Brexit by the new deadline of 31 October. More importantly, he has repeated his willingness to leave the EU without a deal if a new agreement cannot be drawn.
His appointment is widely seen to have increased the likelihood of the UK leaving the EU without a deal at the end of October. He believes the negotiated Withdrawal Agreement is “dead” and hopes to achieve improvements to get it accepted. However, the EU insists that the Agreement cannot be re-opened. They have also said that the Irish backstop, seen as one of the significant reasons behind Theresa May’s failures, cannot be removed. Time is also an issue – there are only three months until the Brexit deadline, and domestic recesses occupy most of August and September.
As part of his Conservative campaign, Boris Johnson repeatedly played down the potential impact of a no-deal Brexit on the UK economy. However, the wider expectation remains deeply negative. Earlier in July, the Office for Budget Responsibility (OBR) announced that they believe leaving the EU without a deal would put the UK into a recession. It would also cause immediate problems for importers and exporters, which has already led to large amounts of stockpiling in the UK economy.
Johnson’s Domestic Economy Plans
It is worth remembering that there are many issues to be solved beyond Brexit. Boris Johnson has already outlined some of the other changes he would like to see to the UK economy, which could have an impact on businesses. One particularly notable desire of his is to cut corporation tax. Currently, it is already scheduled to decrease from 19% to 17% next year. However, PM Johnson appears determined to reduce it even further. Whilst he did not suggest a specific figure, his leadership competitor Jeremy Hunt’s advised number of 12.5% could provide some indication as to the level of decrease possible.
There are a few other investment areas highlighted by PM Johnson that could also have a knock-on effect on business. These include a desire to raise spending in education and to speed up the rate at which full-fibre broadband is rolled out across the country. That second point could prove crucial – currently, only 7% of the UK has access to this, and it is not expected to be nationwide until 2033. Mr Johnson has outlined plans to get the roll-out completed by 2025. This speed increase is likely part of his larger plan to increase development across the UK, growing economic opportunities outside of London and the other major cities. Full-fibre broadband and the access to technologies that it could bring will be a major support for businesses across the country.
A Complex Political Landscape
However, at this stage, all the PM’s grand ideas should be viewed with an element of caution. Whilst he is a new face, and his newly-formed cabinet is designed for his ambitions, Parliament itself remains as divided as ever. Johnson’s Conservative party holds a slender majority, and his divisive nature could make creating specific policy changes challenging to enact.
The lack of control the Conservatives have over Parliament is making a snap general election increasingly likely. Such a vote could take place before Brexit, to make no-deal more feasible, if deemed necessary. This potential election only adds to the confusion that still reigns over the domestic agenda. Whilst Johnson seeks to clarify, the reality is that the outcome of Brexit, and Government in general, is still yet to be decided.
Unfortunately for UK businesses, beyond Mr Johnson’s enthusiasm, the fate of the UK remains strikingly unclear. However, one thing the new Prime Minister has achieved is making a disorderly Brexit appear much more likely. Therefore, businesses must continue to prepare for such an outcome. Here at Expense Reduction Analysts, we have been helping major UK businesses free up capital for Brexit by streamlining their supply chains. Our expert cost reduction consultants have worked across a range of industries and can help reduce your expenses in a variety of cost areas. It is vital, now more than ever, that companies don’t take their eye off the potential Brexit storm. If you are looking to create new capital or refine your supply chain management ahead of 31 October, get in contact with our team today.