Member Article

North East business leaders respond to the Budget

George Rafferty, Chief Executive of NOF Energy said: “Although not a prominent part of the Chancellor’s speech, the Government has committed to expand the North Sea investment and cluster allowances it set out in the March Budget, which will hopefully inject fresh confidence into the industry. While we await the detail, it is clear there is a combined ambition between the Government and the oil & gas industry to maximise economic recovery from the UK Continental Shelf.”

Penny Marshall, Director of the Institution of Civil Engineers (ICE) North East, said: “The renewed commitment to the northern powerhouse, and efforts made to identify new ways to fund local roads are encouraging. The Chancellor is absolutely right; Government must be bold in its commitment to infrastructure if the UK is to achieve a rebalanced economy, increase productivity and maintain our competitive edge. We hope this also translates into bold decisions on aviation capacity, resilience and our future energy mix.

“Bold and strategic investment choices are also needed. We are at a critical point - the scale of the UK’s needs is large and growing yet public finances remain tight. As the spend review approaches, we hope to see Government make decisions for the long-term.”

Jeremy Middleton, Chief Executive of Middleton Enterprises, said: “From the Budget speech, it just confirms what some of us have been warning, that the North East has been left behind in terms of devolution. It appears even Cornwall are ahead of us. How much longer do we have to wait for our political leaders to seize the opportunities that the rest of the country have taken?”

Gillian Marshall, Chief Executive of the Entrepreneurs’ Forum, said: “The setting of the Enhanced Annual Investment Allowance at £200,000 on what the Chancellor described as a permanent basis is good news, not least because it allows businesses to plan their future investments. Coupled with the future plans for reductions in Corporation Tax to an 18% low in 2020 and investment in roads, this is good news for business and the economy. However, the lack of any reference to the North East in terms of progress on devolved powers was worrying and shows that we have catching up to do.”

Charlie Foster, Senior Manager – Taxation Services at North East business advisors and accountancy practice Ryecroft Glenton, said: “For a Budget that was supposedly not going to focus on business, there is a lot for employers to digest that will have an impact on their enterprises.

“Confirmation that the expected cut in annual investment allowances in plant and machinery to £25,000 has settled at £200,000 will deliver business confidence.

“However, while this allowance together with the cut in Corporation Tax will be welcomed by North East businesses and can serve to encourage investment and growth, there is a concern they could be somewhat countered by the introduction of the compulsory living wage for employees over the age of 25.

“Businesses in the North East that benefit from a lower cost base will soon have their overheads increased by having to pay a living wage that has been set to meet the challenges of areas with a higher cost of living.”

Charlie added: “The much-heralded increase in Inheritance Tax thresholds, along with the increases to personal tax allowances for the lowest paid and those paying the 40p rate will be welcomed by many although the reduction in tax relief on pension contributions will not be popular with high earners.”

Commenting on measures announced in today’s Budget Iain Sim, chief executive of Coast & Country, the largest Registered Social Landlord within Redcar & Cleveland, with a current rental housing stock of more than 10,000, said:

“The ‘reform’ of social housing rents for higher earners is certainly headline grabbing but it needs to be considered in context with the other welfare reforms going on and how they are affecting people.

“The Government’s stated objective is to take people out of poverty but if rents increase too much this could pull people back into hardship. More working households are living in poverty in the UK than non-working ones and increases in rent could exacerbate this situation.

“In parts of the North the differential is very low between social affordable and market rents so the money saved will be lower than other areas; however the impact might be to make the individual tenants worse off.

However we really need to see the detail, and take a view on the cumulative impact of all the various measures that the Chancellor announced before commenting on the impact of this one change.

“Unfortunately Coast & Country’s Money and Benefits Advice Team already assists many individuals who are struggling to make ends meet and I haven’t seen anything, so far, which will change that.”

Business Battle-Axe, Amanda Vigar, managing partner V&A VIGAR & Co. (Darlington) LLP, has backed Budget announcements that will support small businesses, but warned that some of the new measures that could slow economic growth.

