Spring Budget 2017: What North West business leaders want to see
This week, Philip Hammond will unveil his first Spring Budget since becoming Chancellor of the Exchequer in July last year.
With Article 50 due to be triggered later this month and the Government recently revealing plans for a new Industrial Strategy, the Budget looks set to arrive at a pivotal time for the UK economy.
But what could it mean for the North West? Below, we’ve gathered the hopes and predictions of the region’s business leaders.
Graham Gordon, Moore and Smalley
“My message to Philip Hammond is simple – do nothing. Workplace pensions, business rates, the national living wage, the Making Tax Digital laws; I can’t remember a time when businesses have faced so many major distractions.
“That’s before we even talk about tax where we recently overtook India as having the longest tax code in the world.
“Our entrepreneurs are being prevented from running successful businesses that create jobs and wealth. We don’t want anything else getting in the way.
“Take the living wage as an example. I don’t disagree that people should be paid more and, at a time when inflation is rising, we need wage inflation in the economy to keep people spending.
“However, it’s not just the increased cost of paying employees a living wage that firms are dealing with. Other staff are demanding more pay to reflect their relative seniority.
“In other words, the bar staff get more, so the bar supervisor wants more and so does the hotel manager. I’m aware of hospitality businesses who’ve had to put 30p on the price of a pint just to meet the knock-on effects of the living wage.
“You might say that’s all part of being in business. But how can we expect people to invest in their businesses when they have so much else to deal with?
“Unless the chancellor can do something so overwhelmingly positive it balances the economy, boosts exports and creates jobs in one fell swoop, I’d advise him to do as little as possible in this Budget. Just let business owners get on with it.”
Paul Nicholson, Luxor Group
“The Spring Budget provides an opportunity to support a thriving rental market which is not only good for landlords and tenants, but benefits the wider economy alike.
“I would like to see the government get behind the landlord population and support the individuals who supply much needed housing stock to the country. Landlords are an integral part of the solution to the housing crisis, not the problem. This means reviewing the planned changes to mortgage interest relief, which is likely to discourage landlords from investing in the property market.
“The stamp duty windfall gives the government an opportunity to reassess the further tax changes, undertake a greater assessment of the policy and back the rental market as it supports the development of new homes.
“Prioritising the private rented sector alongside owner occupation was a great step forward in the housing white paper, but these punitive measures contradict the government’s ambition to introduce more homes built for rent and could dampen investment in buy-to-let overall.”
Noam Handler, EY (North West)
“Keen to push the adage that ‘less is more’ by way of tax policy, the Government had hoped and planned that the first of its two Budgets in 2017 would be a low-key affair, ensuring a smooth run-up to the triggering of Article 50.
“These best laid plans could be frustrated and we may see some significant announcements, not least on the thorny issue of business rates which has been the centre of intense scrutiny in recent weeks.
“Elsewhere, with a review of modern employment practices already underway, the taxation of the self-employed is likely to be high on the Chancellor’s agenda.”
Phil Foster, Love Energy Savings
“There are a lot of unanswered questions being floated around in the run up to the last ever Spring Budget, and it will be interesting to hear Philip Hammond’s response to the recent Brexit proposals and the US presidency.
“Predictions thus far have assumed a ‘boring’ Budget will be on the horizon; a Budget which seeks to prioritise stability in the face of uncertainty. Obviously this should always be a key policy of government, but now it is more important than ever.
“For business owners, we’re expecting clarification on business rates, and a proposal for a reassessment of business taxation to make staying the UK to do business a more appealing option and not charging our native business just for staying put.
“Furthermore, energy security should move higher up on the agenda. As US oil production continues to put pressure on OPEC to keep prices at a viable level, the increased strength of the US dollar may pose future problems for the cost of this politically charged commodity.
“It will be interesting to see if the OBR’s forecasts predict stability or decline in the face of recent geopolitical changes but, what is for sure, is that business confidence needs to be a top priority if the economy is to remain stable over the next few tumultuous months.”
