Spring Budget 2017: A roundup of North East business reaction
With British debt now up to £1.7trn, the equivalent of £62k per household, Chancellor Philip Hammond was today tasked with delivering a Budget that not only improves long term fortunes but also prepares for the short term spectre of Brexit.
But with Britain spending £50bn on debt interest a year - more than it spends on defence and policing combined - Theresa May’s hopes for a successful, all-encompassing Industrial Strategy must galvanise multiple sectors and industries if we are to stand any chance of becoming a world-leading business hub.
In a Budget which placed much emphasis on skills, the subjects of exports and foreign trade were largely held in the backdrop. Announcements regarding tax contributions look likely to stir the self-employed whilst the Northern Powerhouse was again touched on, with £90m plans revealed for Northern areas in desperate need of improvement.
The government will be publishing multiple papers in the coming daysbut until then, Bdaily North East provides you with the most comprehensive look at how the region’s business community is feeling after hearing Hammond’s speech.
Anthony Andreasen, director of tax at RMT Accountants & Business Advisors
“The Chancellor’s commitment to making no unfunded spending promises adds even greater focus than already existed on HMRC’s collection of all the revenues that it believes are due, and the taxman has been given the go-ahead to open up many new fronts on which to continue to fight this battle.
“The Budget contained plans for substantial changes to the tax and National Insurance arrangements for people with differing worker status, most especially for company directors and the self-employed, and it will be very interesting to see how this translates into practice over the coming months as the implications become clearer.
“The reduction in the administrative burden around accessing the Research & Development tax relief system will be welcome by North East businesses looking to invest in their futures.
“This relief can apply to a wide range of manufacturing activities and related staff costs as well as to scientific discovery, and we would very much encourage all regional firms to review whether any of their existing or planned activities qualify them to take advantage of it.”
Ted Salmon, North East Regional Chairman at the Federation of Small Businesses (FSB)
“We are deeply concerned about the sudden announcement of a tax rise on the self-employed. In the North East there are approximately 100,000 self-employed who contribute £4bn to the economy.
“They are a hugely important part of the region’s business community and need to be nurtured not neutered. The genuinely self -employed are qualitatively different than employees. Given the spiralling costs of doing business they need help and support from Government, not additional tax burdens.
“The National Insurance rise to 10% next year and 11% in 2019 should be seen for what it is – a £1 billion tax hike on those who set themselves up in business. This undermines the Government’s own mission for the UK to be the best place to start and grow a business, and it drives up the cost of doing business. Future growth of the UK’s 4.8 million-strong self-employed population is now at risk. Increasing this tax burden, effectively funded by a reduction in corporation tax over the same period, is the wrong way to go.”
Steve Grant, Managing Director of TTE
“Placing skills at the heart of the Budget will be a key part of addressing the UK’s productivity challenges and providing the skilled people industry needs. The introduction of T-levels, along with the growing prominence of Apprenticeships, will put technical jobs and training at the forefront of educational routes for young people, which will benefit UK industry employer.
“I was pleased to see the Chancellor raise the importance of re-training and I hope in the planning of its pilot schemes, DfE looks to the achievements made on Teesside to successfully deliver upskilling and retraining, most notably for former SSI workers.”
Michaela Reaney, MD of Gradvert
“There is more urgency than ever for industry to develop its skills base as we move towards Britain’s exit from Europe, and we’re starting on the back-foot, with the UK having been behind the pack on vocational and technical education for some time.
“Support for technical education is vital. University is not for everyone and there are people who benefit more from hands-on learning. We need to be able to take those skills further and the investment will surely raise the quality and status of workplace skills.”
“For so many young people, unless they go on to university, they simply cannot see a route to a higher level qualification, and with higher level apprenticeships and greater ease of accessing technical training, this will soon become a route that a great many more young people take to access the career of their choice. This Budget announcement is a step in the right direction.”
Gary Hutchinson, chair of Sunderland Business Partnership
“The Chancellor’s increasing focus attention on technical skills is something that I think can only benefit Sunderland and is therefore to be welcomed. Key industries in the North East, and in particular, Sunderland, rely on the availability of skilled talent to support their growth, and in many of these cases, it is through apprenticeships that employers will find this talent.
“As a former apprentice, I am a huge advocate of a technical route into the world of work; it is about time that vocational education was placed on an equal footing to academic education.
“In Sunderland, I am proud to be part of a movement of businesses and organisations that are working together to raise aspirations, and demonstrate to young people the various routes into employment that are available to them.”
North East Entrepreneur and Investor Jeremy Middleton
“The Government’s commitment to find three months’ real work experience more of our young people in further education is a positive things for jobs and skills in the North East. This highlights the importance of the work of schools like Studio West, which make work experience an integral part of their curriculum. I hope to see further progress in the area when our region finally gains devolved powers.”
Penny Marshall, Regional Director of the Institution of Civil Engineers (ICE)
“The Chancellor’s announcement on funding for the alleviation of pinch points is a welcome boost for infrastructure in the North. The proposed competition between local authorities for resources for fighting urban congestion is something I’m sure the ICE and our members will take an active interest in this.”
Rachel Turnbull, CEO of TT2 Limited, the operator of the Tyne Tunnels
“From a North East perspective, the uncertain future of transport funding from a possible devolution deal makes the promise of investment to alleviate pinch points very appealing, although £90 million for the whole of the North is not a substantial figure. A regional traffic model would help us make the best use of the money we do receive, putting the needs of the region as a whole first, rather than allocating it local authorities on the basis of who shouts the loudest.”
