General Election 2015… The results are in, but what does it mean for business?

From an economic perspective, all the pundits were saying that regardless of the ‘who’ a clear (no matter how small) majority result for either party would be much more stable than a hung parliament and another unaligned coalition. So it would seem that this much anticipated election, which no-one could call and the result of which surprised many on all levels, has been cautiously well received by the business community on the whole.

But what does it mean in real terms over the next 5 years?

Small Business Act

If the Government delivers on its manifesto, there are many initiatives to support the growth of start-ups and owner managed small to medium sized enterprises including:

  • increased investment opportunities available to small enterprises;
  • review of the ‘red tape’ regulations that currently stand in the way of innovation;
  • abolishing national insurance contributions for all employees under 21 years of age, and apprentices under 25;
  • a threefold increase in the current start-up loan programme, enabling entrepreneurs to borrow up to £75,000;
  • greater resources to be committed to the technology sector, with the aim of strengthening the UK’s digital economy;
  • likely postponement, cancellation or at least favorable alteration to the reduction in the annual investment allowance, which had been due to drop in January 2016 from the current £500,000 allowance to a mere £25,000

What about the Northwest specifically?

The conservative leadership also promised a rebalancing of the economy to build a ‘northern powerhouse’, with James Wharton as its minister.

Speaking in Manchester today, the chancellor said the “old model” of running everything from London was “broken” and had unbalanced the economy. The hope is to redress this North-South economic imbalance, and to attract investment into northern cities and towns, which boast strong manufacturing, science, technology and service sectors. Greater Manchester will be run by an elected mayor from 2017, as part of plans announced in November to devolve fiscal power closer to the point of spending.

Yesterday’s announcement that Jim O’Neill is to be the man to drive the Northern Powerhouse was welcomed by business leaders across the region, with Chris Fletcher, director of policy at Greater Manchester Chamber of Commerce,  quoted in this morning’s MEN saying: “The appointment of Jim O’Neill to the Treasury team sends a very clear message that the Government means business and will put its money where its mouth is.”

And what about the impact on your individual finances?

With a conservative majority in power it is unlikely that we will see any significant changes during the course of this tax year, however good practice would suggest one should take advantage of what is on offer now, as it may not be available next year, specifically regarding…

Pensions:                

Tom McPhail, head of Pensions Research at Hargreaves Lansdown, has warned Higher-rate Taxpayers to take advantage of Tax Relief on their Pension contributions, while they still can, stating, “further changes to Pension Taxation seem inevitable, particularly for higher earners. In particular, given the manifesto proposals, anyone with plans to make Pension Contributions in the immediate future and particularly those paying higher rates of tax should consider acting sooner rather than later.

Savings:

Other items of interest are predominantly those already announced in the March 2015, with more options for savers, many of whom feel they have been unfairly penalised in recent years by the low interest rates:

Interest on Savings:

  • From April 2016, 95% of UK taxpayers will no longer have to pay tax on savings interest at all. In the recent Budget, George Osborne announced the introduction of the annual Personal Savings Allowance that will make the first £1,000 of interest earned from savings completely tax-free for Basic-Rate Taxpayers from April 2016. Effectively this means that you would have to have £50,000 in an account paying 2% to generate £1,000 of interest (gross) a year. Higher-rate Taxpayers will also have an allowance at the lower figure of £500.

New ISA opportunities:

  • Again, as announced in the recent budget, the new peer-to-peer and help-to-buy ISAs are likely to stay, although it is still unclear exactly how the former will function.

Investments

The rest of the economic world, does appear to view the tory victory as a positive result, giving the UK a strong, stable government for the next five years, therefore those of you investing in the markets should have seen a recent increase in the value of those investments as a result. Some might say this is a long overdue ‘bonus’ for savers, with inflation remaining at an all-time low.

Property

Again, experts see the election result as optimistic for the housing sector and are forecasting house price rises and a significant increase in activity in the market. The biggest potential risk being a return to the early-mid 2000s, which saw housing prices spiral out of control and beyond the affordability of most. We all know how that ended…

 

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