How the upcoming general election could impact your business, plus practical advice for trustees from the Charity Commission
Whilst we have no desire to influence your voting decision at the upcoming general election, we discuss key considerations which may impact your business under a potential new government. We also share advice for trustees of charities in the event of disagreements.
How a general election can affect your business
The news is currently full of reports on the general election, so much so that you may be inclined to switch off rather than hear any more about it!
Of course, we have no wish to take sides or promote the views of one party over another. However, regardless of what happens and who eventually wins, a general election represents a significant event that can shape the economic landscape of a country. For your business, these elections bring about a period of uncertainty and potential change.
Let’s pick apart some of the factors it is worth looking out for so that you can be prepared for any potential changes.
Economic Policies and Regulation
One of the most direct ways a general election affects businesses is through changes in economic policies and regulations. When talking about economic policies we’re usually referring to tax and government spending.
Broadly speaking, policies that favour lower business taxes and deregulation can often boost business investment and growth. Conversely, policies that focus on increasing tax and bringing in more stringent regulations may mean higher costs for businesses but increase government spending that may benefit the economy and your business in a different way.
Key Considerations:
- Taxation: Changes in the company tax rates will directly affect a company’s profitability. Lower taxes generally increase net income, while higher taxes reduce it.
- Regulations: Alterations in employment laws, environmental regulations, and industry-specific standards could make it easier or more complicated to run your business.
Market and Consumer Confidence
General elections can significantly influence market and consumer confidence. The period leading up to an election often brings uncertainty, so businesses and consumers delay spending money while they wait to see what the outcome is.
Key Considerations:
- Investment: Businesses might delay major investments or signing off on purchase orders until after the election. Once they have a clearer picture of what future policies are likely to be, they may revisit spending and investment decisions that haven’t been committed to yet.
- Consumer Spending: Consumers may become more cautious, reducing their spending. This can particularly impact retail and service-related businesses.
Currency and Financial Markets
Elections can also impact financial markets and currency values. Investors react to the anticipated and actual outcomes of elections, which can lead to volatility in stock markets and fluctuations in currency exchange rates. For businesses, especially those involved in international trade, such volatility can affect profit margins and pricing strategies.
Key Considerations:
- Stock Markets: Election outcomes perceived as business-friendly may lead to market rallies, while those seen as unfavourable could cause market declines.
- Currency Values: Changes in government policies on trade, fiscal stimulus, and economic management can lead to currency appreciation or depreciation.
Public Spending and Infrastructure
Government spending priorities can shift significantly with a change in administration. A new government may prioritize different sectors for public spending, impacting businesses associated with those sectors. For example, increased spending on infrastructure can benefit construction companies, while cuts in public services might adversely affect healthcare providers.
Key Considerations:
- Infrastructure Projects: Businesses in construction and related industries may see new opportunities open up to them.
- Public Services: Businesses providing services to the government may experience changes in demand based on shifts in public spending priorities.
Employment Market
The employment market is another area where general elections can have a profound impact. Policies on minimum wage, worker rights, and immigration can affect costs and your ability to recruit the right workers for jobs.
Key Considerations:
- Wage Policies: While a further imminent increase seems unlikely, changes in the policies around minimum wage laws could increase employment costs for businesses. Businesses in low-margin industries can be particularly sensitive to these changes.
- Immigration Policies: Adjustments in immigration laws can affect the availability of skilled and unskilled labour, with knock-ons to your recruitment strategies and employment costs.
Conclusion
General elections are pivotal events that can have wide-ranging effects on businesses. However, by understanding the potential effects on your business you are better able to proactively plan and make adjustments so that your business continues to grow and enjoy stability.
If you have questions about how any proposed policy could affect your business or tax situation, please do not hesitate to call us. We will be happy to help you!
Advice for charities to concentrate on their positive work
The Charity Commission has recently concluded its regulatory compliance case into the Actors’ Benevolent Fund and has drawn out some lessons that can benefit all charities.
The case was opened in February 2022 over concerns about how the Fund was being governed and its financial controls. There were significant disagreements about how trustees were appointed to the charity’s board as well as how they were removed or retired from it. Needless to say, these disagreements have been very disruptive to the charity and its ability to deliver on its charitable aims.
As a result, the Charity Commission are advising trustees of all charities to consider how they can avoid disputes over trusteeship and, where they do arise, how a disagreement can be handled while minimising the impact on the charity.
They have advised trustees to:
- Check that the charity’s governing document is fit for purpose and not open to differing interpretations. It should particularly be clear on how to appoint trustees and honorary roles. The Charity Commission provides guidance that will allow trustees to do this.
- Ensure good practice on governance essentials. This includes running effective meetings and being clear on how to appoint or elect trustees in line with the charity’s governing document.
- Ensure trustees are regularly rotated. The Charity Governance Code recommends a rigorous review of the reappointment of any trustee who has served for nine or more years.
- Ensure that decision-making and governance processes are transparent. Taking minutes at meetings helps to protect a charity when there’s an internal dispute or external critics on a decision made.
The Charity Commission has acknowledged that disagreements can occur but encourages trustees to never lose sight of the best interests of the charity as a whole or the good work it does for those that rely on it.
As implied by the points made above, the Commission found that the Actors’ Benevolent Fund had an unclear governing document and had insufficient financial policies which had contributed to the dispute. The charity’s governing document has since been updated and a new board of trustees was appointed by election in January this year.
While the Charity Commission cannot referee differences of opinion between trustees, this case demonstrates that they can step in and appoint trustees where they feel it’s required.
The wider lesson then is not to allow a disagreement to spoil a good thing!