Wednesday, 22 March 2017

Dividend Tax Changes and Brexit – Damaging to UK IT company creation

In my previous post titled UK Budget 2017 –The Death Knell for Small Business? We scratched the surface in discussing how economic decisions made during political events like the budget, can impact on business creation and people’s wiliness to follow their ideas and dreams and start their own business. 2016 was a pretty big year from an IT contractor/Consultant perspective. New dividend tax and Brexit were amongst the political changes that appear to have impacted on the IT Contracting and Consultancy industries.

We saw in my previous post that the number of IT companies created that classified themselves as IT Companies had fallen with just over 15000 companies created, compared with 25000 plus in 2015 and over 21000 in 2014. That is quite a drop.

In this post I intend to drill into these figures a little more, to see how the dates of the political events occurring can impact on company creation.  We’ll focus on the last 3 full years 2016 2015 and 2014.

The following query will drill into the data a little more and break down the company creation figures, by month and year since 2014.

SELECT YEAR(IncorporationDate) as Yr
,MONTH(IncorporationDate) as Mth
,COUNT (*) AS NoOfCompsCreated
 FROM CompanyData
WHERE YEAR (IncorporationDate) >= 2014
AND ( [SICCode SicText_1] = '62020 - Information technology consultancy activities'
OR [SICCode SicText_1] = '62090 - Other information technology service activities')
Group by YEAR (IncorporationDate),
ORDER BY Yr, mth

In the graphs above, the top chart shows the number of IT company creations per month; note that from month 2 to month 6 (Feb to June )there is dramatic drop in IT Company registrations in 2016. Month 6 – June being the BREXIT vote in the UK. Month 4 is when the dividend tax changes came into place.

Surprisingly, the figures recover dramatically in the month after Brexit vote bucking the overall trend for total company creations, you can see in the second graph which shows total company creations across all industry fell the month after Brexit. IT companies bucking the overall trend

Whether it’s Brexit or dividend tax, company creation was certainly impacted by these two events last year. It will be interesting to see how the budget changes announced last week and the IR35 changes coming into play in the public, will impact on the IT industry – I suspect they will have an impact.

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