Blog / Spending cuts and tax increases…

2010-10-29 18:09:12

Spending cuts and tax increases…

The current round of government spending cuts coupled with the need to increase government revenues (increased taxes !) will continue to hit our industry hard.

There may be some sectors more resilient than others, however I believe that all areas will see a continuing challenging environment ahead.

We will see government spending cuts translated into a reduction in direct business opportunities, typical examples will include :

  • The ‘Building Schools for the Future’ programme indicates that many school new builds and upgrades will be significantly delayed or cancelled, thus reducing the option for sound, lighting and audio-visual installations
  • Leisure centre funding being scaled back
  • Less funding for cultural events
  • Schools discretionary spends being reduced, lowering the available funds for productions, disco’s, speech days, open days, sports days, etc.

The government spending cuts will also have an indirect impact, for example :

  • The public sector will shed a huge number of jobs
    • unemployed people don’t : organise parties, buy tickets, attend events, etc.
    • unemployed people do : delay weddings, set up in competition, etc.

Clearly this is only a brief list of reduced opportunities, less disposable income and insecure job prospects will exacerbate the recent recession, as will the continuing threat of the dreaded ‘double dip’.

The corporate arena will also suffer. Already we are seeing corporate events cancelled or dramatically scaled back.

Just when we are developing plans aimed at mitigating the adverse effects of government spending cuts we are being hit by increased taxes.

The government have identified, and will continue to identify, ways of increasing their revenues. The main immediate headline is the increase in Value Added Tax (VAT) from 17.5% to 20% from January 4th 2011. This increase will realise a staggering increase of £1Bn per month for the government – this means up to £1Bn a month less discretionary spend for our potential customers !!

Is there an upside to this scenario for our business ?

Well, it might be rose tinted glasses time, but I do think we need to think positively and use this situation to sharpen our propositions

Event providers have got to look to generate value added features and services and clear proposition differentiation over their competitors. In the short term this might mean investment in their portfolio offerings, a very tough decision in an austerity climate. However such investment now will create the competitive price/performance advantage demanded by customers, meaning more bookings now and a great platform to build on as the expected financial and job market improvements occur.

Langley Sound & light face similar challenges to the event providers and have been evaluating how we can help develop a climate where our customers might benefit

With this in mind we are committed to :

  • Ensuring that our customers are well aware of the VAT increase
  • Offering some special pre VAT increase deals
  • Offering new products (from small LED clusters to the recently launched video iMax 2010)
  • Considering finance packages for high cost  products/solutions/installs for exceptional cases
  • Ensuring anyone who needs a service package (e.g. rig service, feature additions, etc.) can be scheduled in before VAT increase becomes effective

If there is any area where we can deliver mutual benefit by supporting you, please let us know