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Will your clients be affected by the election?

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With an election on the horizon, your clients may be nervous. So now is the time to offer some business coaching around strategic decision-making to help them continue to grow.

16th Jan 2024
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Last weekend seemed to signal the launch of the newspapers making predictions about the general election and when it will be. Opinion varies between May 2024, early or late October 2024, or the last date it can be in January 2025.

A survey of the accountancy firms in the Corporate Finance Network (CFN) at the end of 2023 found that 80% expect the general election will have some impact on the economy and the confidence of business owners to conduct deals. 

Assuming the election was Q4 or later, 46.7% of respondents thought companies would be more nervous from Q1 or Q2, whereas 33.3% thought they would be more nervous from Q3 or Q4. 

Will the opinion polls be correct?

Reading articles around the build-up to the last general election in December 2019, you’d be forgiven for thinking time had stood still. The Office for National Statistics (ONS) then reported about October 2019 that “a broad swathe of the UK’s industrial sectors struggled in the autumn months to leave GDP growth at zero”. 

However, this poor state of affairs did not deter voters enough to change government and the Conservatives won the election, as opinion polls had largely predicted. 

This time the opinion polls almost unanimously (at present) predict a Labour win, which would mean we could have the first change of controlling party in government since 2010. 

What does this potential change mean for business?

Whether the political situation affects the economy after the election, largely depends upon the reaction to the result of the vote and whether the markets and company owners believe this will be a positive move for the country.

The pledges around economic growth and fiscal policy, and subsequent Budget from the Chancellor, will determine whether investors and businesses are confident to make investment decisions and to take risks to build the economy in this country. 

The Liz Truss and Kwasi Kwarteng era, dubbed “Trussonomics” showed how impactful the markets can be if they don’t approve of the Downing Street partnership. 

Impact during the build-up

However, the nervousness extends for months before the actual election, as the CFN survey shows. The announcements at the forthcoming Budget in early March 2024 may be short-lived if there is subsequently a change of government and this brings uncertainty, which leads most businesses to freeze on major decision-making. 

When Parliament is dissolved, to allow for the campaigning, all business in the House of Commons and House of Lords comes to an end. Any legislation that is partway through the process of readings and stages, could be abandoned if there is a new party in control. 

At the time of writing, there are currently 151 public bills at various stages of debate. Some sectors are waiting for the outcome of these and they can have major impacts on the direction companies take.

For example, when the coalition government scrapped home information packs in 2010, several thousand would-be assessors who had trained to become home inspectors, lost their livelihoods. Businesses that had set up in the ecosystem to support that product became insolvent and the sector changed virtually overnight. The power of legislation affects businesses large and small.

How do you work with clients this year?

Tax planners are used to the uncertainty around the existence of tax reliefs and each year advise their clients accordingly. Every year there is a flurry of activity towards the end of March, as entrepreneurs are nervous about potential changes to capital gains tax and wish to crystallise their gains and taxes on the current policy.

As accountants spread their wings to more advisory work, a similar approach will need to be taken. Bear in mind that clients may become increasingly nervous as the year goes on and the media increases their coverage of the pending election. 

Bain and Company, the US consulting firm, recommends that, rather than freeze, leaders can remain proactive, with the following decision-making process in uncertain times.

  1. Define which uncertainties the company faces and cut through the noise by separating them into those that matter and those that don’t.
  2. Create a set of probable scenarios for how the future might unfold and discuss the threats – and opportunities – that these scenarios present.
  3. Devise a specific set of strategic options that balance commitment to a course of action, with the flexibility to adjust and thrive amid different future scenarios.
  4. Identify a clear set of signposts that will signal important changes in the marketplace and trigger a set of actions already foreseen during the scenario-planning process.

If you want to ensure that your clients don’t drift from Q2 onwards, perhaps offer some business coaching around strategic decision-making and help them to continue to grow – whatever the outcome of the election, and whenever it finally happens.

Replies (18)

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By johnjenkins
17th Jan 2024 09:36

Kirsty, it won't make an iota of difference as to who is in power. Until you get someone like Farage it's going to be "same old, same old".

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Replying to johnjenkins:
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By Kirsty McGregor
17th Jan 2024 16:38

My concern this year is more around business owners feeling uncertain in the run up to the GE & then blaming that concern on avoiding decision-making to aid growth.
We’ll tackle the issue of impacts from the next Government if it happens :)

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paddle steamer
By DJKL
17th Jan 2024 10:12

I cannot see how one can wargame the possibilities, has any party yet announced their future policies in any detail? Frankly all will likely keep their powder dry until nearer the date to avoid policies :

a. being ripped apart for months on end.
b. avoid policies becoming stale.

Still, Rwanda vote could at least prompt yet another Conservative leadership change or even a GE (I doubt the latter), so could be an exciting week or so. (IMHO more likely to end up as a fudge with Conservative Right not going through with vote against own party, but who knows, they are possibly mad enough to shoot themselves)

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By petestar1969
17th Jan 2024 10:32

Well, if Starmer (aka Blair 2.0) gets in I don't see it making any difference. Blair was right wing, more so than Thatcher, and Starmer is pretty similar. Right wing policies work, every so often we let Labour have a go, but essentially everything stays the same.

