Sector Focus

The volatility of cryptocurrency

Despite the growing popularity of ‘cryptocurrencies’, a Birmingham wealth specialist is warning investors to be extremely wary about their volatility as an investment. Steve Johnson, managing

partner of Ward End-based investment specialist S Johnson Wealth Management, said anyone investing in cryptocurrencies should be aware that they could ‘wake up a millionaire and go to bed bankrupt’. He added that it could work

the other way round – but at the end of the day, investing in cryptocurrency was ‘gambling’ and he would not currently provide advice to anyone who is thinking of jumping on the crypto bandwagon. Mr Johnson said that

cryptocurrency was a unit of money produced by specialist software, unlike normal money, which is produced by the banks. Among the cryptocurrencies are Bitcoin, Ethereum, Ripple, Litecoin, Zcash and Dash, and among their advantages is that unlike normal money, there is no middleman involved and little regulation. He said: “How risky is

cryptocurrency? In a word: very. In two words, very very. In investment terms, we say an asset is ‘volatile’ if it is prone to sharp decreases or increases in value over a short period of time. “Ordinary cash is (usually)

not volatile – interest increases its value only very slowly, inflation erodes it only gradually, and often the two cancel each other out. “By contrast, a highly volatile

asset will result in a performance graph that looks like the Big Dipper at Blackpool. Most cryptocurrency falls into that class.” “Cryptocurrency has

historically been amazingly turbulent – to the extent that people could wake up a millionaire and go to bed bankrupt, or vice versa. “This stuff is incredibly high

maintenance and needs to be watched like a hawk, ideally 24/7. “We as a company have

decided not to advise our clients on crypto for the foreseeable future – our message to investors is: if you try this, you are on your own.”

62 CHAMBERLINK March 2019


Use your cash reserves carefully, experts warn

Business owners should give careful consideration about when they choose to extract profits from their companies, an expert from national audit, tax, advisory and risk firm Crowe has warned. Johnathan Dudley, regional managing partner at Crowe, was speaking ahead of Britain leaving the EU on 29 March. Chancellor Philip Hammond has

warned that a no-deal Brexit would require an emergency Budget, and that the Treasury would take “appropriate fiscal measures” to protect the UK economy in such a scenario. Mr Dudley has now stepped in to

warn businesses that they should be planning how to manage their cash reserves ahead of a potential emergency Budget in April. He said: “Personal taxes, at least,

will most likely need to rise this year, regardless of who the Chancellor is, or which political party is in power. With the Chancellor hinting that a Budget may be held immediately after Brexit, any increase to taxes may not be too far away. “We don’t know currently exactly

how Brexit will play out, but it still seems likely that we will be leaving the European Union on 29 March this year.” “Our experience suggests that a

lot of companies in the Midlands, even many of the smaller SMEs, are sitting on cash. Anecdotal evidence indicates that business owners are

Beware of the Budget: Johnathan Dudley

‘Personal taxes, at least, will most likely need to rise this year’

both reluctant to pay dividend taxes and personal tax before they have to, and are also stockpiling cash for a rainy day.” He said there were two issues

that needed careful consideration. Firstly, businesses needed to

consider whether the tax situation would improve after a post-Brexit emergency budget, and secondly whether they had made maximum use of their potential to invest,

particularly in respect of capital allowances and research and development tax credits. Mr Dudley said: “Brexit has taken

a large amount of parliamentary time – for obvious reasons – but this also means, to an extent, that the Government has not had the capacity to dedicate all the time and resources required in other areas. “There is no doubt that, the

Chancellor, whoever that may be in March, will have to raise personal taxes as headline grabbing corporate tax increases simply do not raise enough money for the Treasury. “Depending on what happens

over the coming months, hindsight might tell us in six months’ time that taking profits now was the wiser choice. “Similarly, it is possible that

business tax allowances might stay the same, but it is possible that they may be subjected to greater restrictions or exclusions. “Rather than wholesale business

tax rises, we are more likely to see the usual tinkering around the edges, which will mean increasing restrictions on what can be claimed and by whom. “Again, hindsight might show that

deciding to bring forward investment plans was the wiser choice.” Mr Dudley added that it was

essential that owner-directors of business took stock of their corporate and personal tax position and understood where in the business lifecycle they currently stood.

Accountancy firms join forces

Accountancy and business advisory firm Moore Stephens has merged with BDO. The new firm, operating under BDO LLP brand, has created a 300-strong

team in the West Midlands, with ex-Moore Stephens employees moving into BDO’s base at Two Snowhill in Birmingham later this year. The merged firm will be part of BDO’s international network, which

employs 80,000 people and has revenues of $9bn across 162 countries. UK-wide, BDO now has a combined workforce of 5,000 people across 17

locations, delivering revenues of £590m. The merger, which also relates to the London, Reading, Bristol and

Watford offices of Moore Stephens, will make BDO the third biggest auditor of listed companies. Richard Rose, BDO partner in the West Midlands, said: “There couldn’t be

a better time for our two firms to join forces. “The audit market is going through a significant period of reform and our

Richard Rose

clients are facing unprecedented uncertainty as Brexit looms. However, with uncertainty comes opportunity and together we are in a position of strength to help ourselves and our clients be at the forefront of that change. “Our clear sense of purpose and strong growth strategy will help our entire team make this merger a huge success.”

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