Nick Miller, Eden
“Communities and Local Government Secretary Sajid Javid may be telling us in his property White Paper that the housing market is broken. However, what we’re seeing on the ground here in Cumbria is a property market which is buoyant.
“We want to see Chancellor Philip Hammond ratify the support he has already promised for first time buyers. While the White Paper indicated a shift away from home ownership towards making rental more attractive, more help would be welcomed to encourage those who do want to own a property, and not just borrow one.
“Let’s also see the Lifetime ISA confirmed in the Budget as a way to help first time buyers save to buy their own little castle. But let’s not forget either those at the other end of the property market. Those who wish to downsize need to be offered support so that they can find and purchase the option they need to best suit their lifestyle, leaving family homes free for upsizers.
“There should be no further increases in Stamp Duty as any rise has the unintended consequence of hampering downsizers from selling.”
Rob Garbutt, LDeX Group
“The government understands the importance of providing businesses with stronger connectivity.
“The implementation of next generation connectivity is crucial for businesses and the wider economy to thrive and it is encouraging that the government is taking steps to address.
“After dedicating £1bn to bringing 5G and new fibre broadband into wider use across the UK in the Autumn Statement, we’d like to hear more details about the dedicated 5G strategy that ministers are currently drawing up.”
Paul Shannon, ANS Group
“Following on from the government’s recent Digital Strategy, we’d like to see continued focus on building digital skills.
“As the job market becomes digitally focused it’s more important than ever to provide young people with the knowledge they need to succeed within it. Addressing the skills gap must be a priority.
“We also hope that these plans to develop necessary skills are aligned with the government’s commitment to making the Northern Powerhouse a centre for knowledge and innovation – supporting businesses like ourselves to better engage with young people and bolster the technology sector in the region.”
Luke Massie, Vibe Tickets
“I’d like to see the Chancellor offer more support to entrepreneurs and startups in the Budget.
“Building your own business is always challenging and so new sources of funding, additional tax relief or support channels would certainly be welcomed. Innovative start-ups offer great potential for future economic growth and so I’d hope that the government will continue to focus on facilitating this.”
James Blake, Hello Soda
“As a Northern business owner, I am keen to see significantly more support for the Northern Powerhouse initiative in this Budget.
“Since the Brexit vote, it is even more important that the government invests in regions and businesses outside of London and, although the private sector is now working in partnership with government to make vision reality, we still have a long way to go to ensure that the UK technology industry doesn’t fall behind and businesses aren’t forced to leave the UK.
“Additional announcements regarding transport or funding would certainly be well received, and anything that supports talent development in particular would be welcome.
“I’m sure this is something all businesses across the region would agree with – particularly those in the technology sector. It would be brilliant to see government encourage further collaboration and between business and education.”
John Lyon, ICS
“We will be keeping a close eye on any developments related to the reformed IR35 legislation. The new legislation is due to be rolled out next month, however the release of the online tool has been delayed.
“As the online tool is a fundamental piece of the reforms, its late release must be taken into consideration, but it is unlikely that because of this the implementation of the new rules regarding IR35 will be delayed, so individuals should still be making arrangements to work within the new legislation.
“We are conscious there is still a lot of uncertainty surrounding IR35. Therefore we hope that the Budget will offer some answers for all those concerned. Either way, we would advise both public sector contractors and firms to plan ahead with the likelihood that the new legislation will come into play next month and if they are unsure, to seek out a compliant accountant for advice and guidance.
“Aside from IR35, I am expecting further movement in personal tax allowances, as well as movement in the 40% threshold as it is an election manifesto commitment. There may also be positive changes in fuel duty and air passenger duty, compensating for some of the increasing costs that are faced with the exchange rate changes we have seen post-Brexit.”
