Member Article

Autumn Statement 2016: London businesses tell us their hopes, fears and predictions

Today the Chancellor of the Exchequer, Philip Hammond, will unveil his first Autumn Statement, stepping into the limelight after assuming control of the government’s purse-strings in July. Infrastructure spending, housebuilding and a potential corporation tax cut are all rumoured to form key planks in Hammond’s strategy for staving off stagnation and plotting the country’s course through the continued Brexit confusion.

Ahead of today’s announcement, we’ve canvassed the views of a selection of London’s businesses to find out what they’d like to see.

Sinead Hasson, Hasson Associates

“Graduates and young professionals cannot afford to live in London so it is vital that we make London more attractive to people starting out in their careers. We have recently worked with a candidate who is worried about how to live in London on a starting salary which barely covers her rent & student debt.

“The issue of affordable housing and student debt are definitely key barriers for employers who want to hire in London. If we do not address these issues then we will not be able to attract the brightest and the best to help London and the UK economy to thrive.”

Lindsay Whitelaw, URICA

“Hammond has given only tenuous hints ahead of the Autumn Statement. A possible sign that he has yet to decide what the statement will bring, but more likely that he’s playing his cards close to his chest.

“What has been established is that he no longer believes George Osborne’s approach to be relevant in our current, post-Brexit climate.

“Hammond will need to turn on the tap for a flow of intelligent infrastructure spending to support the economy in these uncertain times. He must free up the political quagmire surrounding HS2 and Heathrow and follow through.

“Worries and a vacuum of certainty about the consequences of Brexit need to be addressed. This uncertainty seems set to remain. Triggering Article 50 will not mean the other side has to start negotiating immediately. Doing nothing for a while might seem a good negotiating stance if you were sitting in Brussels. So Britain must do all it can now to stimulate its own domestic growth.”

Martin Campbell, Ormsby Street

“There are two measures that I would love to see, both of which would have a real impact on the UK’s small businesses. First of all, the current tax system is a headache for small businesses and is in urgent need of simplifying.

“We have lots of different kinds of national insurance, we have personal allowances that appear at a certain salary and disappear at another, we have some things that are allowable as an expense for corporation tax purposes but not for VAT purposes. Clarity is long overdue.”

“In the run-up to the 2015 election, the government made much noise about a ‘name and shame’ website that was supposed to address late invoice payment. This has had little effect, so how about this? When a company files its corporation tax return it has to file its balance sheet, including what it owes to its suppliers.

“Why not add a requirement to report separately what is overdue to suppliers, and tax that at 25%? They’d still have to pay the original invoice, and would be making a contribution to the wider economy commensurate with the damage they are doing by unlawfully withholding cash from small businesses. Larger businesses, which report more often, would have to pay the levy each time they report.”

Nick Gross, Coffin Mew

“There is more limited scope for tax cuts, and any spending initiatives must be carefully chosen. Mr Hammond has said that there won’t be a spending “splurge”, and that he wants to focus on “shovel ready” projects, which can deliver the quickest schemes, offering the highest economic benefits, and the greatest increases in productivity.

“In particular, Mr Hammond has signalled that any fiscal stimulus in the Autumn Statement would be concentrated on boosting Britain’s roads and railways. Good news for the transport sector.

“It is notable that, except for HS2 (which is increasing in predicted cost with every new announcement, and given the shift in policy may not be invulnerable from slashing or pushing back in the queue), much of the government’s spending commitments are expected to be delivered via local bodies, such as the Local Enterprise Partnerships (through the Local Growth Fund), or via the Local Transport Majors for larger projects.

“However, money won’t be easy to come by – the current Local Growth Fund round is over-subscribed by five times, and in last year’s Autumn Statement the Department for Transport’s operating budget was slashed by 37% - the biggest drop for any Government Department – so there’s ground to make up.”

Nick Leavey, Coffin Mew

“I expect that a new multi-billion housing package will be announced in the Autumn Statement. This will largely take the form of HCA loans used to back developers of all sizes and it is proposed that the Home Building Fund will be increased from £3b to £5b.

“Our developer clients in particular will be keeping an eye out for something to this effect.

“It is also anticipated that there will be a more balanced approach between building starter-homes and build-to-rents. Theresa May is reported to be more amenable to the latter than David Cameron was, however that probably won’t be popular whilst the 3% SDLT surcharge remains in place.

