Budget 2017: Reaction roundup from Yorkshire businesses

Following Chancellor Philip Hammond’s Spring Budget delivery, in which he pledged “to make Britain the most attractive place to start and grow a business”, Bdaily caught up with business leaders from across Yorkshire to get their immediate reactions.

Christine Hewson, head of tax at KPMG in Yorkshire

The Chancellor overall delivered messages of long-term economic stability, fiscal responsibility and the foundations to build a stronger, fairer Britain in today’s Budget.

With few major changes announced, Philip Hammond demonstrated the Government is listening to businesses’ wish for stability. I expect those leading this region’s businesses will be relieved to have the breathing space to deal with current changes taking effect during this year.

But his quest for a fairer tax system and his challenge of finding more money to address the deficit in the social care budget rather fell to entrepreneurs.

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 and 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.

There were some sweeteners of course; the delay to digital tax reporting for micro businesses will no doubt alleviate some of their administrative burden, and the cushion for those businesses coming out of small business rate relief is also good news.

Other welcome announcements demonstrated that the Government acknowledges technological innovation is key to grow the economy in the future and addressing its productivity gap.

These include £300m to support the research into STEM subjects, £270m to support development in areas of disruption and innovation including biotech and driverless vehicles, and £200m on improving access to superfast broadband.

The £690m made available to local councils to address local congestion issues will present a great opportunity for start-ups innovating in the area of smart cities and transportation.

Tim West, head of tax in Yorkshire and Humberside 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, it was another dry Budget.

Leigh Taylor, regional director for SME banking in Yorkshire at Lloyds Bank Commercial Banking

With few major shake-ups revealed by the Chancellor in the Budget, businesses can focus their attention on driving growth and preparing for any uncertainty ahead for the economy.

More than a quarter of Yorkshire firms told us in our latest Business in Britain report that they had experienced difficulties recruiting skilled labour in the second half of 2016, and so firms will welcome the government’s commitment to boosting skills through the creation of ‘T-levels’.

The Chancellor’s continued commitment to the North’s transport infrastructure through a new £90m fund will also be key for Yorkshire’s firms, and many will welcome the plans to improve connectivity to the rest of the UK.

Investment in broadband connectivity is also encouraging to see, as this has the potential to boslter the productivity of firms in parts of the region, which are held back by slow and unreliable networks.

Firms may have to wait for more clarity on business rates changes, however the three measures outlined by the Chancellor’s will be well-received by some small businesses.

Richard Wright, executive director of Sheffield Chamber of Commerce

The Chancellor has presented a budget today in an environment where the country has slightly better finances than predicted a few months ago, and we have not seen the catastrophic fall off a cliff that was predicted by some after the Brexit vote.

We should all be realistic though. Slightly better finances mean the country is only expected to lose £69bn this year. The buoyant economy is maintained by unsecured consumer debt.

Rising prices and costs, coupled with Brexit uncertainty means we are seeing businesses starting to struggle and start reducing things like capital and product investment.

Universities and colleges are worried about tightening of international student visas, as well as research and development money and partners after the Brexit discussions are completed.

Uncertainty is high which is why, in my opinion, the Chancellor is being cautious and, if the rumours are correct, Government departments are being asked to look at 3% and 6% spending reductions in real terms.

The Chancellor spent a lot of time talking about skills and I do agree with his focus on technical skills. T levels obviously come from the rationalisation and better focus on vocational skills recommended in the Sainsbury report. The Budget is, however, light on saying how these will be funded in FE or other areas. There is also a critical shortage of teachers at every level.

Businesses will be extremely worried about the proposed changes in National Insurance and business rates until more details are known. I recognise that he has hinted at doing some things but, as we move forward, more and more of the business rates will be retained by local authorities and must be used to fund growth in the wealth creating sectors that so many people’s jobs are dependent on.

We welcome money for infrastructure and research and development. We have to be sure that the north gets more than its fair share of this because for many years we have been left far behind.

At the end of the day, however, this was a very unremarkable budget – perhaps unsurprisingly given the issues I’ve mentioned.

Kay Ingram, director of Public Policy at LEBC Group

LEBC is disappointed that the Government did not take the opportunity to simplify the tax treatment of pension savings to incentivise more saving for the longer term.

The imposition of both an annual and lifetime allowance makes pension saving harder as these taxes are highly technical in their application and can come as a surprise to those saving for retirement, especially if they seek to do so without professional advice.

It would be easier and fairer if either one allowance or the other applied to pension savings, but not both. The annual allowance restricts the ability of higher earners to save for retirement.

It is no longer confined in its impact to those on bankers’ salaries and bonuses. In the past couple of years we have seen more and more public sector workers caught by this restriction especially those with long service in the NHS, Fire or Police services and senior teachers.

It is time that the annual allowance was either scrapped with only the lifetime allowance putting a total cap on tax relieved pensions or all taxpayers given the standard £40,000 per annum allowance which should also be inflation linked and not a static amount which loses value over time and with no lifetime allowance test also being applied.

Both allowances and the tax payable for exceeding them amount to double taxation of the same funds.

