Member Article

Summer Budget: What North East businesses are saying

Chancellor George Osborne will deliver the summer Budget tomorrow, following the surprise Conservative Party majority victory in the General Election.

The Chancellor is expected to focus on revenue raising measures, while setting out his plans for the future direction of the UK’s tax system.

We’ve asked a host of North East businesses to comment on what they’re expecting from the budget and what the first Conservative Budget since 1996 could mean for the region.

Simon Whiteside, Tax Director at EY in the North East

“In the upcoming Budget, the Chancellor will have to strike a balance between the commitments he made prior to the election, both in terms of spending and tax constraints, and his need to generate revenue.

“As history shows, the first Budget post an election is when most Chancellors seek to fill their coffers, hoping that the benefit of spending those additional funds outweighs any initial pain.

“The Conservative Party’s manifesto pledge for a Tax Lock on VAT, National Insurance and Income Tax (that together make up two thirds of the overall tax revenues) limits the Chancellor’s room for manoeuvre. As a result we may expect to see tackling tax avoidance feature heavily, as a means of expanding the tax base, or indeed the number of taxes.”

Ted Salmon, North East Regional Chairman, Federation of Small Businesses

“The North East’s small businesses are reporting record high levels of confidence. Unemployment is continuing to drop, wage growth is at a four year high and there are encouraging indications that productivity is finally on the rise.

“The Budget is an early opportunity to provide a boost to the increasing positive sentiment, and for the Chancellor to demonstrate his pro-enterprise credentials by again backing small business to deliver the growth and jobs the economy needs. That effort must however begin with a continued focus on reducing the deficit that remains too high for comfort.

“As our submission sets out, further supply-side reforms to boost the UK’s flagging productivity should be the other main area of focus. As well as progressing existing policies, this will require all parts of Government to co-ordinate their efforts and focus on areas such as raising skills in the workforce, simplifying the tax system, encouraging exports and removing barriers to enterprise

“In doing so it’s important that no areas are left behind in this recovery – rebalancing economic activity and raising the performance of the North East and not just London and the South East must be a priority for this Government. Though improving, our research shows that confidence in some areas lags behind that of others. There is no quick fix to this issue.

“As is widely recognised, long-term efforts are required to stimulate growth and raise productivity in areas outside of the South East, which is why the FSB has continued to call for investment in infrastructure in these regions to help rebalance growth. The Chancellor must therefore follow through with much-needed infrastructure development across the UK as a whole by enhancing transport links, improving broadband and investing in the Northern Powerhouse.

“By delivering the recommendations set out in our budget submission, the Government can create the right environment for small businesses and enterprises to flourish, making the North East economy one of the most buoyant in the world.”

Lee Watson, senior tax manager at Clive Owen LLP, Durham

“It’s clear that business owners were not satisfied with the outcome of the previous Budget and hope that now that the coalition Government is no more, a single Government can make things easier, in the upcoming Budget, rather than the previous situation where many agreements and compromises were made.

“As a firm, it would be great to see some policies introduced to help the smaller business grow, as these businesses really are the backbone of the economy and entrepreneurs should be able to concentrate on working on the business rather than in it, dealing with red tape.”

Chris McDonald, CEO of Materials Processing Institute on Teesside

“The previous Government had a successful industrial strategy based around sectors, such as automotive and aerospace. We anticipate a shift in this to include additional sectors, such as rail and metals and also more focus on the eight great technologies, such as advanced materials.

“This is welcome, but we also want to know how the Government will use innovation policy to reach further up the supply chain, to create strength and depth in the economy, beyond the large household name companies. We anticipate early indications of measures to support the reshoring of these supply chains back to the UK, through support for skills and innovation particularly.

“We need to see how the Government intends to develop plans for the Northern Powerhouse. Other than Manchester it isn’t clear what areas will be involved and how it is possible to engage. We remain extremely positive about this development, particularly how it relates to innovation, including the Sir Henry Royce Centre for materials research, but there is a danger of duplication if it remains inaccessible to potential partners. We also need to see more positive investment in regional transport infrastructure.

“A major concern for manufacturers is the strength of the pound and the adverse effect of this on achieving an export led recovery. The Bank of England is in unchartered waters with falling unemployment, low interest rates and low inflation, allowing little room for manoeuvre on the currency side. We will be interested to see what the Chancellor makes of this macro-economic environment and how it impacts on his long term economic plan.

“The Chancellor will also be rightly concerned about the relatively low level of productivity in the UK and here again we anticipate a positive environment for innovation, as the only certain way to raise productivity and overall standards of living.”

Stuart McKinnon, Tax Partner at Baker Tilly North East

“With the backing of a Conservative Parliamentary majority, the Chancellor would dearly love to be able to lower taxes to appeal to the party faithful, but with a stubborn deficit and a growing debt, his options are limited.

“Public spending cuts will only go so far meaning taxes will have to rise. The question then is where? With pre-election promises ruling out any rise in income tax, VAT and national insurance, and with any change to the corporation tax regime very unlikely, we will need to keep a close eye on which groups of individuals stand to lose out.”

David Nicholson, Managing Director of Billingham-based Nicholson’s Transport

“There needs to be more support and funding for driver training before the country grinds to a halt. The transport sector is what is driving the economic recovery yet we are at a position now where more and more experienced drivers are leaving the industry.

“The Road Haulage Association (RHA) is calling for a £150million fund to identify and train the 45,000 drivers that are needed now never mind the 35,000 who are due to retire over the next two years.

“There is so more to becoming a driver than just getting a licence, there needs to be an incentive to employers to take on newly qualified drivers and give them hands on experience.

“We are proud of being a successful North East company and want to promote the sector and the region. But for that to continue, the sector needs a steady supply of qualified and committed drivers.

“We have had genuine and meaningful support from Government initiatives that rewarded small businesses who invest in training, such as those developed by Tees Valley Unlimited. These have helpedNicholson’s Transport to fund several additional new posts in recent years.

“Supporting business via grants, apprenticeships or job creation schemes has far greater benefits in the long run.”

Mr Nicholson is also calling for the Chancellor to make a meaningful cut to fuel duty.

He added: “We have had a repeated stay of execution from the Chancellor in the last few budgets but we need more of a commitment. A reduction in fuel duty would be a clear statement from the Government that they are willing to support the transport and logistics sector.”

Look out for North East reaction to the Budget later this week. To submit a view email Jamie at jamie.hardesty@bdaily.co.uk.