Covid-19 and a no-trade deal Brexit could be perfect storm for businesses

With the UK officially in recession and the looming threat of a no-trade deal Brexit, in the midst of an ongoing global pandemic, there are very real fears that some manufacturing businesses could run out of working capital before the New Year.

According to an article last week by BBC Economics Editor, Faisal Islam both these “trade shocks could build on each other.”

Individually, each of these major issues have the power to deliver an economic shock but combined they have the potential to cause major disruption for the economy. For example, the government has spent around £8billion so far on Brexit preparations - it was spending the same in some individual months on the furlough scheme.

The BBC article argues that in the wake of a no-trade deal Brexit: “Some, especially smaller business exporters, will not have the working capital to invest in new procedures and staff, after this year.

“While it is not possible to put precise numbers on it, a raft of new trade taxes applying to a market that accounts for just under half of a country's total trade is always going to be an economic shock.

“This will disproportionately be felt in sectors and regions most reliant on exports to the EU. Tariffs will obviously hinder any business model built on the UK as an export hub to the rest of Europe.”

The best way to guard against ‘trade shocks’ is to prepare for them as early as possible.

Cashflow is the fuel which keeps businesses motoring yet a number of manufacturing companies in Northern Ireland are regularly missing out on financial windfalls which could run into tens of thousands of pounds.

Keeping on top of cashflow and generating additional income has never been more important for businesses. There are several ways of improving cashflow such as renegotiating contracts, reducing expenses and reducing waste.

But one way of generating up to tens of thousands of pounds is claiming R&D (research and development) Tax Credits. R&D Tax Credits is a government initiative developed to encourage innovation and can provide a valuable source of financial benefit for companies.

When you consider that in August a survey of 1000 microbusinesses revealed three quarters believe that they are just weeks away from having to close due to the crippling effects Covid-19 has had on cashflow, it is critical we raise awareness of all tax relief support available for businesses.

The UK government has clearly identified that innovation is the key to driving economic recovery and in the last budget pledged £22bn per year in R&D spend by 2024 – the fastest and largest increase ever recorded in the UK according to Chancellor, Rishi Sunak.

There has never been a better time for companies to embark on R&D projects with the government ready to give financial assistance to companies who can help forge new innovations.

The Momentum Group is actively urging companies to consider their processes and see how R&D Tax Credits can help. With time very much marching on, it is best to prioritise any action which can lead to working capital coming into your business.

Often a stumbling block for companies is not being able to identify what processes constitute R&D. Many find that these processes are already part of their working practices with tax credits going unclaimed.

Projects do not need to be on a grand scale to qualify for R&D Tax Credits. Pioneering work is already taking place at companies across Northern Ireland.

During the early days of the pandemic we saw local companies such as The Boatyard Distillery pivot production to produce much-needed hand sanitiser, elsewhere, Bloc Blinds teamed up with packaging specialist, Huhtamaki to ramp up the production of face shields.

Having successfully secured over £150million in tax benefits for our clients, The Momentum Group are specialists in helping companies like this secure the tax credits their work deserves and have been offering free claims advice to numerous companies during this challenging time.

Our growing team works closely with a broad range of companies across the UK and Ireland to help them get their fair share of the millions made available by the government. Let us help to keep your business motoring.