Confidence remains fragile, however there is increasing optimism that interest rates might fall back to a sensible level. Despite confirmation of a technical recession at the end of 2023 and ongoing uncertainty over when and what a general election might bring, more hopeful signs have emerged.

Despite this, members working in construction say the sector remains nervous about the prospect of contractors and subcontractors collapsing and the domino effect of companies going under. This sector in particular “needs some news on interest rates to get things going”, in the words of one member. The 60% decline in value of Five Churchill Place in Canary Wharf was cited by several as an example of how the commercial market has continued to struggle.

Although January’s ONS number saw a rebound from December’s record fall, members working at the coalface in retail reported difficult conditions due to cost-of-living concerns and nervous consumers. 

We heard reports that the luxury sector was starting to show signs of the economic climate biting, a sentiment further fuelled by the news that KaDeWe, Berlin’s flagship department store, had filed for administration. One Scottish-based exporter expressed relief that “the impact on our debtor book was thankfully not large” and called for the reintroduction of tax-free shopping to “stop losing sales to Europe”.

By far the biggest topics of discussion this month were regulation and employment. 

Regulation

The burden of regulation continues to affect members working in smaller businesses. Despite the vital role it plays, members this month highlighted examples of situations where regulation impacts on the ability of a business to grow.

A member working in business advisory noted the “perceived complexity and punitive tone of regulatory compliance”, describing communication from regulatory bodies as “daunting and somewhat authoritarian”. Faced with often limited resources and a lack of in-house expertise, regulation can be a costly distraction from running a business, particularly given the challenges businesses face in the current economic climate. 

One member described the importance of positioning regulation so as “not to deter the entrepreneurial spirit”, suggesting a shift towards a more supportive and accessible communication strategy that presumes honesty and “aims to guide rather than chastise”.

Another member highlighted challenges in relation to employment bemoaning “policies framed with big businesses in mind”. They suggest a simpler approach that offers partial exemptions to give SMEs “less work and more leeway”.

Meanwhile, an ICAEW member and adviser to the construction industry said the complexity of the regulatory environment and the difficulties in resolving issues were having a “significant impact on the ability of SMEs to grow and remain compliant”.

Similar feedback has been received from members trading or looking to trade internationally. New UK import controls from 31 January 2024 for animal and plant products are singled out as causing delays and adding costs.

ICAEW’s ongoing Better Regulation project uses insight gathered from ICAEW members to assess whether the UK’s regulatory regime is good enough and how it might be improved. 

Employment

Employment difficulties have been regularly cited by ICAEW members across a multitude of sectors as being a barrier to growth. Although skills, retention and recruitment issues appear to have eased over recent months, challenges relating to hybrid and flexible working have dominated several discussions. 

Many organisations adopted a “wait and see” approach to hybrid working, typically settling for two to three days per week in the office. However, new flexible working rules from April 2024 present new considerations for businesses. One member working in manufacturing said: “This will add a whole new tranche of problems for us.” 

A member in the West of England noted: “Hybrid is a choice and as we’ve not made it contractual, it can be taken away. Flexible working is contractual with employment contracts changed to reflect agreement.” Another noted that flexible working encouraged staff retention and warned that loyalty could disappear once flexible working requests are a day one right.

Others are less concerned about hours in the office with productivity/output the most important consideration. “People should use their common sense; it’s performance that matters at the end of the day,” one member remarked. It’s clearly a delicate balance with no organisation wanting to lose good people who are working effectively from home.

The rise in the National Living Wage was an issue raised by members after the Autumn Statement. As April approaches, businesses find themselves having to budget for this increase, on top of annual pay awards. The “ripple effect of awarding a 10% pay rise to staff is difficult to afford,” one member said.

On annual pay increases, there is some consensus on inflationary pay rises at the lower end with less for senior staff.

ICAEW is hosting a webinar together with Acas on 24 April at 1pm, covering key updates and developments in employment law. 

And finally…

Insights gathered from ICAEW members played a key role in shaping ICAEW’s Manifesto and were well received in a recent meeting with Rushanara Ali MP, Shadow Minister for Small Business and Investment.

To share your insights directly with ICAEW’s business team and to read previous articles, please visit the Member Insights page on the ICAEW website.