It seems like a very long time since the then Chancellor, George Osborne, warned in January 2016 of a dangerous “cocktail of risks” facing the UK economy.
The British Chambers of Commerce (BCC) echoed this, citing volatile stock markets, plummeting commodity prices, a potential slowdown in China, a poor 2015 Christmas for retailers and uncertainty about the outcome of the referendum on the UK remaining in Europe.
March brought news of Tata Steel’s decision to sell off or close its UK steel operations, prompting fears for hundreds of jobs particularly in Port Talbot, Wales. While by November Tata had announced it had agreed a deal with the various trades unions over Port Talbot, possibly safeguarding an estimated 8,000 jobs, the outcome is not yet 100% certain.
In April came news of yet another large retail collapse, this time BHS.
In the run-up to the June EU referendum there were signs of a marked slowdown in investment decisions, coupled with worries about skills shortages if restrictions should be imposed on overseas recruitment.
In June, of course, the outcome of the referendum was a majority in favour of leaving the EU and the first monthly Markit Purchase Managers’ Index (PMI) immediately thereafter showed that the UK economy had been shrinking at its fastest rate since 2009 with confidence in both manufacturing and services falling below the benchmark of 50.
The decision also precipitated a massive devaluation of £Sterling by 15% against the $Dollar and by 10% against the €Euro, which benefited exporters but was predicted to eventually feed through into higher prices for imports and increased inflation. In response, the Bank of England further reduced interest rates.
Another indication of slowing global economic growth came in September with the collapse of the South Korean company Hanjin Shipping, the world’s seventh largest container company.
However, on the whole business activity post-Referendum showed no marked signs of contraction and by November the monthly Markit PMI index was showing upward trends in activity in Construction and Services. But just this week the BCC was warning that the “business as usual” approach that had so far prevailed since was unlikely to last and that business optimism was “continuing to fall”.
At the same time, quarterly reports on business insolvencies have remained steady, showing only statistically insignificant increases.
Also in November Donald Trump won the US presidential campaign, prompting yet more concern and uncertainty, particularly about the impact on other economies, including the UK’s given his notably “protectionist” views as stated during the campaign.
What was 2016 like for SMEs?
The measures introduced in the 2015 Small Business, Enterprise and Employment Act started to come into force with April deadlines for UK companies to compile PSC (Persons with Significant Control) registers. There were also changes to the taxation of income received from share dividends with the introduction of a new tax-free dividend personal allowance.
Pension Auto-enrolment continued and there was another potential worry for SMEs with the government’s proposals for businesses to file quarterly tax returns.
There was one bit of potentially good news in the April budget, when the threshold for business rate tax relief was increased to £15,000, which may be good news for small High Street retailers, once the outcome of September’s rates revaluations become clearer.
A change of regime in Government produced some recognition of the difficulties for SMEs with the new Chancellor, Philip Hammond’s Autumn Statement, promising extra investment in local transport and digital infrastructure as well as Rural Rate Relief being increased to 100%. But business costs are also mounting with increases in the national living wage, insurance premium tax and changes to NI rates.
The 2016 picture will not be complete, however, until the Christmas retail trading figures and the next set of quarterly insolvencies are revealed sometime in January 2017.