The home delivery expert ParcelHero says UK businesses, from retailers to manufacturers, are bracing themselves for what could be a roller-coaster ride, as new Prime Minister Liz Truss takes over.
The new PM takes office against a background of economic turmoil following Brexit, the pandemic and soaring energy and food costs.
During her brief speech when confirmed as leader of the Conservative Party, Ms Truss said: ‘I know that we will deliver, we will deliver and we will deliver.’
ParcelHero’s Head of Consumer Research, David Jinks M.I.L.T., said, ‘As delivery experts ourselves, we know that successful delivery is about consistency and careful planning.
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‘Liz Truss was previously Foreign Secretary and – perhaps significantly for UK businesses – International Trade Secretary. The new Prime Minister has given mixed signals to business during her Conservative Party leadership campaign.
‘Liz Truss is well-known to be a free-marketeer at heart and clearly wants to introduce tax cuts as soon as possible. However, with the economy under severe stress, it’s believed her team has been working on a support package for energy bills for some weeks.
Indeed, her likely new Chancellor, Kwasi Kwarteng, has told the “Financial Times” that a government led by Ms Truss will borrow more to help people this winter.
‘The concern for many British business leaders is that tax cuts at a time of increased government spending sounds like an exercise in squaring the circle that could put further strains on the economy.
‘In recent weeks, PM Truss has given some significant clues about her future key business policies, some of which follow her tax cutting agenda, but others imply further financial support:
Freeze to energy bills
‘Early in her campaign, Ms Truss was notably less enthusiastic about helping households and small businesses with energy bills than her opponent, Rishi Sunak. She ruled out a windfall tax on energy companies to fund a cap on prices. It now seems that, rather than take money off energy companies, she is proposing to loan them money to fund a payment freeze. Energy sector companies will be sighing with relief at this potential solution. The good news for SME businesses is that any freeze in energy prices may now include business customers as well as domestic ones.
Brexit/ NI Protocol
‘Ms Truss kicked off her stint as Foreign Secretary by saying that she supported a negotiated settlement with the EU over outstanding Brexit problems, particularly the thorny issue of how shipments are processed between Great Britain and Northern Ireland.
However, Ms Truss later angered the EU by tabling legislation that unilaterally scraps part of the arrangements, in a bid to limit any checks on goods between the two countries. UK-EU exporters are unlikely to see an improvement in red tape and restrictions if we are forced into an open trade war.
‘However, in her former role as Trade Secretary, Ms Truss was instrumental in introducing to Parliament the Trade Act 2021, which established the legal framework for the UK to conduct trade deals with nations around the world. She also negotiated a pioneering Free Trade Agreement with Japan and a number of other countries.
Corporate tax cuts
‘Ms Truss’ plans to cancel the increase to corporate tax from 19% to 25% will boost UK corporate earnings, easing the pressure on some organisations. However, this could also decrease an important Government income stream that could have been used for funding further business support. It’s another example of how her premiership will have to try and square the circle.
‘More universally welcome will be her plans to simplify IR35 tax rules for self-employed workers.
Business rates cuts
‘Ms Truss eventually followed Sunak’s lead in proposing much-needed relief to the UK’s eye-watering business rates for smaller companies. Ms Truss is considering raising the threshold for relief from business rates from the current rateable value of £15,000 to £25,000 – a move that her team believe will help around 200,000 businesses.
‘However, those SMEs that occupy properties with slightly higher rateables values, and there are many, will miss out on this relief.
‘Liz Truss is reportedly considering cutting value-added tax (VAT) by 5 percentage points across the board to help tackle the cost-of-living crisis. That would reduce VAT from 20% to 15%. This move alone is unlikely to encourage a High Street spending boom, however.
Green energy levy cuts
‘Liz Truss has called for green levies to be temporarily halted on energy bills. However, these levies help pay for greener energy schemes. Renewables are now the cheapest way of generating power in the UK. Defunding investment now seems a regressive move, as do plans to reintroduce fracking in the UK.
‘Liz Truss seems less enthusiastic than her predecessor on the ‘levelling up” agenda. However, she has made a public pledge to support Northern Powerhouse Rail. This is a scheme to improve rail connections between Liverpool and Leeds. The new PM said recently: “What I want to see is really fantastic rail services and better roads, so people are able to get into work.”
‘Ms Truss is also expected to halt the introduction of new smart motorways and may even scrap existing ones where there is no hard shoulder. Conversely, she is also reportedly considering raising the blanket 70mph speed limit on some sections of motorway.
‘The logistics industry supports initiatives to make the UK’s roads safer and reduce needless delays. However, as leaders in the greening of Britain’s businesses, many transport and delivery companies will be concerned about the environmental impact of some of these proposed changes.
‘The challenges facing UK businesses, particularly its retailers, are severe. We’ve learned from the former Culture Secretary, Nadine Dorries, that Ms Truss is a canny shopper, allegedly spending just £4.50 on Claire’s Accessories earrings, but little about Ms Truss’ true plans for retail.
‘For further information on the plight of retail, ParcelHero’s influential report “2030: Death of the High Street” has been discussed in Parliament. It reveals that, unless retailers develop an omnichannel approach, embracing both online and physical store sales, the High Street as we know it will reach a dead-end by 2030.