“Oxford Economics Research say that SDLT increases are backfiring with 2,000 fewer £1m+ sales in the year proceeding the changes. This is having a wider impact on the economy - £8.3bn hit to gross domestic product, a £450m drop in wider tax receipts and the loss of 14,000-plus jobs.

“Many doubt the benefit of the SDLT changes for first-time buyers and are calling for Philip Hammond to make changes to reverse these effects.

“Developers are less inclined to pursue higher-quality sites for fear that prospective buyers will be put off because of the SDLT rates (particularly for dwellings +£1m).

“My view, therefore, is that, whilst the Government may seek to boost housebuilding via HCA funding for developers of all sizes, developers might not take the bait unless SDLT changes are promised in order to give prospective buyers confidence.”

Luke Davis, IW Capital

“In light of this year’s economic and political events, the upcoming Autumn Statement stands out as one of the most significant government announcements in recent years. At the start of 2016, small businesses accounted for 99.3% of all private sector businesses, 99.9% of which were SMEs.

“Since the Spring Budget, however, Britain’s scale-up community has been adjusting to the Brexit announcement and record low interest rates. These two events present significant opportunities, but businesses need to be provided with targeted government and industry support to ensure they are able to take advantage of them.

“Evidently, access to finance remains a significant issue for British scale-ups. A recent Parliament report on business access to finance found that British business growth is being restricted by a lack of awareness surrounding alternative finance options. Importantly, this report championed the role of venture capital schemes such as the Enterprise Investment Scheme as a vital source of business growth capital, and called for greater promotion of these schemes.

“Chancellor Philip Hammond should use his first Autumn Statement as an opportunity to demonstrate the Government’s commitment to these venture capital schemes.

“Amid record low interest rates and Britain’s withdrawal from the European Union, it is important that these schemes are used to support and grow Britain’s business community through the sustained injection of investor funds. Failing this, we risk undermining the full growth potential of Britain’s entrepreneurial talent.”

Mark Sismey-Durrant, Hampshire Trust Bank

“In order to help stimulate the UK economy, the government should lower corporation tax. A fifth (21%) of SMEs that we spoke to as part of our recent SME Growth Watch report said taxation in general is a key barrier to their business growth. We believe that easing this burden will create improved conditions for future growth.”

“We would like to see increased support for the housing market and smaller SME housebuilders in particular. Support to date has focused on larger housebuilders, but we think it is time for the large numbers of smaller SME housebuilders to be given a boost – so much of this translates into wider economic benefit.”

“Increasing investment in road and rail infrastructure projects will help to boost the economy at a local as well as national level. Our recent SME Growth Watch report found that contributions to the economy from SMEs in Leeds and Manchester are forecast to grow by 15% from 2015 to 2020, compared to 10% growth in value add in London over the same time period.

“It is important that we improve infrastructure across the country, as this will help make it easier for SMEs to do business with each other and cut work travel times.”

Marta Krupinska, Azimo

“After the uncertainty surrounding Brexit, this is one of the most hotly anticipated Autumn Statements in years. Markets, businesses and investors alike are looking to see how Philip Hammond will set some markers as to the future direction of the British economy in the light of the vote to leave the EU. Hammond needs to secure a climate of confidence again – and to ensure that the UK, and London in particular, remains a technology hub. Access to the best talent is paramount; in Azimo’s London office, 77% of our workforce are born outside the UK and that cross-cultural diversity is what makes our business thrive.

“Fintech is under particular threat as a result of Britain’s exit from the EU; it has thrived thanks to access to funding, great talent and a positive regulatory environment and it would be catastrophic if all this was undone. It will be interesting to see what he will say about tax and spending plans; he’s already abandoned George Osborne’s targets to ‘balance the books’ by 2020, meaning he might cut some taxes and increase spending on infrastructure projects to help stimulate activity.

“As we’ve come to expect in this country, November 23rd will – I’m sure – throw up a few surprises.”

LendInvest

“LendInvest believes there is a trio of access points which require coordinated action by industry and government to improve the capacity of SME developers to contribute to their fullest potential and put more homes on British streets: access to land, finance and skills.

“We believe that government could partner with financial services firms like ours to disseminate funds to SME developers. By getting more funds into the system, SME’s will have a greater opportunity to access a range of finance products and get their projects off the ground.

