Dealing with the challenges ahead of the UK general election

As the UK prepares for the general election, small and medium-sized enterprises (SMEs) are expressing increased concern about political uncertainty.

According to recent research by Shawbrook, more than half of SME decision-makers are concerned about a potential change of government.

This uncertainty, combined with rising costs and other economic pressures, creates significant challenges for SMEs. Accountants, with their expertise in financial planning and risk management, play a key role in guiding SMEs through these turbulent times.

“By July 5 we will have a final result that will shape the direction of our government for the next four years,” says Neil Rudge, Shawbrook’s enterprise director.

“Naturally, this transition period may cause some concerns in the business community. “Incoming administrations often introduce new policies, regulations and tax structures, which can disrupt established business plans and make it more difficult to forecast the future, especially for SMEs.”

The impact of political uncertainty

Shawbrook’s research shows that 51% of SME decision-makers are concerned about a potential change of government, and 50% are concerned about political uncertainty in general. This concern is understandable because new administrations often introduce changes to policies, regulations and tax structures that can disrupt established business plans.

Accountants can play a key role in helping SMEs prepare for these changes, staying informed about potential policy changes and advising clients on proactive risk mitigation measures. This includes scenario planning, reviewing business continuity plans and ensuring that financial strategies can be adapted to a range of policy outcomes.

“It is important that political parties prioritize the dissemination of clear and detailed information on potential policies that may impact SMEs. Ambiguity on such issues can make it significantly more difficult for businesses to prepare for potential changes, says Rudge.

Rising costs and economic pressures

Rising costs also remain a top concern for SMEs, with 73% of respondents identifying them as a major concern, up from 68% last year. This increase reflects the increasing pressure SMEs face in the face of continuing economic instability.

Accountants can help SMEs manage rising costs through effective budgeting, cost control measures and financial forecasting. By identifying areas where expenses can be reduced and optimizing cash flow management, accountants can help SMEs remain profitable even in difficult economic conditions.

Additional concerns for SMEs

In addition to political uncertainty and rising costs, SMEs are also concerned about the cost of living, economic uncertainty, interest rates and supply chain disruptions.

Shawbrook’s research shows that 69% of SME decision-makers are concerned about the cost of living, 66% about economic uncertainty, 67% about interest rates and 57% about supply chain disruptions. Accountants can support SMEs by providing strategic advice on how to deal with these challenges.

This includes helping businesses cope with interest rate fluctuations, diversifying supply chains to mitigate disruptions, and planning for potential economic downturns.

Positive signs and possibilities

Despite the challenges, there are positive signs on the horizon. Shawbrook is seeing an increase in funding applications, reflecting cautious optimism among SMEs. Additionally, falling inflation and the expectation of a reduction in interest rates suggest a potential improvement in the economic situation.

“We are inspired by the cautious optimism that is already evident among SMEs, as reflected in the recent increase in funding applications. “This positive sentiment, combined with falling inflation and the expectation of a reduction in interest rates, suggests a potentially interesting second half of the year for the economy,” says Rudge.

Accountants can help SMEs capitalize on these opportunities by advising on financing options, investment opportunities and strategic growth initiatives.

By keeping an eye on economic trends and providing forward-looking financial guidance, accountants can help SMEs position themselves for success in the second half of the year.