Lisa Wilson, Cowgill Holloway
“Over the last 12 months we’ve seen legislative changes regarding individuals holding property personally, with many choosing to incorporate their property business. As such, it wouldn’t be a surprise if property and investment companies were excluded from any upcoming changes to corporation tax, potentially even manifesting in a two-tier system where property companies are treated differently.
“In the 2016 Budget the Chancellor pulled a rabbit out of his hat, by announcing a cut in the rate of Capital Gains Tax, with the 18% going to 10%, and the 28% rate to 20% for chargeable gains, excluding those in relation to residential property. This measure is incongruous with the high personal tax rates and so we may see this reversed, being as there wasn’t a real reason for the initial reduction.
“Given the context, there will no doubt be measures to ensure the UK is not just perceived, but an actual attractive place to do business for inward investment. As to how these incentives might look will be interesting. They could be in the form of allowances and reductions, or a reduction in payroll costs. The rise in the annual investment allowance (AIA) to £500k was very well received, but has since been reduced to £200k, therefore movement around the capital allowances and spending could be on the cards.
“The Government’s own success story on figures cited on those perceived as aggressive tax avoiders is beginning to come to an end and so it’s likely that the attention will turn back to taxation of SMEs rather than the big headlines including the likes of the Panama Papers.
“With the fall in the value of Sterling, and a likely increase in inward investment incentives we’d expect to see an increase, and have already seen to some degree, in overseas buyers looking to invest in UK companies or overseas owners of UK businesses. As the demand for UK businesses increases, this could impact the value of businesses and potentially drive the price, which would be music to the ears of UK SME business owners.”
Mark Rathbone, Brabners
“The Spring Budget represents a real opportunity for the Chancellor to flesh out his plan for transport infrastructure investment. The government has stated that 1.2% of GDP will be set aside annually. What we need now is a clear outline of how this money will be spent nationally and where.
“Businesses across the UK will be hoping for greater transparency on the distribution of funding across the country and, in particular, how much will be spent outside the South East.
“In the Autumn Statement, the Chancellor did acknowledge the need to rebalance spending, but we’re still waiting for the specifics of how this commitment will close the gap between North and South.
“The media focus has consistently been on passenger transport with projects like high-speed rail. But equally as important is infrastructure focused on the efficient movement of freight and the relationship of this to passenger movements, as well as the interconnectivity of different modes of transport.
“It seems that we continue to see grand projects such as HS1, 2 and 3 and the Heathrow expansion without any national strategy as to how our infrastructure, planned and existing, can better connect to serve the whole nation most effectively and sustainably.
“The Budget should outline what the government wants to achieve through infrastructure, how different transport elements will be connected and what the benefits will be. Ultimately, businesses across the UK want a clearer picture of how the national transport infrastructure will look five and ten years down the line and how the government’s overall investment can impact upon that.”
Peter Dobson, PMD Business Finance
“In the forthcoming Budget, business owners will be interested to see if the Chancellor changes Annual Investment Allowances (AIA). AIA are capital allowances that allow a business to deduct the full value of an asset from their profits, before tax, in the financial year they’re purchased.
“AIA are currently set at £200k but they’ve been varied many times since 2008, ranging from £25k to £500k. The last time they changed was in January 2016 when they reduced from £500k to £200k. They were set at higher levels to stimulate business growth, especially in the manufacturing sector which has a heavy reliance on capital equipment and machinery.
“Even at £200k the saving for companies spending up to this amount on business assets can be as much as £40k. This incentive can influence asset buying decisions. Unused AIA can’t be carried forward and many clients accelerate buying decisions to ensure they utilise their AIA.
“Assets financed on hire purchase and loans still qualify, as do cash purchases. Equipment, machinery and commercial vehicles also qualify, but assets that are subject to lease agreements generally do not. There aren’t many Government incentives for businesses, so it will be interesting to see if AIA are changed on Wednesday March 8.”
