Picture by Pippa Fowles / No 10 Downing Street.
The Covid health emergency is far from over, but UK Chancellor Rishi Sunak has warned that the “economic emergency had only just begun”.
Private client professionals agreed that yesterday’s (26/11/2020) Spending Review was “naturally subdued” and highlighted a set of worrying figures on the state of the UK’s finances.
UK GDP will fall 11.3 percent this year – the largest fall for 300 years and the economy won’t return to pre-crisis levels until Q4 2022. Even then, the economy will be three percent smaller in 2025 than expected at the March Budget.
Unemployment is predicted to hit 7.5 percent next year with 2.6 million out of work and should come down to 4.4 percent by the end of 2024.
The UK government has borrowed £394 billion in 2020, of which £280 billion has been used for the fight against coronavirus.
The Chancellor acknowledged that while this is a high cost, “the cost of inaction would have been far higher.”
Jessica Jamieson, partner at law firm Cripps Pemberton Greenish, said: “Whilst the spending review was never intended to give any detail on changes to tax rates, and did not do so, it is clear that such a gloomy forecast has laid the ground for tax rises in the future.”
She also drew attention to the government’s focus on immigration and attracting talent, both after the pandemic and Brexit.
"A new points-based immigration system was also announced, to ensure the UK’s economy is ready to attract the ‘best and brightest’ from around the world. We await the detail of this to see how this may impact on individuals looking to come to the UK, and it remains to be seen whether this will have the hoped-for boost to UK businesses,” Ms Jamieson explained.
She wasn’t the only one thinking about Brexit, or the lack of its mention in the review.
Robert Salter, a director at accountancy firm Blick Rothenberg, said: it is “sad” there was no mention of Brexit in the speech, “despite the problems this will cause to the British economy and the very real additional costs that will arise for British firms in a number of areas.”
From the loss of access to EU labour for those companies in sectors which rely on it – notably the already hard-hit hospitality industry – to the double social security costs arising for businesses with UK employees active in the EU, this speech represents “a lost opportunity to help businesses – especially smaller businesses handle the delays and additional...
