Graham Lamont is chief executive and managing partner of Lamont Pridmore, a multi-award winning firm of chartered accountants, tax and business advisers with offices in Penrith, Keswick, Carlisle, Barrow, Kendal, Whitehaven and Workington.
Here he reflects on the challenges and opportunities facing Cumbria’s business community in the coming months.
One of the key issues in business at present is that anyone with any substantial borrowing has been feeling the pinch, particularly over the past three years.
Since the crash of 2008, the Bank of England has set two tests for borrowing — the first being a 70% borrowing to asset value. But it is the second test which is biting now — the affordability test — with lenders morally bound not to lend more than businesses can afford to repay.
Some are keeping up, but with interest rates on the way up, we are having more conversations with clients asking ‘what are we going to do about this?’
Later this year we are expecting the situation to ease a little, with a cut in interest rates, tracking a reduction in rates in the USA.
The question has been asked whether the Bank of England acted early enough to attack inflation. And the other factors which will affect the picture going forward will be inflation, unemployment and wage levels.
It will be a bit before we feel any relief, perhaps later in the year, with these factors playing off against each other.
What we are hearing from clients is that wage increases, and in particular the minimum wage increase on April 1, have had a big impact, as have supply chain issues and cost inflation.
We deal with a lot of businesses and some are suffering while others, perhaps in different sectors, are not doing too badly.
The level of discretionary spending which customers in different sectors have is also a big factor.
So at the luxury end, some businesses are seeing trade boom, while at a level where customer spending is under more pressure businesses are struggling a bit.
Businesses must not miss any opportunity during this inflationary time to maintain their margins.
Looking at a possible general election later in the year, I would say that the country as a whole doesn’t have much money left, whichever party gets in.
So whoever gets in will not have an awful lot of money to throw around on things like the NHS. And those with the broadest shoulders are going to have to bear the biggest burden.
It is a difficult time to be elected. And whoever is elected will need to take some money from someone in order to run the country.