Amanda, who has a blog called the Business Battle-axe (http://businessbattle-axe.blogspot.co.uk/), said: “This is a mixed Budget for businesses. The cut in Corporation Tax to 19% in 2017 and 18% in 2020 is great news for the British economy making the UK one of the lowest tax regimes in the world to do business. This will encourage both home and foreign investment into UK business, in turn leading to more jobs which are vital to the growth of the economy.

“The new Apprenticeship Levy for large employers welcome move as it feeds into the creation of apprenticeships by SMEs. At last the government is doing something that directly helps small businesses. The government target is to create an additional 3 million more apprenticeships this year and this is a good way of helping small employers grow their staff without taking on a huge financial burden.”

Amanda added: “Whilst, from an employee perspective, I support the creation of a Living Wage, I am not convinced that many smaller businesses will actually be able to afford such a large leap in wage costs. The Government is saying that the NMW will go up to £7.20 from next April and to £9.00 from 2020 for those aged over 25. A lot of SMEs are still living hand to mouth in a still very uncertain economy and over the next few years are already having to factor in extra costs with the introduction of auto enrolment pensions. I suspect that it will discourage those smaller businesses from taking on new staff, which will stifle growth in this region.”

In addition, Amanda was disappointed by the lack of action on late payment. “Probably the biggest issue to small businesses is cash flow. I believe that much work is still needed to be done” to tackle the crippling effects of late payments to SMEs”.

Steve Grant, Managing Director of The TTE Technical Training Group, said: “The Apprenticeship Levy will help build momentum for vocational training and increase the opportunities for young people to follow an apprenticeship route. With employers responsible for deploying the funding it is important they receive support from experienced training providers that can ensure they get value for money from their investment and the young people they take on earn relevant, industry-specific skills and competencies to benefit their careers and their employers.”

Bryan Bunn, Managing Director at the Nortech Group, a successful professional engineering design and project management company based at Wynyard, commented: “The crucial importance of the North Sea oil and gas industry cannot be over-estimated. There is only one significant announcement in this Summer Budget for the energy sector and it’s short on detail at present. The removal of the climate change levy on renewables could well encourage growth in the sector, however we do need more detail on this measure.

“There is little doubt that the government believes in making the most of the UK’s oil and gas resources, including the safe extraction of shale gas. Building on action set out in the March Budget 2015, it’s to be welcomed that the government will expand the North Sea investment and cluster area allowances to include additional activities which will maximise economic recovery. The government will also bring forward proposals for a sovereign wealth fund for communities that host shale gas development.”

He added: “On a general level, for potential North Sea investors, all the signs are that the smart money is on further significant oil and gas discoveries in the North Sea.

“The UK does have one problem, however. Should it focus on developing its own potentially world class shale gas reserves, its deep-water discoveries in the South Atlantic, or simply stick with the North Sea which forever keeps re-inventing itself”

Alan Gott, Tax Supervisor at Waltons Clark Whitehill, said: “This budget saw one or two things we were expecting a couple we weren’t. It’ll be interesting to see what the guidance says when it’s released and the impact it has on businesses and individuals.”

Anne Elliott, CEO at Latimer Hinks Solicitors, said: “The Budget statement contained many significant measures relating to the housing market. The announcement likely to have the biggest impact is the additional £175,000 inheritance tax allowance for those who leave their homes to their children or grandchildren from 2017. The relief is tapered away for those with estates of more than £2m.

“This is a move that will benefit families, enabling property to be passed more easily down the generations. It will ensure that greater numbers of hard-working families can keep the investment they have made in their properties and safeguard the interest of future generations. Wealthier families, with property values at over £1m will still be subject to IHT.

She added: “The extension of the income tax-free allowance to £7,500 for resident landlords who rent a room in their home is an additional key measure to be welcomed. But, buy-to-let landlords are set to be hit by new rules which will allow then only to offset interest against costs at the basic rate of tax, not the higher rate.

“All in all, it’s a significant Budget for families and for the housing market. Anything which helps families pass down their hard-earned assets to their loved ones has to be welcomed.”

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