Empower your business to generate more revenue in United Kingdom

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the UK tax burden has increased to the highest level since 1948. in the past three decades the burden has risen from 28 to 37 of GDP and it will continue to rise with a typical household expected to pay an extra 650 pounds a year however whilst in 1948 the government was setting up the NHS and welfare state 2023 has seen record waiting lists and Public Services Under Pressure like never before why have we ended up with paying higher tax but deteriorating Public Services is it bad luck bad management or bad decisions in the post-war period the UK economy was growing at an average of two and a half percent a year not spectacular by International standards but it was enough to enable growing public sector spending without increasing the tax burden but in 2007 that started to change the UK experienced a sharp fall in economic growth and since 2016 has performed much worse than our main competitors anemic growth means that the government receives much less tax than expected the Financial Times report but if UK growth had been maintained at pre-crisis levels the average person would be a staggering ten thousand pounds a year better off and forecasts the 2023 and Beyond remain very pessimistic for the UK however whilst tax revenues have fallen our demand for Health Care continues to rise an aging population the effects of covid a rise in long-term sickness new expensive treatment and this rise in healthcare spending is on top of a growing pension bill which I sawed in recent years because of more old people and the triple lock pension guarantee furthermore High house prices and rents have also caused more pressure on housing benefit to try and fill this fundamental funding shortfall the government has tried to trim other budgets like sticking multiple plasters on a growing wound 2010 to 16 saw a decrease in many government spending on departments such as education and public sector investment it also led to public sector falling behind the private sector nurses have seen a 10 fall in real income and 20 percent less growth in private sector pay however all this trimming at the edges Place more long-term pressures on the system the impact of covid combined with these long-term funding Cuts stretch the system to Breaking Point leading to the concerning Rising waiting lists that we see now it has caused a slower growth in life expectancy than expected the big question is why is economic growth much slower well for many reasons suggested firstly the UK has seen a decline in previously strong Industries in the 1980s the UK received a GDP and tax Bonanza from North Sea oil adjusted for inflation the government received around 18 billion pounds a year but this strength of oil led to a strong pound and really hurt manufacturing export industry in the 1980s also received a one-off bonus from privatization but unlike say Norway this was not invested in public sector investment or Sovereign wealth fund but was used to cut the tax burden and whilst there was talk of an economic miracle in the 1980s both a considerable amount of good fortune that would prove temporary in recent years oil revenues have declined as North Sea oil has gone past their Peak output and this decline has been affected in GDP and tax revenues the Boon of privatization receipts has also declined to a trickle furthermore the 2007 credit crunch particularly affected the UK Finance industry which is a traditionally a major contributor of tax revenues since so many people are high earners but post 2007 the UK economy has definitely struggled with a decline of its major industries of oil finance and also a continued weakness in manufacturing other reasons for the low growth in the UK include the austerity of a 2010s there's a strong link between austerity and lower growth because Cuts in government spending were generally not replaced by a booming private sector in the 2010s the pessimism of austerity contributed to lower growth lower investment and lower competence but you could say the real problem started in 2016 at least compared to other countries growth firstly the uncertainties of brexit changing trade rules and then covert hit business investment very hard whilst other countries were covered the UK didn't in 2021 the UK left the single market and it was replaced with a hard brexit which has disrupted trade much more than many business ever expected the new custom rules regulations and cost of trade have fetched small and medium-sized business in particular and it's not just the higher barriers to trade but the sense of constant change and uncertainty critics argue government policy has been prone to flip-flopping a situation which reached a peak in last September's budget of truss and quateng the radical budget of borrowing to finance tax cuts for the rich was rejected by the public but perhaps more importantly it was rejected by markets interest rates soared as the UK government's borrowing looked suddenly much less appealing and though nearly all of a budget has been reversed it is not without damage to the UK's reputation and it definitely made the government tread a more cautious path in limiting the amount of its borrowing because it feared that Rising bond yields which we saw in September and this Rising interest rates is a key reason why the government have had to increase taxes despite the political costs but it's important to stress it's not just these short-term problems other long-term