Businesses hoping for a shot in the arm sorely disappointed

Businesses hoping for a shot in the arm sorely disappointed.

Following the Prime Minister’s speech at the Conservative party conference on 6 October, Nigel Morris, employment tax director at MHA, a network of independent accountancy firms, argues Boris Johnson’s vision of a high wage economy, while a worthy long-term goal, does little to address the problems many sectors are currently facing:

“Businesses grappling with the supply chain crisis, labour shortages and soaring costs look very unlikely to get a shot in the arm from this government, despite much pleading. The Prime Minister didn’t offer one in his speech today, so the Chancellor likely won’t in his Autumn Budget on 27 October.

“The trouble is Boris Johnson’s dream of a high wage, low tax country, with greater investment in skills and productivity will certainly take a very long time to deliver. In the short-term we will see rising wages in certain areas – such as logistics and retail – but many companies simply aren’t in a position to put the Prime Minister’s vision into practice. If they do feel they must raise wages, we could see this being prioritised over investment and training rather than complementing them because margins are tight. In addition, if investment in infrastructure, training and higher wages happens too quickly it will put further pressure on businesses to increase prices and raise the general cost of living.

“Companies that do raise wages though need to think carefully about how they go about this. Many will find their financial situation requires they ensure the overall impact of a rise in the wage bill is minimised. A danger when implementing pay rises is that increases for junior staff end up rippling up the whole organisation. Businesses are likely to want to stop this happening and so might use more tax efficient rewards and benefits to remunerate higher ranks, confining wage rises to the lower rungs of the company hierarchy.”

Businesses hoping for a shot in the arm sorely disappointed.

Following the Prime Minister’s speech at the Conservative party conference on 6 October, Nigel Morris, employment tax director at MHA, a network of independent accountancy firms, argues Boris Johnson’s vision of a high wage economy, while a worthy long-term goal, does little to address the problems many sectors are currently facing:

“Businesses grappling with the supply chain crisis, labour shortages and soaring costs look very unlikely to get a shot in the arm from this government, despite much pleading. The Prime Minister didn’t offer one in his speech today, so the Chancellor likely won’t in his Autumn Budget on 27 October.

“The trouble is Boris Johnson’s dream of a high wage, low tax country, with greater investment in skills and productivity will certainly take a very long time to deliver. In the short-term we will see rising wages in certain areas – such as logistics and retail – but many companies simply aren’t in a position to put the Prime Minister’s vision into practice. If they do feel they must raise wages, we could see this being prioritised over investment and training rather than complementing them because margins are tight. In addition, if investment in infrastructure, training and higher wages happens too quickly it will put further pressure on businesses to increase prices and raise the general cost of living.

“Companies that do raise wages though need to think carefully about how they go about this. Many will find their financial situation requires they ensure the overall impact of a rise in the wage bill is minimised. A danger when implementing pay rises is that increases for junior staff end up rippling up the whole organisation. Businesses are likely to want to stop this happening and so might use more tax efficient rewards and benefits to remunerate higher ranks, confining wage rises to the lower rungs of the company hierarchy.”

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