Covid-19 has been unprecedented and has impacted businesses, the economy, society as a whole and sadly many people’s lives.
But what will this return to normality look like? Will the economy bounce back quickly? If it does what will it mean for accountants and their clients? What will the ‘legacy’ of Covid-19 be? What should we be doing to prepare for the future? These are all key questions being considered by the Accounting Sector, so I will give you my personal views below.
Are we already seeing a recovery?
It does look like we are seeing the green shoots of recovery, but this is more a reflection of just how much impact coronavirus has had on the UK and Global economies.
According to Organisation for Economic Co-operation and Development (OECD) data, the UK economy shrank by 9.8% in 2020, the biggest fall in almost 300 years. Understandably this fall was skewed towards those sectors more directly impacted by lockdown, but it does demonstrate the shock the economy suffered.
The data highlights the resilience of the UK economy and the strength of the entrepreneurial drive that powers it. The OECD is forecasting growth in UK GDP of 7.2% in 2021 – higher than almost all other developed economies – and data from the first part of the year largely supports this. Looking further ahead the forecast for 2022 is further growth of 5.5%, meaning we could potentially be back to pre-Covid levels by the end of Q1 2022.
So, are we seeing a recovery? At present it would be a tentative ‘yes’, but there is certainly improvement. Whether the OECD forecasts are accurate will largely depend on how effective vaccines are and whether the market can truly open up in the second half of this year as we all hope.
Start-up trends
A large part of the forecast growth in GDP is attributed to small and start-up businesses. The UK has always had a strong entrepreneurial culture, so it is no surprise to see that our resilience is largely due to the types of businesses and individuals TaxAssist was set up to support. Companies House data supports this view and demonstrates just how the new business market is responding.
More than 810,000 new companies were incorporated in the 12 months to March 2021 – a rise of 22% on the previous year. While detailed data isn’t available, the view is that this increase in start-up companies is mirrored by new unincorporated businesses.
Most expect this trend to continue over the coming year, fueled by those who have sadly been made redundant, who have been on long-term furlough or are simply frustrated with corporate life. There is also an expectation that the Government will increase its support for new businesses, with tax breaks, funding and reductions in ‘red tape’.
This represents a great opportunity for those firms in the accountancy sector who are geared up to support start-ups. Many in the TaxAssist Accountants network are seeing an increase in leads as a result. Our accountants are ideally positioned to take advantage of this opportunity and we will continue to help all in the network develop their start-up services.
Changes to the tax regime
The shock created by the pandemic has forced the Government to fund the economy in ways we have never seen before. Individuals and businesses across the UK have received funding to support staffing, property and lost profits as well as loan support and deferral of tax liabilities. Whether this was sufficient remains to be seen and your view may well depend on your own experiences and political views. Whatever these are, the simple fact is that public sector debt is at levels not seen since the Second World War.
This creates a real dilemma for the Government. It will need to stimulate demand to support growth in GDP, but it has to ‘balance the books’ eventually and repay this historic level of debt.
Most commentators suggest we will see a gradual increase in taxes initially, with perhaps some more fundamental changes over the coming years, depending on the pace of recovery. We have already seen planned changes to corporation tax for 2023, but there continues to be speculation around a number of different areas of taxation, including capital gains tax, pension relief and inheritance tax.
I think we will all have to accept that the recovery will go hand in hand with tax changes and almost certainly an increase in overall tax take. I think it’s also true that we are probably looking at levels of public sector debt that will take a generation to repay.
There is much debate on this topic within the accountancy sector about how this will challenge them over the coming years. Tax changes and higher tax bills always create uncertainty and concern for clients. Accountancy firms will need to respond to this, but with change comes opportunity. Those accountants who are well prepared will be able to communicate effectively with their clients, help them plan and minimise the tax impact of any changes and promote tax services to win more new business.
Client expectations
Everyone in the TaxAssist Accountants network will have seen the effect Covid-19 had on their clients. Accountants were the focal point for many of the changes and Government initiatives that came in quick succession. Clients looked to them in difficult times for help and support.
The legacy of coronavirus for many TaxAssist clients will be the reassurance that TaxAssist was there for them when they needed us. Unlike many of our competitors, our accountants continued to communicate and made sure they gave them all the support they needed. We know from client surveys just how much this was appreciated.
What many accountants are talking about is the changes this has created in terms of client expectations. Businesses and individuals needed to engage with their accountants in ways they had never done before. Suddenly interaction became more than just a compliance need, it was critical to their businesses and futures.
While recovery will hopefully bring some return to normality, there is a question as to whether there has been a shift in what clients expect from their accountants. This was happening anyway, largely driven by technology and online bookkeeping software, but it does feel like the pandemic was a catalyst for change. Our relationship with clients seems to have changed and we are still seeing many needing help to understand what changes mean for them, to plan for the future, to make key decisions, to access longer term funding and to understand how their business is performing.
Accountants will need to plan for this change. Regular communication will become even more important, as will understanding client needs. This will be difficult for some and will make staffing and resourcing even more challenging, but it does look like we are going to see a period where there will be ever more opportunity to provide additional services and to win new clients.
Are we ready?
So, are we now seeing a recovery? All of the indicators we see suggest we are and while we all need to be cautious, we hope there are better and easier times ahead. And if we are now in a recovery, are we ready for it?
The very clear answer here is ‘yes’. There is still a long way to go and there will almost certainly be more changes and challenges to come, but TaxAssist has proven how as a network we are stronger together through difficult times and are as well positioned as we can be to take advantage of the opportunities we will see.
About the author:
Daren Moore FCCA joined The TaxAssist Direct Group Board of Directors in February 2018. Daren has spent his whole career in the accountancy practice sector, having worked his way up from accounts trainee to a member of the Management Board of Price Bailey LLP, a Top 25 regional firm, where he has an outstanding track record of achievement.
Daren's role involves working alongside our award winning support team, using his 25 years of experience in practice to help our network of franchisees grow their businesses and deliver high quality compliance and advisory services to their clients.
He works to ensure that TaxAssist continues to grow, capitalising on its growing brand and reputation as a leading provider in the UK and supporting the business as it looks to mirror this success at a global level.
September 2021
