Governments
Sep 11
I am proud of the fact that many of my readers do not know what my political views are. I am proud of that because I do not want this business angel blog to become a political rant (although I have done the occasional rant!). However, I did want to write a specific blog about how government uncertainty can have a negative impact on the business environment.
Businesses hate uncertainty. Uncertainty creates opportunities but it can also disrupt the environments you are working in. My biggest problem with the current British Prime Minister, Gordon Brown is that he cannot be relied on to make a decision and stick to it. This is not a political criticism of him, but a criticism of the way he operates.
Businesses need to be able to plan. The level of tax we pay is critical in our ability to make decisions about the future. There have been numerous occasions where his government has tinkered with the tax system only then to reverse the decisions made. Recently it has thought about imposing a windfall tax on utility companies. This then creates uncertainty for the utility companies and their shareholders. It disrupts their ability to make optimum decisions.
A classic bit of uncertainty surrounded the housing market. The government had let it leak that they were thinking about reducing or suspending the transaction tax imposed on the transfer of houses (stamp duty). No one is going to be buying and selling in the market if they feel that the tax (which can be up to 5%) is going to be tinkered with. As a result, they exacerbated an already depressed housing market. It is only last week, after many weeks of uncertainty, that Gordon Brown has finally clarified the situation. This is poor governance.
When you are the CEO of a company, the one thing many of your staff will look for you to provide is certainty and clarity. It is true that in these turbulent times, you may not be able to provide certainty, but you should always be able to provide clarity. When you are in a position of authority, people will attach weight to what you tell them. You need to be very careful not to raise their expectations to a level that you cannot meet.
As Gordon Brown can tell you having spent 10 years building up his credibility and authority, it takes a long time to acquire it. He will also be able to tell you that it can be destroyed very quickly.
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