2023 - Time to Take a Gap Year?

21st Nov 22

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The gap year was once the preserve of teenagers. It bought time between the completion of A-levels and embarking on a degree course. It was often presented as an exercise in self-improvement but was, in truth, mostly about fun. The ambitious went to Australia. The less dynamic would stay in bed.

In recent years, though, the career break has become popular with more and more full-blown adults. It has offered the chance to recharge the batteries and to explore some pastures new. The trend has probably been accelerated by COVID-19, with the aching desire to escape the limits of lockdowns.

About the only people less inclined to seek a gap year will be those about to start as students.

Thanks to Jeremy Hunt’s Autumn Statement on November 17th and the forecasts of the Office for Budget Responsibility (OBR) which accompanied his tax increases and spending constraints, will the queue outside the CFO’s office asking for a year off work become longer? There may be CFOs themselves who are considering whether they should be part of that crowd. About the only people less inclined to seek a gap year will be those about to start as students. They may be destined to discover that the Bank of Mum and Dad is not only shut but redirecting the cash.

For all of the many charts and numbers churned out by His Majesty’s Treasury (and it still feels odd to describe it in that manner) and indeed the OBR itself, the central assumption and proposition is this. The economy, having grown reasonably robustly in 2022 despite rampant energy prices, supply lines that have been thoroughly disrupted and a political performance that if captured in a film may be entitled Carry On Up The Conservative Party, has already slipped, if comparatively mildly, into a recession, a state of affairs that will become more entrenched through the whole of 2023 with, if we are fortunate, a corner being turned right at the end of the year and far sunnier prospects in 2024. During that time, if we were not feeling downbeat enough, we will all be taxed more for our efforts. Hence the idea that somehow skipping out 2023 could be a smart move might really obtain traction.

One has the sense that all over the United Kingdom, citizens are digging in.

Some people may do so. The vast majority of us will not. We will grin (sort of) and bear it (kind of). There are already signs that the great British stoicism of old has not deserted us. This is, after all, the nation which invented the queue, which spent years believing that central heating was something which those feeble types on the continent had, but that we were made of sterner stuff, which bid a tearful farewell to the outside lavatory and which for decades after the end of World War II put up with a standard of quality in many restaurants which implied that rationing had not been abolished. One has the sense that all over the United Kingdom, citizens are digging in. They will have a blast at Christmas but after that wallets and purses will be mothballed, plans for expensive foreign travel curtailed and long-lost pullovers retrieved from the back of wardrobes as the heating is turned off.

You can sense this modern version of the Dunkirk spirit in the manner in which Mr Hunt’s measures appeared to have been received by the public. We are in one sense a strange bunch. On September 22nd whoever that woman was who was briefly Prime Minister and whoever that chap who was Chancellor for an even shorter stint announced that they were going to hand us back the better part of £45 billion in tax cuts (with admittedly some securing a larger share of it than others). This was, it could be argued, merely returning our own money to its rightful recipients. What did the opinion polls immediately indicate that our collective reaction to this initiative appeared to be? We hated it. And that was the message of the instant surveys, even before it became clear that the mini-Budget was actually a maxi-bombshell that was about to send mortgage rates into the stratosphere, provoke the pension fund sector into a cardiac arrest and direct the pound to Davy Jones’s locker. Even the further sweetie of the Government paying much of our fuel bills could not win it friends.

It turns out that what many voters want is a sense of stability, certainty and senior ministers who can probably tie their own shoelaces.

Look at the contrast with the Autumn Statement. Virtually all the tax cuts once pledged have been abandoned and indeed replaced by a whole raft of tax increases that no one offered any hint of as little as three months ago. Many of these are being aimed at precisely the same people who we were informed until very recently needed to be incentivised by tax reductions, and the complaint from the electorate, in so far as there is a focused one at all, is that the Chancellor should have gone even further now that he has become an advocate of what could be deemed “trickle up” economics. The prediction of a recession was received with a weary shrug and the sense that it could have been worse. The limitations on spending, which are not scheduled to start until the middle of the decade, seem less likely to trigger riots on the streets than Matt Hancock being on I’m a Celebrity (alas the lowering of the threshold at which one starts to pay at the 45p rate from £150,000 to £125,000 does not come in until next April so there will be no reduction in what he takes home from £400k).

It turns out that what many voters want is a sense of stability, certainty and senior ministers who can probably tie their own shoelaces (even if the shoes concerned cost some £500 plus a pop). The Conservatives may have taken a massive (perhaps fatal) hit in terms of the next election, but they have (possibly only temporarily) ceased to be an out-and-out sh*t show. The sentiment is there that some grown-ups are back in residence at 10 and 11 Downing Street and that is a good thing even if it means that they insist that we have to do our homework, cannot have a second helping of pudding and must tidy our bedrooms on a regular basis. Order has triumphed over anarchy, even if there will be less money to spend next year and we have to cope with a contracting economy for 15 months.

What should a CFO conclude from all of this? That most of us are prepared to tough it out. That we respect coherent and consistent leadership even if we might choose a different direction of travel. The numbers taking the option of a gap year for 2023 could rise but not by much. That the quality of management is only truly tested in times of adversity and that decisions taken in such circumstances are what can secure the lasting support and trust of staff. Recessions are not a laugh and that will be especially so for companies that rely on consumer sentiment. It is better, however, to show that you can rise to the challenges that a recession will bring than be in denial and become a laughing stock.