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Replying to petestar1969:
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By DJKL
17th Jan 2024 11:51

I would have said more centrist though of course one can only decide the centre with reference to the edges and where they at that point sit.

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Replying to DJKL:
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By johnjenkins
17th Jan 2024 13:29

"stuck in the middle with you"?

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Replying to johnjenkins:
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By DJKL
17th Jan 2024 15:31

Ah, Gerry, someone I have appreciated more and more as I age (I love the City to City album.)

He fits in with Deacon Blue , Proclaimers, Texas, Mackenzies, Waterboys and Runrig on my Best of Scottish Playlist (I also have some SAHB and AWB though possibly Waterboys and AWB are maybe a bit of a cheat being claimed as Scottish, to a degree they are like adding in AC/DC)

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Replying to DJKL:
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By johnjenkins
17th Jan 2024 15:54

Say what you want, I like Lulu.

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Replying to DJKL:
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By FactChecker
17th Jan 2024 19:16

+ Stone the Crows with of course Maggie Bell for me
And if you're prepared to travel back to mid-'60s, the Poets are up there with the best in raucous rhythms (although you'll need nearly a grand to buy their 'In Your Tower' single!),; or the wholly different and unique Incredible String Band.
If you prefer a gentler, introspective style (and don't fancy leaving the current century) you could try almost anything on the Fence record label.
And in between those times ... you mention Texas and the wonderful Sharleen, but not Shirley Manson (although I'll admit the rest of the band weren't Scottish).

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Replying to FactChecker:
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By DJKL
17th Jan 2024 21:58

Shirley was in the Mackenzies that I listed, she is from my neck of the woods, Comely Bank, Edinburgh, but was about 6 years younger than me so we did not overlap at Broughton High School though I may have served her at the local hotel where I worked until I was 24.

https://www.youtube.com/watch?v=iDoNutREuO8

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By Husbandofstinky
17th Jan 2024 13:35

I don't believe that a change in a political party in power is a given. The only poll that counts is on the day itself.

Given the recent geographical constituency changes (which helps the Tories out no end), Labour would have to have a swing even greater than Blair did back in 1997 to have an outright majority.

Manifesto's are nowhere to be seen yet obvioulsy and even then there are not exactly gospel. The Tories 2019 fails, getting Brext done, 40 new hospitals, points based migration system and tougher sentencing....

No matter what happens it will be the same centrist going nowhere fast drivel. All to scared to rock the boat and bust the Westminster bubble. Trussonomics is of course not a too distant memory should anyone have the remotest of radical thoughts.

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Replying to Husbandofstinky:
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By Kirsty McGregor
17th Jan 2024 16:40

The uncertainty during the build-up can unfortunately be more damaging than the actual result - whoever wins

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By Kirsty McGregor
17th Jan 2024 18:14

I notice Mazars have just issued a report on the exit plans of 250 UK companies.

70% are considering a business sale & 32% of those state it’s due to political instability.

Some business owners go through life in a bubble, hardly considering their strategy. But the better ones look upwards & outwards. And it’s these who are in that cohort, which is worrying for me (& should be for the Chancellor too).

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Replying to kirstymcgregor:
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By FactChecker
17th Jan 2024 18:46

But CEOs (and those business owners that pretend to more than running a 'lifestyle company') are prone to reaching into the grab-bag of phrases acceptable to their compadres ... and 'political instability' is just but one of those.
[BTW 'lifestyle company' isn't the insult it's sometimes taken to be; I was always happy to operate under that banner - successfully for 30 years, until selling-up 2 years ago.]

If pushed, most will explain that by 'political instability' what they really mean is a financial / taxation environment that chops & changes at short notice (often like a friendly fire impact from warring politicians).
But that has nothing much to do with the relatively imminent GE.
From at least 2008 onwards (and often for reasons not primarily of pure politics), the financial framework has suffered constant buffeting (much globally but some locally induced) - with far too many short-term decisions (often cack-handed in their implementation) and rapid 'reverse ferrets'.

I guess what I'm pointing out is that *any* result in the GE (whether single party majority or coalition) is unlikely to lead to the calm waters envisaged by these unhappy owners.
And, speaking for myself, the opportunity to move into my 7th decade free of all responsibilities for welfare of both clients and staff (as well as avoiding the nightmare of regular meetings with the wounded beast that HMRC has become) ... was not a hard decision.

In this febrile environment (and a greater sense within the next generation or so that there's more to achieve of value than capital growth), there is little incentive to take it all too seriously. Have some fun, before it's too late to enjoy it!

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Replying to FactChecker:
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By DJKL
18th Jan 2024 14:14

Just take the view of one of my employers, they have been in business since the 70s, have endured everything politics can throw at them (ERM throwing rates so high the business ought to have died) , and he just does not bother to vote and considers all of them incompetent *****

I think I now support his view, just ignore them, ride it out, keep making money.

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Replying to DJKL:
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By johnjenkins
19th Jan 2024 09:09

What's the old saying. "Don't let the b......s grind you down"

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Replying to johnjenkins:
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By DJKL
22nd Jan 2024 21:52

In cod latin, please,"Illegitimi non carborundum"

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Replying to DJKL:
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By johnjenkins
23rd Jan 2024 10:31

"fishy, fishy, fishy"

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