What Will The General Election Mean To Businesses?

Peninsula Team

April 23 2010

Friday May 7th will see us all waking up to a new dawn, a new Government, and a fresh start – or will it?

We can choose between the "future fair for all" (i.e. crisis, what crisis, let’s have more of the same) with Labour, “join the government of Britain” (i.e. participate in a Big Society whatever that might be) with the Conservatives, or enjoy “fair taxes, have a fair chance, a fair future, and fair deal” (i.e. the future is beige) with the Liberal Democrats. Other parties are available if required….but are not mentioned here as they are unlikely to affect the final outcome!

Whatever the nation decides, I believe that there is still a real risk of a double-dip recession. Until now, the incumbent government has sat on its hands regarding the action it knows has to be taken with regard to public sector spending. It is the elephant in the room that no-one wanted to acknowledge until after the election. So from 7th May, the cat will be well and truly out of the bag.

The bankers in the City might believe that all is well again and that the good times have returned with their bonuses and exotic holidays – but that bubble may yet burst again. There have been two things in the past year that have achieved unanimity of opinion across the supporters of all parties. One is the outrage at the behaviour of MPs over their expenses. The other is the behaviour of the bankers over their bonuses. Both groups have been feathering their nests whilst the rest of the country has worried about whether they would still have a nest at all.

All the political parties avow in their manifestos to put an end to these excesses. We wish them well – but don’t hold your breath. Whoever forms the government in May will be faced with much bigger problems that can be avoided no longer. They will inherit a National Debt of £1.1 trillion with an annual interest bill of £43 billion! The projected deficit for 2010 alone is a further £175 billion.

Quite simply, this can’t continue. And after the election, it won’t. Whichever party is in power, it is generally understood that they will have to find budget reductions of £90 billion pa – equivalent to £2,840 per household. These are the kind of cuts only experienced twice before in history – in the depression of the 1920s and the aftermath of the war in 1945. So if you have any doubts about the seriousness of the situation, ask your grandparents. We all need to wake up and smell the coffee – but will it be Nescafe or Camp? (Those under 50 probably won’t understand this reference – look it up on google!).

The unions have already begun to realise the severity of what they are facing. The nature of their reaction will have a significant impact on how the savings will be achieved. If they follow the lead of Unite in the BA dispute, then a long and bitter battle will ensue over every cut and reorganisation that is proposed. With public sector staff cuts of at least 5% being mooted, we must all hope that the unions display a more modern, enlightened approach than many fear they might.

The private sector has taken the majority of the pain of the recession to date – it is now the turn of the public sector. The remarkable way in which the private sector workforce has reacted with salary reductions, unpaid holidays, job-sharing and so on, has enabled the unemployment numbers to remain below the Armageddon figures many feared. Let’s hope the public sector behave in a similarly public-spirited way.

Maybe then even the bankers and MPs might join in this new-found united approach for the betterment of all – or will pigs fly first?

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