What the Tories Mean for Business

On Friday, December 13, the country awoke to the news that the Conservative Party won the general election in an unprecedented landslide victory.

The Conservative Party bagged 365 seats (a seat change of +47 and 13.9m votes cast), whereas the Labour Party won 203 (a seat change of -59 and 10.3m votes cast). The result has divided opinion throughout the nation.

However, the country has spoken, and we will now continue under the leadership of the Tories. With this in mind, we thought it important to find out what exactly a Conservative government will mean for your business.

Here’s what we found out.

What the manifesto claims

The Conservative’s motto “Get Brexit Done. Unleash Britain’s Potential” aims to create a post-Brexit economy with “high wages, low tax, high skill and high productivity”. The party has promised to accumulate a £1bn (US$1.3bn) boost for businesses over the course of the next three years, a benefit they claim can be achieved by changing the Employment Allowance (EA), the Structures and Buildings Allowance (SBA), the Research and Development Expenditure Credit (R&D) and business tax rates.

Employment Allowance

As it stands, businesses can claim a reduction – called EA – up to £3,000 (US$3,876) on the amount they spend on Class 1 National Insurance Contributions (NICs).

A rejigged Tory government means employers could claim back up to £4,000 (US$5,168) – which, Conservatives claim, would provide a tax cut for more than half a million businesses.

Structures and Buildings Allowance

By raising the Structures and Buildings Allowance (SBA), a tax relief allowing businesses to invest in the construction and conversion of non-residential buildings and structures, from two percent to three percent, Conservatives hope to make it easier for companies to purchase, build, or liaise, making the economy more dynamic.

Research and Development Expenditure Credit

The party says it will increase businesses’ allowance to spend on research and development by one percent. Through this, the Conservatives claims private companies will see a spike in productivity, particularly in manufacturing, science and technical services.

Tax rates

The most impactful action the Conservatives promised following a majority win is reducing business rates. The party hasn’t yet broken down potential costs and percentages, but claims it will launch a “fundamental” review of their budget once re-elected.  

Moving forward

For now, it looks like Johnson’s main goal for businesses is to facilitate their development in various areas by cutting taxes. It will be interesting to see how these proposals develop as Brexit negotiations unfold, as it’s still unclear whether the UK will leave the EU in the near future.  

But what has the morning post-election brought us?

Known Unknowns

With Brexit looming on the horizon – and lots of uncertainty surrounding our exit from the European Union – many businesses are apprehensive about what will happen to British trade.

Unfortunately, we’re still not certain what Brexit will bring (unhelpful, we know). We’re still unsure as to what the terms of a new trade deal with the EU will entail – especially as a no deal remains firmly “on the table” for the end of 2020.   

It’s still hard to know what the end of free movement of labour with the EU and whatever happens to migration more widely will do to the labour market, ie employment and wages (because, again, all we can assume is there will be a “points-based system”, which means nothing); and nor do we have much idea of exactly how the wider global economy will develop.

The value of the pound

Following the Conservative win, the pound and shares surged, with sterling gaining 1.9 percent to US$1.34 – the highest level since May 2018 – on the hopes that a majority win will remove Brexit uncertainty.

Similarly, the pound jumped to a three-and-a-half year high against the euro.

The FTSE 100 share index rose 1.5 percent, while the FTSE 250 – looking at more UK-focused shares – leapt 4 percent, hitting record highs. Although the FTSE 100 saw big gains, the rise in the value of the pound will see companies with big international operations affected – cutting the value of the companies’ overseas earnings when they’re exchanged back into the UK and converted into pounds.

Prime Minister Boris Johnson said the election result meant that the Conservative government "has been given a powerful new mandate, to get Brexit done". Mr Johnson has pledged – and remains adamant – that the UK will leave the European Union by 31 January.

For now, the country has a waiting game on its hands to see what benefits – and upsets – a Conservative government will bring.