The UK’s financial straitjacket and high tax is holding back growth

Charles White Thomson is the CEO of trading and investment firm Saxo UK and says Britain needs to grow again.

It always takes a few weeks for the contents of the Budget to sink in.

They are complex affairs with feints and plays to hopefully strike a balance between naysayers and supporters.

Well-intentioned but uninspired and more about the status quo rather than broad and bold changes that balance risk and reward.

I am in favor of bold plans that will unlock the UK’s potential and break the loop of high taxation and low growth.

The status quo is becoming increasingly painful and uninspiring, and this should not be about celebrating recent monthly GDP growth of an anemic 0.3 percent and avoiding a technical recession.

The UK is still underperforming its main counterparts, but is a good customer of the bond markets with their focus on more of the same, regular coupons and maturities; but more importantly, they have not served the majority and their aspirations.

Change is required.

Rather than talk about the Chancellor and Government, I prefer to keep referring to the UK as a public company.

Instead of Prime Minister, we have a Chief Executive Officer and for the Chancellor a Chief Financial Officer.

This, I hope, removes the politics, point-scoring and infighting that hinder the country’s progress. Judging by recent comments about ‘managed decline’, this is wishful thinking, but we are moving forward.

My resounding conclusion from the recent UK PLC financial statement (Budget) is that the management team is in an unenviable position as there is little room for maneuver for major changes.

The UK PLC is effectively in a financial straitjacket with constraints including: £2.4 trillion of government debt and all the service costs it entails, taxes to GDP levels approaching record highs or 37.5 per cent according to the Office of Budget Responsibility, and corporate income tax which will rise to 25 percent from 19 percent for fiscal year 2023/24.

For generations, UK PLC management’s financial forecasts (budgets) have focused on the status quo, as opposed to a more dramatic plan to kick-start growth, confidence and the all-important benefit it brings.

‘UK PLC needs to increase sales and reduce costs’, says Charles White Thomson

The financial outlook or budget for a PLC is the final flourish of the business plan. It is the icing on the cake and shows that the plan is financially viable, executed by the prudent and well-considered people (CFO team), who sharpen and support the ambitions of the CEO and the management team.

Good plans contain a well-considered balance between risk and reward. So, what to do and how to throw off the financial straitjacket wisely?

UK PLC needs to increase sales and reduce costs – economy 101. Measures include making Brexit a success and improving the UK’s competitiveness against the world – become profitable and a popular place to do business.

This includes incentives and a tax system that attracts and supports international clients, partners and our homegrown projects. Ireland PLC has succeeded in this and should provide inspiration.

When it comes to tax, successful PLCs are highly profitable, and shareholders benefit from this. The same logic should be applied to the UK PLC with a reduction in the personal tax burden.

To this we add an open and honest debate around the sacred cows or major spenders, including the NHS; and the general lack of productivity in the UK. There should be no prohibited areas or topics.

Productivity is also an area that needs a big boost knowing that since 2008 there has been a perfect storm to crush productivity – the global financial crisis of 2008 and maybe now we add 2023, a global pandemic, multiple epidemics, climate change and all the disruption that this entails, a war and an industrially loose monetary policy.

Interest rates in the UK hit a low of almost 0% and this super-cheap money meant that many projects were built on cheap financing rather than productivity gains or watertight business cases.

For productivity, the focus is rightly on the leveling agenda, addressing skills shortages, boosting the workforce and, most importantly, growing confidence that provides the final push to make the marginal investment.

As I review this abbreviated shopping list, it’s important to recognize the symbiotic nature of the plan to deliver growth and ambition.

By itself, the plan dies on the vine knowing that the legendary money tree is tired. This involves risk-taking, which is why marketing and executing the plan is absolutely essential in preparing people, meeting the status quo adherents at the pass, and addressing major concerns.

To end with a flower. We have the advantage of UK PLC being the sixth largest global company or economy in the world with all the scale and reach that this entails.

This is about a bold and comprehensive plan to ensure we unlock the full potential and unleash the prosperity that a large proportion of UK shareholders want.

The alternative to a bold and broadly changing economic plan, not based solely on industrially low interest rates and quantitative easing, is continued stagnation and underperformance.

This won’t be easy, but the alternative is to sell out the next generation, which should never be a consideration.