problems in the UK economy include things such as the planning system which makes it easy to block or at least for delay the building of Housing and investment projects it means there's a shortage of Housing and office space in key regions of Economic Development such as London Manchester Cambridge and Oxford projects like hs2 and the expansion of heifer airport are perhaps symbolic of UK investment projects they take so long to get permission and agreement that costs tend to escalate and in the end they have to become scaled back or canceled we could contrast this with France and European countries who generally have quicker planning schemes and can get big projects built quicker and the elephant in the room for the UK economy is brexit the cost of brexit may not always be top of a political agenda but business have definitely struggled with a sharp rise in paperwork costs and uncertainty the obr forecast the UK has lost four percent of GDP from the impact of brexit not a major recession but more like a slow long-term puncture the center for European reform claimed the loss of GDP is closer to 5.5 percent the impact of brexit can clearly be seen in the shock to business investment from 2016 which has never recovered this is a unique decline of a key factor that determined long-term economic growth but brexit-induced devaluation of a pound also led to higher import prices cost push inflation and exacerbated Verizon oil and gas prices during 2022 the UK economy used to be an economy reliant on free trade and an open economy but brexit marks a fundamental shift with the obr stating there has been a 15 fall in export import penetration which reflects how barriers to trade with our newest traded partner have not been replaced with trade from non-eu countries such as Australia of United States on top of these problems there are also structural problems with the UK labor market it currently is a curious mix of Labor shortages and falling real wages textbook economics suggests that labor shortages that the UK is facing should push up real wages but this has not happened yet we've inflation at 10 percent and very low productivity growth workers have seen the biggest fall in real wages for decades and this decline in real incomes has been magnified for public sector workers another area of concern in the labor market is the decline in labor participation rates this is particularly an issue for older workers who are increasingly leaving the labor market due to Rising ill health or plan for early retirement the UK like many other Western economies is facing an aging population which will get significantly worse in the next few decades but dependency ratio will almost double and this is a concern for the future with less young workers with the necessary qualifications to fill labor vacancies and this shortage of Labor is another friction for business and a discouragement to expansion and investment the impact of all these factors has been to cause record low levels of productivity growth which is output per worker now productivity has fallen across the world not just for UK perhaps reflecting lower growth in technology but the UK's productivity growth has still been relatively bad another concern is that in the short term the UK May struggle to adjust to the to ending the era of ultra low interest rates for around 13 years we got used to interest rates close to zero and this was a key factor in pushing house prices and house price to income ratios to record levels but the arrival of unexpectedly High inflation has caused a sharp rise in interest rates which are causing mortgage payments as a percentage of income to get closer levels last seen before 1991 and 2007 house price crash the higher interest rates will catch many people out especially when they have to get a new fixed rate deal later in the year and find out how much costs have gone up and this could cause a significant fall in house prices which will only add to more negative pressures on the UK economy looking for better news more optimism there has been a substantial fall in oil and gas prices since last summer and this is important for the UK because gas is by far the most important source of heating for households lower gas prices will help reduce inflation and also reduce the costs of a government as energy price guarantees will become cheaper than predicted it is one reason why borrowing has come in at a lower levels than expected secondly if inflation does fall rapidly to two percent as some predict or perhaps hope it will enable a reduction in interest rates and Below inflation will also bring to an end the period of falling real wages which would be very welcome however whilst these temporary factors will be very welcome they do not start to address the long-term issues facing the UK economy it's not just brexit and covid and oil price shocks it's for low levels of investment decline in manufacturing it's the demographics low investment low productivity planning regulations lack of skilled workers all these create real problems for the UK economy in the long term now the good news is that because growth has been so bad in recent years in theory it should be possible to catch up and there should be scope for a surging growth but at the moment it is hard to see that because of so many negative factors all weighing down on the UK economy if you found this video useful please give it a thumbs up and you might enjoy this video on the extent to which a UK house prices are 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