Helen Watson, Aaron & Partners LLP
“We’ve already had the draft Finance Bill 2017 and that has given us a good idea of some of the government proposals we can expect to come into force from April.
“They include the alignment of National Insurance Contributions (NIC) for employees and employers and salary sacrifice limitations, where the government is fixing a taxable value of those benefit in kinds provided through salary sacrifice at the higher amount of the cash forgone or the amount calculated under existing benefit in kind rules. This means there will no longer be a tax benefit for entering into these agreements.
“We’re also expecting to hear plans for the alignment of dates for making good on benefits in kind. This will have the effect of reducing the taxable value of the benefit in kind.
“Additionally, small businesses are set to suffer with business rate revaluations coming into place in April. Some businesses could be faced with a 400% increase whilst some larger businesses may actually receive a decrease in their business rates.
“More generally, the main focus for this Budget has been on a predicted drop in government borrowing.”
Jamie Alaise, Manchester Outsourcing
“With the 2017 Budget on the horizon, and if recent key topic predictions are correct, the agenda will focus strongly on pensions. This perpetual focus on pensions will create new ventures and increased enterprise in the North West through the requirement to offer the public more support and advice on how to prepare properly for retirement.
“We have already received proposals at Manchester Outsourcing from several businesses wanting to acquire additional customers in the investment space, signaling that this is an area of growth.
“How will pensions look when we retire? Nobody really knows, as there have been numerous changes in recent years, however it is evident that there is a requirement for the public to have additional support and guidance on the best way to save and invest their money.
“This is due to the complexity around investments and poor interest rates offered by the banks’ standard saving options. Investments are rarely a first choice for the public and they often stick to pensions feeling that they are a safer option. With relentless changes to pensions, the public will be forced to look at other options that they previously may have avoided. This will give finance businesses the opportunity to help the public save and hopefully avoid the high fees that are often being charged to manage their investments.”
Andy Sagar, Kingsland Drinks Ltd
“At Kingsland Drinks we are calling on the Chancellor to support our industry with a 2% duty cut in this year’s Budget. We employ 300 people locally and are asking our local MP, Barbara Keeley, to lobby the Chancellor on our behalf.
“Independent forecasters have predicted that this modest drop would allow the wine and spirit sector to contribute a further £2.9bn in economic activity to a record breaking level of £52.6bn.
“In 2016 we warned that currency fluctuations post Brexit could lead to wine prices going up by an average 29p per bottle, which coupled with any rise on duty could be problematic for the wine trade.
“The cut would also help to boost the Chancellor’s coffers by a further £368m as the industry grows and revenues increase according to EY. These calculations are backed up by a recent duty cut success story. After a freeze in wine duty in the 2015 Budget, wine duty income increased by £136m (+3.6%) the following year.”
Geoff Wilks, TRP Consulting
“We are not expecting to see any great announcements on infrastructure in the Chancellor’s speech.
“However, it is our hope that Mr Hammond continues on the path he set in his Autumn Statement to continue to close the productivity gap that exists between London and the North. It is vital that we see that momentum maintained.
“Investors and developers need to have confidence in the economic outlook, even more so as we move towards the Brexit door. So the strong message from this Budget has to be that Britain is open for business.
“It will also be interesting to see what, if any, measures are announced to further support the increase in house building that the UK needs so badly.”
Nicola Rigby, GVA (Manchester)
“On the housing front, I think the market is expecting in general a focus on encouraging more SME presence in boosting housing supply. Reduction in stamp duty could be a big opportunity to encourage this - effectively this is currently either SME risk or a cost passed on to customers. It could be that this reduction focuses on SME sites alone, or to encourage higher density development on SME sites.
“The other thing that could happen is reducing or removing the interest rate increases on buy-to-let investors, which would address a concern now recognised by Government around the ability of private renters to access the market.
“Both are key themes of the White Paper so for me big opportunities for the Government to start to deliver against that specifically.”
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