Restricting the amount that can be saved each year and then also applying an overall cap leads to underfunding of retirement income, an extra cost for final salary schemes and a penalty on good investment returns with no corresponding compensation when investment returns are poor. Its net effect is to discourage long term saving.

With projected life expectancy on the increase we need to encourage more not less saving.

Marcus Brew, managing director of industrial shredding specialist UNTHA UK

Was this a budget that overwhelmed me with surprise and stimulation? No. But was it a budget that could prove crucial to the future of our economy? Yes, I think it was.

Hammond has prioritised stability, which is something we surely all crave following the economic uncertainties of recent times. With stability we can each focus on growth, innovation, evolution and long-term competitiveness.

It seems that money is being pledged to support this longer-term outlook too, with £90m allocated for much-needed transport infrastructure improvements in the north, for example. And I’m sure nobody would complain about the £200m fibre broadband overhaul and £16, 5G mobile tech hub.

But it’s not all rosy. I remain incredibly concerned by the skills deficit. It has been highlighted that young people are leaving education without the talents they need to succeed in industry, and this continues to worry me.

With so much talk of the apprenticeship levy and the uplift in technical qualifications, some businesses will be reassured that the skills challenge is being addressed. And don’t get me wrong I’m certainly pleased that practical, real-world development is being encouraged in addition to academic studies. But a) how many businesses have got their head around the apprenticeship levy, and b) how many firms are going to change their processes to better support skills development internally? Education/apprenticeship providers have a role to play in enriching our future generation, but so do we.

It would be a huge generalisation to say that skills is the only thing holding the UK back, but it’s certainly an area that requires further attention, without delay.

We’re currently occupying an economic ‘middle ground’, with a GDP ranking of 4th within G7 countries. I’d like to see us pressing on to improve that standing, but overall think the budget isn’t a bad step to do that.

Claire Evans, head of fleet consultancy at Zenith

Dubbed the Brexit budget by commentators, the Chancellor made some headline-grabbing announcements to push disruptive technologies and enhance productivity.

For the fleet industry this was a budget of stability, which will be welcome news after many recent changes. It was disappointing not to see company car tax rates for 2021 published. As part of the air quality agenda, the government said it will explore the taxation of diesel vehicles ahead of potential changes. We can expect an announcement on both points in the Autumn Budget.

Following the consultation to review taxation policy to align it to IFRS 16 lease accounting changes the decision has been made to keep with current position.

There are calls for evidence expected on 20 March on expenses and BiKs that will need to be monitored for any impact.

We saw £270 million allocated to keep the UK at the forefront of disruptive technologies that will include funding for the development, design and manufacture of batteries to power the next generation of electric vehicles. Increased range on new battery technology will speed their adoption by fleets.

Research by the Society of Motor Manufacturers and Traders (SMMT), found that 51% of motorists would be more likely to buy an electric car for their low running costs, while 46% said that cheap or zero car tax would influence their decision.

The £16 million made available for a new 5G mobile technology hub will also support the move toward driverless vehicles. A £690 million competition for local authorities to tackle urban congestion and get local transport networks moving again is a welcome addition.

Finally, we saw vehicle excise duty frozen for hauliers, and HGV road user levy is frozen too.

Mick O’Donaghue, director in the rating team at Colliers International’s Leeds office

The Chancellor’s Budget announcement on business rates is too little, too late. It is not the ‘Budget for business’ that the Chancellor wants us to believe, all the time he proposes swingeing rates’ increases for thousands of firms.

Yes, for small businesses coming out of Small Business Rate Relief (“SBBR”), this Budget will offer an olive branch, but will not delay the inevitable increases coming down the road.

We are still awaiting the Government’s response on the last review on business rates reform. Yet another review, announced today, into business rates is a waste of time and money. It is absolutely clear that more frequent revaluations – even, three-yearly – would go a very long way to improve the current system.

Although on the surface, a rates discount for pubs seems a positive step, it is only for “small pubs.” European State Aid rules limit the amount of discount any one company can receive from Government. For larger pub chains, which may have already received Government support, this new discount is simply a fiction.

With around 326 local authorities in England, the Chancellor’s ‘discretionary fund’ means just £990,000 per council to offer relief to businesses over five years. This is clearly a paltry amount given the Government has caused these staggering increases itself.

By putting politics before business when they delayed the revaluation, the Government has created this perfect storm. The chickens are now coming home to roost. I am regularly asked: ‘who are the real winners and losers?’ The real answer is that there are only losers.

The big losers are those firms in London and the South East about to get the largest rates’ increases seen in a generation.

But also losing out significantly are those businesses in depressed areas of the country who are not seeing their rates’ bills go down nearly quickly enough.

And this is the crunch: the Government created this shambles. Much-needed decreases in depressed areas of the country will not be fully felt for a number of years as staggering increases in London and the South East are phased in.

At the same time, over 300,000 outstanding appeals continue to fester as firms now face these huge increases.

Michelle Mathers, partner at Weightmans LLP in Leeds

Business Rates - The Chancellor’s move to ease the burden placed on smaller businesses by the rates re-evaluation through a measure that will cap the rates paid by firms coming out of small business rates relief.

