Blog – January 2021
Debt, Lovely Debt!
Oh what an era to be an economist! First the credit crunch and now COVID-19 to get your teeth into.
Although no economist, I have read with interest the growing consensus regarding debt affordability. It seems that there is increasing confidence that we can accommodate larger debt burdens as a country, provided interest rates remain low, and that this can be achieved using Quantitative Easing (QE). The government (or strictly speaking the Bank of England) has been ramping up the QE holdings – from £200bn in November 2009 to nearly £900bn in November 2020.
Most commentators appear to believe that this QE will ultimately lead to inflation, which itself would be very helpful to reducing the impact of government debt. However, it may also run counter to the current Bank of England 2% inflation target (CPI currently stands at 0.3%).
For a government committed to levelling up we cannot ignore the possibility of future tax rises, but allowing inflation to ramp up might seem more politically savvy. I am not so sure that the next government budget in March this year will herald the magnitude of tax rises – and in particular changes to Capital Gains Tax/Business Asset Disposal Relief (formerly Entrepreneurs Relief) – that have been foretold.
I for one, will be glued to my screen on 3rd March.
Meanwhile, M&A activity in the tech sector remains robust and we have four deals currently in Due Diligence. So if any of you did take stock over the Christmas period and would like to arrange a 1-to-1 then please do get in touch.
Happy New Lockdown!