Navigating the UK’s uncertain business outlook

Michael Queenan at Nephos Technologies explains what the latest announcements from the UK government mean for business

 

As British businesses brace themselves for trading downturn, I can’t help but reflect on how we ended up here and the lessons to be learned. Fast hopefully.

 

Business leaders have entered the new year off the back of the Autumn Budget, which to put it plainly, was a massacre for businesses. With higher taxes, raised National Insurance contributions and more employment directives to comply with, is it surprising that business leaders may be feeling pessimistic about the year ahead?

 

As co-founder and CEO of a British technology company, the impact these new measures could have on our industry and the wider business community concern me. Our government must understand that economic recovery does not happen in isolation. Small businesses are the lifeline of this country. They need private enterprises to create job opportunities and drive economic growth.

 

The fact of the matter is that there isn’t a single policy that came out of the Autumn Budget that will help entrepreneurs and small businesses. The UK needs to encourage and support entrepreneurs to start and grow businesses in order to grow the economy.

 

However, by increasing capital gains and inheritance tax, freezing tax brackets and increasing employer National Insurance contributions, the government turned off the very tap it desperately needs to turn on. Raising the minimum wage is the final nail in the coffin. For businesses with small margins, how are they supposed to survive?

 

There is also no longer incentive for entrepreneurs to start a business in the UK. In today’s globalised world we’re competing with wealthy countries who are offering 0% corporation tax, 0% income tax, and 0% capital gains tax. Why would you start a business in the UK if your hard work is going to be worth less when you want to take the value from it? Where is the incentive to take  risk? And then your family gets hit by more taxation when you pass it to them?

 

The government is killing ambition and chasing out the few entrepreneurs that are left in the UK.    

 

A further hurdle: the Employment Rights Bill

Policies announced in the Employment Rights Bill are another area for concern. The right for all employees to request flexible working arrangements is one of the most alarming aspects. This initiative threatens to introduce significant logistical challenges for companies. The need to maintain adequate coverage across all working days will likely force businesses to hire additional staff, pushing operational costs even higher, which will inevitably lead to price rises. 

 

The government’s well-intentioned but misguided push for worker-centric policies also misses a crucial point: flexibility for businesses is paramount in today’s interconnected, global marketplace. UK companies already face stiff competition from international firms, particularly in outsourcing-heavy industries where large contracts are won based on cost efficiency and flexibility. Additional employment restrictions will only make it harder and could lead to a decline in contract opportunities. 

 

In a technology-driven world where global competition is fierce, these changes make little economic sense and could put UK firms at a distinct disadvantage compared to international rivals who are not bound by red tape. 

 

The UK on a technological global stage

AI is another area in which the UK is competing on a global stage. With Trump now inaugurated as President and already having issued a flurry of executive orders and announced his AI plan, the UK needs decisive leadership on this front. 

 

Whilst the government has at least started to address AI with its new AI Action Plan, I do question how effective the plan will be at achieving its aims. I fear it is just an announcement full of buzzwords that is all style and no substance. 

 

To put it into perspective, both China and the US have over 200 supercomputers. What will the UK achieve in spending so much money on just one? Spending that money on specifically tailored and targeted programmes would deliver way more benefit to a broader population than one supercomputer that a very small handful of people would use. 

 

It is positive to see the government recognising AI to help the NHS in the plan, but the measures laid out in the plan are unlikely to ever become a fast reality because trade unions will fight it to protect jobs. The best we will see is AI having a first stab at diagnosing conditions like cancer and doctors having a second look to diagnose. But without removing it from a doctor’s workload completely, no efficiency is being created.

 

AI could be revolutionary in reducing waiting times if it is used to enhance GP functions and can identify symptoms and prescribe the right drugs. That is the opportunity that the government should be looking at. 

 

The outlook for 2025

From a business perspective the first six months of a new government in the UK have been very negative. However, I anticipate a shift in messaging as we move through 2025, with the government repositioning itself as more business-friendly.   

  

The real test will be in their actions, not their rhetoric. We need meaningful steps to be taken to demonstrate genuine support for the business community. The government must understand that economic recovery does not happen in isolation.

 

Businesses are the engine of the economy, and without policies that encourage investment and growth, the economy will continue to stagnate. It’s time for decisive action and for the government to show they value the role of business in driving national prosperity.

 

---

 

Michael Queenan is CEO and Co-Founder of Nephos Technologies

 

Main image courtesy of iStockPhoto.com and studiostockart