“A number of prospective developers find it difficult to access funding, with mainstream lenders often unwilling to offer finance for their projects. Initiatives like the LendInvest Property Development Academy are supporting aspiring professionals to transition to property development. With government support and endorsement, we expect to see rapid proliferation of such academies and initiatives across the country.

“Government should prioritise SMEs when selling public land to rebalance the shortfall of smaller developers, who are better incentivised to complete on land swiftly. This will quickly and meaningfully contribute to meeting government housebuilding targets.”

Tal Orly, Cogress

“Following a highly tumultuous year, the Chancellor would be would well advised to extend an olive branch to the property market by offering consumers and stakeholders alike certainty and stimulation.

“The market has already demonstrated its incredible resilience against Brexit-induced fears that have only stoked prolonged stagnation, amplified by the Stamp Duty Land Tax (SDLT) measures. Rather than provide a much-needed boost to public coffers, the stamp duty tax has led to an eight per cent decline in transactions, which has acutely impacted prime properties worth more than £1 million.

“In the Autumn Statement, the government must recognise the market’s forecasted uncertainty and offer help to first-time buyers looking to get onto the property ladder. If the Autumn Statement were to reduce or scrap the SDLT, this would form an accessible purchasing incentive that would boost property transactions across all levels of the market.

“The likely outcome will be that the Chancellor will announce a potentially £5bn housing package to galvanise the construction of new houses across the country. Although a reduction in SDLT for high value prime properties remains unlikely as it would be politically unpopular, the higher end of the property market would certainly benefit from a sustained period of stability as transaction costs have constantly increased since 2014. We hope that the chancellor agrees.”

Martin Hurworth, Harvey Water Softeners

“The Autumn Statement needs to lay out the direction of travel. It’s a big moment to see what the Chancellor is made of. We’re going to be investing more than we’ve done previously, but the country needs big, bold measures if we want more companies like Nissan to stay and invest here long-term.

“Investment decisions and future growth depend on it. I’d like to see Mr Hammond expand R&D tax credits and increase the potential cash repayment from HMRC on R&D spend from the current limit of 33.35% of the cost. He should also make apprenticeships a priority.

“The icing on the cake would be clarity around the UK’s negotiating position when it comes to trade tariffs. An indication of the Government’s ‘red lines’ when it comes to trading with Europe post-Brexit would allay many concerns.”

Martin Wright, AHR

“Housebuilding has to be a priority and we know the Housing White Paper will call for 1 million new homes by 2020 - but how and where will the money be spent? We believe innovative design, including the utilisation of offsite and modular technologies, has a crucial role to play in quelling the housing crisis. This approach can also help address the skills gap that threatens our industry - another issue I’d like to see covered.

“We hosted an event in our Birmingham office earlier in the year called ‘Infra-Penny Infra-Pound’. I hope this is how the Chancellor looks at Infrastructure spending, as extra cash for major projects like HS2 and HS3 will unlock wider regeneration and development opportunities.

“Similarly, I’d appreciate a clear message on the Northern Powerhouse and, more generally, that we see investment being used to push economic positivity and negate market uncertainty in the run-up to Article 50 being triggered.

“Plans for a construction spending spree and support to help businesses innovate would make me very happy indeed on November 23rd. Oh, and I would like a new pair of skis; but that is one for the guy dressed in red, not the one with the red briefcase.”

Carl Reader, The Startup Coach

“We might all be bored of hearing about Brexit and the US Elections, but the truth remains that the economy is in a fragile position, as business hates uncertainty. I believe the Chancellor will look to reassure the public about his plans for the upcoming years, together with his intention to reset the targets set by his predecessor.

“[On simplifying the tax system] There are a wide range of tax reliefs and different tax rates, and my prediction is that Hammond will use this opportunity to make his mark. One opportunity is the harmonization of Income Tax and National Insurance, which have different thresholds.

“Over the last couple of years, the government has looked to help multinationals by reducing Corporation Tax, yet making the system tougher for small business. I understand Hammond has met with leading small business representatives, and I would hope that he has taken their comments on board.”

Hugo Burge, Momondo Group

“UK businesses need this year’s Autumn statement to be supportive and reassuring, particularly after the political uncertainty they face post-Brexit and the US election result. One of the swiftest ways the government can achieve this is through its approach to corporation tax, with rumours of a cut to 15% continuing to circulate.