National Insurance Contributions
David Elliott, KPMG’s Newcastle office senior partner
“Despite assuring us that he was committed to Britain being the best place to start and grow a business, the Chancellor threw the SME community a curve ball with the announcement around a NIC rate change for the self-employed. It is a sticking plaster as the Government looks for a more permanent solution to the disparity between employees and the self-employed. For those entrepreneurs who believe reduced NI is the quid pro quo for a lack of paid annual leave and sickness pay, the announcement may be a bitter pill to swallow.
“Add to the proposed NIC increases a reduction in the dividend allowance from £5k to £2k from April next year, and it was not a great day to be a small business owner.”
John Savage, Managing Director of Flame Heating Spares
“I have long been an advocate for supporting small businesses and the self-employed, as we deal with a lot of sole traders every day, but I feel that the rise in NI contributions is very harsh.
“The 1% rise next year, with a further 1% increase in 2019, will hit the self-employed in their pockets, so while this tax increase may benefit the Treasury, it could have a detrimental effect on various industries, including the heating and plumbing trade.”
R&D and Robotics
Richard Baker, North East Local Enterprise Partnership Head of Strategy and Policy
“We welcome the continuing focus on building productivity and employment. The announcements on technical skills and lifelong learning are the right focus to ensure that our labour market can respond to changing technologies and demographics, following on from the Autumn Statement focus on innovation and infrastructure.
“The announcement of £270m from the Autumn Statement’s Industrial Strategy Challenge Fund into new technologies such as robotics, biotech and driverless vehicles will present specific opportunities for our North East economy.
“These themes are identified in the North East LEP’s Strategic Economic Plan, as is the opportunity for securing additional funds towards enhanced broadband and 5G connectivity.”
Brian Palmer, CEO of Robotics Design and Manufacture company Tharsus
“The Chancellor’s pledge to simplify the application process for R&D Tax Credits is a step in the right direction, as is the creation of 1,000 extra STEM doctorates and fellowships.
“We also welcome his pledge of £270m funding to keep the UK at the forefront of disruptive technologies such as biotech and robotics. These policies will create jobs and growth in the short term as well as help to future-proof our economy.”
Jonathan Scott, Tax Partner, Haines Watts
“It’s good to see that the chancellor has taken on board industry calls to simplify the administrative process of Research and Development Expenditure Credit (RDEC) tax relief, though we are yet to hear the details of which aspects are going to be changed. This increase in simplicity will hopefully create more certainty around claims, encouraging more businesses to apply. Currently the RDEC process can be very time consuming and complex which often puts off companies from claiming.
“The budget reaffirmed the Government’s commitment to innovation and research, outlining once again that they believe this to be a key driver in economic growth. At Haines Watts, we are seeing first-hand just how valuable R&D tax relief can be to businesses – allowing them to innovate, grow and remain competitive.
“The latest budget also described a commitment to further publicise the R&D relief for SME’s as companies that are able to claim under the relief are still not doing so, even though the latest figures show an increase in uptake of the relief. This should hopefully mean more qualifying companies undertaking claims in the future.”
George Rafferty, Chief Executive of NOF Energy
“This is a positive step towards maximising the assets of the UK North Sea. It will provide opportunities for smaller operators to deliver the economic recovery of resources utilising the skills, safety-led practices and technology-led solutions of the UK supply chain.
“This can form part of the collaborative approach that is taking place between the industry and government to ensure the sustainability of the UK North Sea and it’s valuable place within a balanced energy mix.”
Nigel Mills, Chairman of the Entrepreneurs’ Forum
“The freeze of excise duty on beers and spirits is welcome as these British industries already bear a heavy tax burden and in the post Brexit world we need them to grow, both domestically and abroad, to create the jobs and wealth necessary for the country’s future prosperity.
“The increase in National Insurance for the self-employed is designed to close a loophole, but for some aspiring entrepreneurs this is another reason not to take the bold step into self-employment and ultimately build a business, which in the future can employ others.”
Craig Cumpson, Head of Tax in the North East at EY
“Business rates featured today in a budget with very few tax changes, but even here the changes were small and focused on the smaller business community. Following furore over the increases arising from the revaluations, the Chancellor announced a discretionary support fund, some targeted support for Small Business Rate relief recipients and a special £1,000 discount for small pubs.
“These changes will be welcome by those receiving them, but they still don’t address the underlying tax hike – from the 41.4% rate imposed at the last valuation to the 48% rate coming into force in April. Large businesses, which have had little help in either this or the last Budget, still face some of the highest property taxes in Europe. Given that business rates are paid even before a single pound of profit is made, this can act as a real deterrent to UK investment.
“The Chancellor hinted that he would be looking at “a better way of taxing the digital part of the economy” in the medium term, but gave no details or timeline. This was an issue ducked by his predecessor in the recent consultation on reform, so perhaps he was wise to avoid committing himself.
“So those pint-pulling publicans may well be happy, but online shoppers have been warned! As for larger businesses, in was another dry Budget.”
What did you think of the Budget? Let us know your thoughts in the comments section below.
Looking to promote your product/service to SME businesses in your region? Find out how Bdaily can help →
Enjoy the read? Get Bdaily delivered.
Sign up to receive our popular North East morning email for free.