Macroeconomics: UK economy, IB Economics

More electioneering, and Labour seeking to cast itself as the party of business have pledged to reform business rates to help SMEs. 

It's low-hanging fruit, which businesses have been demanding for many years? You never know, they might think about reforming Council Tax next.

One for the costs of Brexit file, with data suggesting that UK food exporters have incurred extra costs selling to the EU, equivalent to £170m since 2019. This is clearly inefficient and it's also going to significantly reduce both profit margins and their incentive to sell to our closest trading partners. 

However, the distributional effects of this are most heavily concentrated upon SMEs who lack the resources to cope with the increased red tape and have invariably stopped exporting to the EU rather than incur these costs and this is desperately sad. 

This article is perhaps the most depressing business-related article that I've 'scooped' in a while. Not only is Britain not "Open for Business" as far as trade appears to be concerned but it's seemingly the case that even small domestic businesses are finding it harder to navigate the red tape associated with being a start-up. 

If this is the case, and there's no reason to doubt that it is, it will have an adverse effect on the supply-side and represents a waste of the entrepreneurial inclinations of many people.

The Cheeseman cometh! The director of the Cheshire Chesse Company writes an opinion piece on why Brexit almost drove his company to the wall. 

It is the clearest statement of why Brexit is such a farce and explains why it is rightly described as "the longest economic suicide note in history". The sooner it is ended, the better. 

The impact of the cost of living crisis on SMEs is assessed in this article which highlights how parlous they're in. The Barra Beach Hotel is one of many business contemplating closure in the short-term; without a government plan their energy bills are likely to go up sixfold, and with other costs rising too, they don't think that there will be customers prepared to pay a room rate high enough to make the business viable. 

One of the real issues with the energy crisis is its effect upon businesses, particularly small and medium-sized businesses. The problem is that whereas households are getting some assistance, as yet nothing has been proposed for businesses, and many of them are faced with increases in energy costs of up to 80%. 

The retail sector has been under the hammer for the past year, and a number of retailers are calling for the government to offer a 'Shop Out to Help Out' scheme during the coronavirus recovery. The scheme would cover up to 50% of a shopper's costs up to £10, Monday to Wednesday but only in selected small stores. 

It's an interesting suggestion but I'd immediately wonder about the distributional effects of this - it would go to a select group of shoppers who are able to shop on those days, and by and large, wouldn't seem to be likely to be spent on household essentials like food. And what about those who simply can't afford to buy anything other than essential items? Will there be adverse distributional effects? 

The in-depth analysis of the Budget has started with this BBC article noting that the rise in corporation tax to 25% has taken analysts by surprise, although the Chancellor has been quick to emphasise that it doesn't apply to smaller firms. 

Indeed, today's 19% rate will still apply to firms who earn less than £50,000 profit and there's a sliding scale that means that the headline 25% will only apply to firms earning more than £250,000 profit. 

The change is expected to raise £17bn per year, and represents 60% of the increased in tax revenues likely to be generated by this Budget. 

I'm not sure that John Harris is saying anything particularly controversial here - but it is true that large firms have been better placed to overcome the challenges faced by both Covid and Brexit.

However, it hasn't been kind to small firms - as this article illustrates.  

Gordon Brown is backing calls for greater support for businesses, with some LSE research suggesting that as many as 1 in 7 businesses are at risk of collapse, jeopardising 2.5 million jobs.

He wants to see the Chancellor use his March Budget to support these businesses.

With the announcement of a second lockdown, the government haver also announced another package of aid for UK businesses. It includes non-refundable grants of up to £9,000 and devolved governments and local authorities are also getting funds to give to those not otherwise covered by the state aid.

However, there is some criticism that any further help is going to be delayed until the Budget in March, which many people see as too late. There are also worries about the self-employed and those in receipt of Universal Credit. However, the costs have to be weighed against the costs of substantial business closures and rising unemployment. 

An old favourite, tax avoidance, from a familiar source: Amazon. 

It seems that the introduction of a digital services tax in the UK is going to fall on third-party sellers who use Amazon as a platform for their sales, but not the company itself. 

This is because the tax isn't being levied on sales but on the provision of services - and Amazon are providing these small traders with a service. To put that into context, Amazon, which only paid £14.4 million on total UK revenues of £13.7bn last year, seems to be able to avoid tax once again.

Legal, no doubt. Ethical? Perhaps Amazon might consider paying the tax on behalf of small traders. Ho, ho.

Similar pronouncements to my last 'scoop', Professor Mervyn King has attacked the government's response to the pandemic suggesting that there's been a lack of help extended to small and medium-sized firms, and that any failure to look after them will delay the supposed V-shaped recovery. 

This Larry Elliott piece looks at the reality of the Labour Party cracking down on tax avoidance: it's not as straightforward as it might seem, and that the reality is that most of the so-called tax gap is due to small businesses underpaying taxation. 

The Observer suggests that despite government policy focusing on subsidising innovation, there's little to suggest that UK small businesses aren't an engine for growth, and that larger companies with spare capacity are better placed to innovate. As a result, we might need to think about how we can reinvigorate our entrepreneurs. 

This Bloomberg clip looks at the impact of higher energy costs on British businesses, and suggests that we are on the brink of seeing a surge of bankruptcies among small and medium-sized businesses, which will only be exacerbated by the ending of the government's energy support scheme in the very near future. 

More of the same; the week's big story appears to be the fact that without a comprehensive plans to provide help with energy bills, many SMEs are on the brink of bankruptcy and that would probably trigger a sizeable recession.  

The cost of living crisis laid bare in York, where SMEs are already closing and those still open are not looking forward with much confidence to winter trading conditions. 

The Federation of Small Businesses is calling for more support for tis members  because of a gap between the time when various protections end and the re-opening of the economy begins. 

It strikes me as a wholly reasonable position.

Just another for the costs of Brexit file - "We've been sold a dud". 

Well who would have thought it?

Budget. Help for small businesses. That is all.

It seems that the government is going to give small firms more time to repay their Covid-related loans - with the announcement of "pay-as-you-grow" repayments to relieve some of the pressure upon them.

A worrying revelation from the Federation for Small Businesses (FSB), with the news that a record number of them could be on the point of closing. 

This would be bad for the UK economy, and might get you thinking about those reasons why small businesses are so important - as engines of growth, as innovators, and as a testing ground for entrepreneurs, among other things. I wonder how many more factors you can come up with?

Phillip Inman writes in the Observer about the possibility of a future debt crisis, with small firms having borrowed large amounts to stay afloat during the pandemic and subsequently being unable to repay their loans.

He looks at solutions to this, siding with Sir Jim O'Neill in suggesting that there's a need for large-scale government intervention to prop up viable firms, but this, of course, raises the spectre of cherry-picking, and decisions made on political rather than economic grounds. 

A Guardian piece that highlights the fact that the UK's emergency funding schemes have seemed slower to react than many of those on the Continent. 

The reason, apparently, is the fact that the UK has lost some of the institutional capacity and experience to deal with small businesses, and looks at a number of instances where SMEs have had to turn to the government for help.