3 December 2014

Business people and macro stack of euro coins

Kevin Horne, Nwes CEO summarises and comments on the parts of the Autumn Statement relevant to small businesses:

“What used to be a once a year occurrence subject to the highest levels of secrecy has morphed into a twice a year statement with pre event stories aplenty planted in the media. I am old enough to remember budget leaks being a cause for resignation now it would seem that someone would be fired if everything had not been leaked days before.

“For most people and businesses they are interested in what will affect their immediate plans and how changes will impact upon them. We are already in election mode and so every announcement will be ‘spun’ by every party in order to equate to their view of life and what they believe will win them the most votes.

“As businesses we have to put aside these petty games and understand what will really happen following the Autumn Statement. I’ve put aside those announcements which are of little interest to small businesses and have concentrated on the following key points:

Improvements in infrastructure.

All developed countries need to invest in improvements to infrastructure in order to remain competitive. These are major capital decisions which are unfortunately subject to party political timeframes. This is a major weakness as it delays implementation and resources are not necessarily spent where they are most needed. The UK will always fall behind its competitors in this regard until all such decisions are taken outside party lines and agreed by all parties who are then unable to unpick or delay matters if power changes. In the East we are promised some rail and road improvements but the details are sketchy and the timeframe is endless. As such we can expect to remain disadvantaged for many years to come. Of much greater importance is fast broadband and full mobile coverage. For a fraction of the money spent on road and rail we could have the fastest connectivity in the world within 2 years and yet we see a patchwork of improvements with no logic. Could it possibly be that a new road or train makes a much better photo opportunity than a new junction box? The verdict here is that it is welcome but the proof will all be in the delivery and no-one is holding their breath.

Business Rates.

This is a 400 year old tax which is basically unchanged in all that time. In case government has not noticed the world has moved on. We have a review taking place but this will not report before the 2016 budget – kicking it into the political long grass. Prior to the internet this was a broadly equitable tax as routes to market were fewer. What we have now is a penalty tax on those businesses which invest in offices and shops and create jobs. A radical new way of thinking is required but the issue (as advised off the record by a senior minister) is that this is a tax with very high payment rates – as such it is an ‘easy’ target. It is a tax which impacts more on the smaller business. An independent trader will pay much higher pro rata rates on turnover than say a supermarket and certainly more than an internet trader. The verdict is that political expediency gets in the way of common sense.

Bank lending.

The Chancellor has announced an increase in the Funding for Lending scheme by £500m. It sounds a lot doesn’t it? However, in the 3 months to the end of September net Bank lending REDUCED by £128m and £48bn has already been allocated to the scheme with no real net increase in borrowing so I doubt that many firms will benefit in any real way from this announcement. The concept is to be applauded but it needs to be combined with some grip upon Banks to ensure that the funding hits where it is needed. In cases such as Lloyds and RBS where the government holds the balance of power it has the ability to implement a change in mindset – to date this has not been evident on the ground. The verdict is that the concept is good but the delivery is flawed.

Oil Industry Supplementary charge.

The decrease in the oil industry supplementary charge is most welcome and needed. This is a ‘golden goose’ and we were in danger of killing this as the fields mature. The reduction in duty may help marginal fields which can only benefit the business base in the East. Offshore jobs are highly skilled, well paid and a source of real income to the Treasury and the local economy. Verdict – welcome and appreciated.

“I could go on but these are the key issues.

“The overall summary is that the Chancellor has done a good job with a limited hand. However the last five years have offered a chance for radical thinking when it comes to taxation and spending.

“In reality we have seen some tinkering yet where the Chancellor has been bold (Pensions/Stamp Duty) he has been widely applauded. Could this be an opportunity lost?

“I still believe that the government (whatever the colour) does not really understand small business and as such the best that can be expected is “crumbs from the table”. Stability is required going forward and so whoever is in power next May needs to build upon what has been achieved and be bold when addressing the concerns of small business. SME’s are the heartbeat of the UK so keep the blood flowing and see us thrive – restrict it and see us struggle and die.

“This is not party political – it is common sense.”

Kevin Horne, CEO

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