Following the election result, which was closely followed by all businesses – and not just those involved in the supply chain — and the subsequent formation of the coalition government, the Conservatives and Liberal Democrats have had to sit down with each other and reach agreement on how to move forward in all sorts of areas.
This has involved both parties dropping manifesto/policy commitments and making compromises, although in other areas, the parties had similar plans. So, what has the coalition proposed for business and how will it (at least in general terms) affect businesses in the supply chain? Here are four ‘thoughts to ponder’.
1. TACKLING RED TAPE
Before the election, both the Conservatives and Liberal Democrats promised to tackle red tape, including imposing a “one-in-one-out rule” for new regulations. This rule will now be implemented. They have also agreed to scrap the culture of “tick-box regulation” enforcement and will introduce “sunset clauses” (a Liberal Democrat policy), so that rules will expire if they are not reviewed. Finally, the Government will scrap the “gold-plating” of European legislation (i.e. the transposition of EU legislation into English law going beyond what is required by that EU legislation). In other words, this should now mean less regulation and, therefore, fewer costs on business. In an environment of higher taxation (which would have been the case whichever party had won the election) and potential drops in turnover as people at the end of the chain have less money to spend, any possibility of reducing costs, therefore increasing margins, must be welcome.
2. BUSINESSES
The Government aims to encourage new start-ups by reducing the number of forms needed to register a new business, so that Britain becomes the fastest place in the world to start a business (Conservative policy). This policy would certainly make it easier to start a supply business and Chinese manufacturers are already rubbing their hands in glee at the potential supply possibilities. On the other hand, everyone expects fuel costs to rise further.
3. TAKEOVERS
The Government “will review the range of factors that can be considered by regulators when takeovers are proposed”. There are currently no further details. The Conservatives’ manifesto did not explicitly deal with takeovers, but the Liberal Democrats promised to ensure that the takeover rules restored a public interest test, so that a broader range of factors, other than competition, would be considered by regulators when takeovers are proposed. This will probably not affect any consolidations that were going to happen anyway in the market.
4. OPERATING AND FINANCIAL REVIEWS
The Government will reinstate Operating and Financial Reviews “to ensure that directors’ social and environmental duties have to be covered in company reporting, and investigate further ways of improving corporate accountability and transparency” (Liberal Democrat policy). These Reviews were originally proposed, but then dropped, by the Labour Party in 2006.
As energy policy, green credentials andhow suppliers and distributors get their products to where they have to be, is very much in vogue, it is interesting that directors are now going to be held directly to account as to the social and environmental duties in this area.
It is currently early days for the Government, and their recently-published ‘Coalition Agreement’ will be implemented over the next five years.
Although the Queen’s speech, with its 23 initial implementing Bills, highlighted that many of the Government proposals still lack sufficient detail at the moment — but this will surely become clearer over time. The emergency budget, which will be heard on 22 June, will be a starting point. From a small business perspective, look out for the capital gains tax changes. Oh — and watch this space!
