Wesleyan’s Neil Richardson talks through the current economic climate and how dental professionals can best prepare for what 2023 may bring.
What do you expect 2023 to bring?
It’s really difficult to kind of give any accurate viewpoint on it because we can only speculate on what we expect to happen in the market.
But effectively the Bank of England have one job, which is to use their base rate to try and keep inflation under control.
They have a target rate for CPI of 2%. If we look at where things currently are, the Bank of England website lists CPI as 10.7% – so way above the 2%. We’ve also got a bank base rate of 3.5%. What the Bank of England is doing is gradually pushing up the base rate to try to have an impact on inflation.
Speculation in the market suggests that we might hit 4% early this year, with a potential peak somewhere near 5%.
That’s not great news for people with mortgages – the cost of fuel, gas, food, has pushed inflation higher and higher. That’s meant the Bank of England have had to move interest rates and that has moved mortgage rates for people.
The good news is that the Bank of England’s own monetary report published in November 2022 states that they expect inflation to fall rapidly in the second half of 2023.
How will dentistry be affected in particular?
You’ve got to look at it from the perspective of a dental businesses. Just like any other business, it will do well when people have more money in their pockets. Mortgage jumps that we feared would increase, for example, haven’t come in as steep away as we expected.
This should mean the average customer has more money in their pocket. Therefore, they’re still looking at spending some of that money on themselves. That’s obviously good news for dentists.
I definitely do see the cost of living crisis rebating a little. We all have to get used to a new normal of interest rates and inflation being higher than they’ve been since the credit crunch. That does have some impact that lasts.
I don’t think we’re gonna see everything revert back to the prices that we saw before. We’ve seen a big surge but they will definitely fall, so that’s obviously good news. We look at market speculation and that’s what it would currently tell us.
‘Particularly pressing’
Regarding the financial challenges within dentistry, one point is particularly pressing. This is the fact that IR 35 and the CEST legislation effectively becomes a real issue for dental businesses this year.
So IR 35 – to get away from using terminology – is the legislation that relates to off payroll working. It considers whether or not a person working under contract is legitimately doing so as a self-employed person or whether they should be deemed to be an employee.
A change in government legislation in April 2021 now places the responsibility on the firm engaging a contractor. This is the standard dental performer. They assess whether their terms of business make them legitimately self-employed or not. That means that practices are now responsible for considering the status of their dental performers before April 2023.
CEST is the check of employment status for tax, and it sits on the HMRC website. It’s effectively a series of questions that any individual or practice can run through to test where a performer is likely to stand against the IR 35 legislation.
What’s complicated that is that recently the BDA has come out with new guidance. It is ultimately a new contract for associates which identifies three different types of workers within dentistry.
These are employees, workers who are self-employed contractors (pay their own tax) and then non workers (traditional associate).
This just really highlights the importance of both individual dentists and practices carefully looking at each of the people performing dentistry.
Watch the full video above. This was recorded on 4 January 2023.
For more information visit www.wesleyan.co.uk/financial-advice/dentists.
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