This means they will not face an increase of more than £50 for a year, and will go some way to shield smaller businesses from the changes in the short-term. But it will be of little comfort to businesses with a rateable value that exceeds the threshold.

Retailers and small business owners are already struggling to compete with online firms.

We welcome the proposed further consultation on more substantive reform to alleviate the current system’s problems, which as the Chancellor noted unfairly penalises bricks and mortar over the digital economy.

But we are not sure that more frequent revaluations, or providing forms of transitional relief to placate those businesses that are hardest hit, are the way forward.

Corporation tax - With the exception of previously announced reforms to substantial shareholding exemption, corporation tax loss relief rules, restrictions on interest deductions for larger corporates and the finance bill set to be published on March 20th, it’s good to see that Mr Hammond has, from a corporate tax perspective, given firms a breather in today’s Budget.

Going forward it would have been good to see a more concerted effort or commitment from the Government to simplify the corporation tax system and look to reduce complexity.

However, with the inexorable march towards digital tax returns, part of the overall business road map and modernisation of the tax system announced during George Osborne’s tenure, there are likely to be significant practical and technical issues around the corner.

Paul Davinson, rating director in JLL’s Leeds office

Philip Hammond indicated that he was prepared to listen to the concerns of those most negatively affected by the business rates hike but what has offered will provide no real comfort and is a missed opportunity to implement the changes that are urgently required.

He has largely ignored the impact of both significant rates cost increases in many sectors regionally as well as the limit of downward transitional caps on those businesses seeing reducing business rates levels in 2017.

The announcement that business rates will be reformed, is on the face of it welcome news. However, business will be frustrated that they have been told they will have to wait until the next revaluation in 2022 before any real changes are made.

This is far too little too late and business will conclude that Mr Hammond was not listening after all.

Chris Chidley, chief executive of diversified recruitment group Specialist People Services

Following the transport-heavy Autumn Statement, it was to be expected that infrastructure would not feature strongly in the Budget.

The previously announced £1.1bn investment to improve the UK’s road and rail networks has been welcomed by the industry, and it’s encouraging to see that work has already begun on renewals in some areas.

However, further clarification on how this momentum will continue is needed.

Although the £113m committed today to improve road networks across the North and Midlands is encouraging to see, when compared to the cost of projects like Crossrail it is fairly insignificant.

The industry would now welcome solid timelines for the planned infrastructure improvements across the country, including the electrification of the Midland and Transpennine mainline routes.

We know that infrastructure spend creates a ‘multiplier effect’, with each pound spent bringing more back in jobs and stronger economic growth. But it is essential that this spend is distributed across the country, particularly as the government has reaffirmed its commitment to rebalancing the economy.

Dan Fell, CEO of Doncaster Chamber

Doncaster Chamber welcomes the Chancellor’s emphasis on the need for technical education for young people and particularly the aspiration to create a parity of esteem between technical and academic routes.

However, Doncaster businesses will be forgiven for being sceptical of the Government given that today marks yet another missed opportunity to follow up on and accept the town’s bid for a University Technical College (UTC).

The local business community has high aspirations and stands ready to support Government’s aspirations in relation to the Northern Powerhouse, Industrial Strategy, Social Mobility and now Technical Education.

However, the ball remains firmly in the Government’s court when it comes to the UTC and it must now deliver without excuses and without delay if today’s announcements about technical education are to have any credibility with the Doncaster business community.

Nick Houghton, managing director of insurance, financial and health and safety services group JM Glendinning

My interest lies very much in the Government’s focus on training and upskilling young people to create tomorrow’s insurance industry business leaders, so it was encouraging to hear the Chancellor talking today about investment in technical education.

I’ll be very interested to see whether a T-level for the insurance industry materialises in the fullness of time.

What I haven’t seen or heard much about as yet is whether Insurance Premium Tax (IPT) has crept up yet again.

This has become a stealth tax on business and, if it’s not kept in check, will lead to situations where two neighbouring businesses that are the same size with similar turnover and staff numbers will end up paying vastly differing amounts in tax, simply because one’s business activities are seen as ‘riskier’ than the other’s.

This is what I’ll be looking out for as the finer detail of the budget emerges over the coming days.

Stuart Natkus, planning director at Barton Willmore

The Chancellor made only one passing reference to housing in the entire speech – not the progress on the Government’s Housing White Paper that many would have hoped for.

This was an opportunity for the Government to set out how the more starter homes it called for in the Housing White Paper could be brought forward. We didn’t get that.

Nevertheless his promise to help the next generation with housing affordability is encouraging. We’d hope this signals the extension of Help to Buy – a major driver in promoting the building of much needed new homes in this region.

Mention of reform to the business rates revaluation process could provide relief from some of the dramatic rises facing city centre businesses.

In which case, this could safeguard the viability of some city centre property schemes. We’ll have to watch the forthcoming detail to gauge what impact this could have.

In the short term the continuing uncertainty will not be helpful for developers and tenants alike.

Some support for SME housebuilders would have been welcome. SME developers can make a significant contribution to the new housing stock in this country, but at the moment they face an obstacle in the face of Stamp Duty Land Tax (SDLT). Reducing SDLT would help bring forward more housing.