“The move to 17% is already driving a positive impact, and although I don’t feel the speculated 15% cut will actually come into effect, any acceleration that is possible should be applauded.

The Government’s investment in UK infrastructure, including further runway development, will be a focus for many – including Momondo Group. Following the important and overdue addition at Heathrow, new runways at Gatwick or Manchester are essential to the UK’s future health as an economic hub, and would help create a more connected UK to cater to an increasingly open world.

“As Hammond has previously suggested, judicious investment into small projects such as our rail and road infrastructure would support more decentralised and diversified growth too.”

Chloe Marienbach, Weroom.com

“With the recent Brexit vote and the abolition of the Help to Buy scheme resulting in a period of uncertainty, the struggle for young Brits to make that all-important step onto the property ladder is not going to ease up any time soon. This means that the demand for people needing to enter flatshares, particularly in larger cities, could continue to increase.

“However, with the changes made to stamp duty fees on Buy-to-let mortgages in the budget earlier this year and the recent announcement made by the government to impose stricter rules on buy-to-let landlords, costs for landlords are at an all-time high. Should landlords need to sell some of their properties to recover any costs lost, renters may end up having to foot the bill by losing their home and paying higher rent as demand rises.

“With buying a less likely option for some in today’s economy and the size of the rental market potentially shrinking, the government need to better support landlords who are at risk of selling their properties to cover their finances.

“It is fundamental that the government also provide more support for renters. The likes of the lifetime and help to buy ISAs have been great in helping those who are attempting to get onto the property ladder but something similar should be put in place for renters – people who are not yet in a position to purchase a property and are renting long term.

“In previous years, the budget and Autumn statement announcements have had a strong focus on assisting first time buyers on to the property ladder, which is certainly not a negative effort. However, given the uncertainty of today’s property market and a large number of young people still in rental accommodation, it is important for the government to refocus their attention on how they can better improve the conditions of the rental market and how they can support those within it.”

William Newton, EMEA Director, WiredScore

“Britain’s digital economy is growing at a tremendous rate, making up a greater percentage of GDP than in any other European nation. But many UK companies still need faster, more reliable, more affordable internet to be able to grow. Innovation is stifled when employees can’t even upload an attachment to an email.

“Nearly a third of British SMEs are still without access to super-fast broadband and 130,000 businesses receive speeds below 10Mbps. One reason for this is that many small businesses are being priced out of enterprise broadband solutions, using residential services with low and/or unpredictable speeds.

“Matt Hancock’s plan for full fibre has made it clear that he has high ambitions for the UK’s connectivity. However, before we get there, it’s essential that SMEs are able to access the internet they need at affordable prices. The Government must bring back the Broadband Connection Voucher Scheme and educate SMEs on the value of using it to buy enterprise-grade broadband services. This will ensure Britain is enabling our businesses to thrive in the digital economy.”

Paresh Raja, Market Financial Solutions

“Britain, and its UK Brand, is globally renowned for a robust property market spanning both commercial and residential investments and developments – in January 2016 Britain’s residential property market amounted to an impressive £6.17 trillion.

“National property demand was up 3% between Q1 and Q2 this year, extending from office buildings located in esteemed commercial precincts to prime residential real estate. The Brexit announcement has created some uncertainty in the market, and this Autumn Statement is the ideal opportunity for the Chancellor to give clarity to both retail and commercial property investors.

“Despite this uncertainty, the bridging market has continued to perform strongly – the volume of bridging loans in Q3 2016 rose by 54% year-on-year. While this is positive news, it demonstrates a clear demand for fast loans. I hope this Autumn Statement recognises the vital role bridging has played in stimulating property investment, catalysing the much-needed movement in commercial and residential real estate markets.

“From a property investor’s perspective, the Government’s decision to increase the stamp duty on additional property purchases from April 2016 means that investors now have to pay an extra 3% in tax. Real estate constitutes an important 12% of UK GDP, it’s important that the Government does not freeze certain sections of the property market through instruments such as stamp duty which could ultimately deter property transactions.

“At a time of significant political and economic transition, our post-Brexit government bears a critical responsibility to encourage an agile infrastructure for the property market, sustaining growth well-beyond the monumental events we have seen in the last year.”