POLITICS
Prepping your payments for Brexit
With the end of the UK-EU transition period rapidly approaching, now is the time for businesses to be addressing their currency needs, says Andy Medler (pictured), senior account manager in corporate partnerships at moneycorp, the Chamber’s foreign exchange service. He warns currency markets may fluctuate ahead of 1 January, affecting the amount of money businesses may receive when making an international payment.
As we move into 2021, we have massive ranges being forecast by the global banks, with GBP/EUR ranging from €1.05 to €1.20, a 12% swing; GBP/USD ranging from $1.20 to $1.51, nearly a 21% swing; and finally EUR/USD with a range of €1.15 to €1.27, just shy of a 10% swing. Add in the ongoing uncertainty with
He cautioned against reforming business rates
without wider consideration for how businesses are taxed elsewhere, otherwise “we could end up solving one problem and creating another”. Dr Marshall said chambers of
commerce have long been calling for annual revaluations as it would take many of the issues inherent in the system, while he also welcomed suggestions for a simplified valuation methodology and regional pooling so local authorities could retain 100% of business rate revenue growth. Commenting on a recommendation to remove
plant and machinery from the valuation process, he added: “I’ve heard from so many businesses
over the years that have said they’ve taken the decision not to invest in improvements to their premises because they were worried about increasing their fixed costs over time. “That’s crazy and should not happen in
a country that desperately needs investment and improvement in its productivity.” But he warned against abolishing
business rates relief without illustrating to businesses and landlords how things would
improve for them, while he said there must be assurances that removing the cap on total business rates revenue doesn’t just lead to firms becoming a “cash cow” for authorities to fund local services.
Centre for Cities feedback and recommendations
WHAT’S WRONG WITH THE BUSINESS RATES SYSTEM?
The report identifies FOUR fundamental problems with business rates: 1. Business rates do not reflect local economic realities
2. Business rates are too complex 3. Business rates disincentivise investment 4. Business rates do not incentivise local growth
HOW SHOULD THE BUSINESS RATES SYSTEM BE IMPROVED?
It set out 10 proposals for reforming of business rates in a way that addresses each of these issues:
Reflecting local economic realities 1. Introduce annual business rates revaluations
2. Devolve the valuation process to local government
Simplifying the system 3. Ensure the valuation process uses the most up to date local economic information transparently
4. Reform the system of discounts and incentives
5. Make landlords take on 50% business rates liability
6. Abolish business rate relief, with some exceptions for community groups
7. Equalise the empty rates relief between retail and industrial units
Promoting investment 8. Remove plant and machinery from the valuation process
Incentivise local growth 9. Allow local authorities that participate in a new pooling system to retain 100% of business rate revenue growth
10. Remove the cap on total business rates revenue.
Covid-19 and no one really knows what the future weeks or months ahead look like. Now, more than ever, is a time where
companies need certainty in their costs, rather than more uncertainty. Here is an example of how currency
fluctuations could impact a company’s finances and potential profit margin:
Manufacturer exporting goods to the EU • Client exports order for €500,000 for delivery in 90 days’ time
• At today’s rate of €1.10, the GBP return is £454,545
• In 90 days’ time, if the GBP/EUR rate is €1.16, the GBP return is £431,034
• Profits are therefore reduced by £23,510.
Company importing from the EU • Company spends €1m per annum on imports
• There is the potential for cost variance between £833,333 to £952,380 – or £119,047 – when looking at market forecasts for 2021.
By locking in your rates for a set period in
advance, this can help secure your costs, which in turn could protect margins and improve your bottom line. Chamber FX, powered by moneycorp, can
work with Chamber members, which don’t have to pay any transfer fees, to look at a solution that can remove some of the risks around currency movements. No one has a crystal ball, but currency
fluctuations could play a huge factor in making gains or losses. Through Chamber FX, we can look at some solutions and help remove some uncertainty for the bumpy ride ahead.
For more information, email
chamberfx@moneycorp.com or call Andy Medler on 07551 170665 or 0203 823 0526, quoting East Midlands Chamber.
business network December 2020/January 2021 61
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