Autumn Budget 2018: London business leaders offer hopes and predictions
Chancellor Philip Hammond will announce the Government’s Autumn Budget on Monday (October 29), setting out plans for tax and spending in 2019/20.
This year it comes just weeks after the Conservative Party conference, where Prime Minister Theresa May told an audience “the end is in sight” for austerity. It’s also the UK’s last as a member of the European Union, with March’s Brexit deadline looming.
But what do business leaders in and around the capital expect Mr Hammond to announce in his Autumn Budget speech? What do they hope to hear?
We reached out and heard back from companies operating in a swathe of sectors, from accounting and software to recruitment and IT. Here’s what they had to say:
Tony Smith, managing director of debt advice firm Company Debt
“Hammond has made it fairly clear he will raise income tax this autumn, principally to help fund the NHS. It is possible he may also lower the VAT threshold from 85,000 perhaps to as low as 45,000. This is obviously going to have a huge impact on 500,000 or so small businesses but could raise the government a billion or more.
“My prediction is he will go after pension tax breaks in some form, either by cutting the tax-free annual allowance or bringing down the rate of relief.
“Most of interest from my perspective is what Mr Hammond does around a digital services tax. While the EU is considering its own 3% sales tax for the tech giants, Philip Hammond announced at this year’s Tory conference he has plans for his own, with or without the support of other countries.
“Given that Facebook recently paid only 7.4 million in tax for 1.4 billion in turnover this move is the right one, in my opinion.”
Lesley Stalker, tax partner at accountancy and tax advisory firm RJP
“There have been rumours circulating that the VAT registration threshold is going to change for a long time. We’re not sure about that, but it is quite possible that an additional rate of VAT will be introduced to help traditional high street retailers compete more equally with ecommerce companies.
“There are suggestions that the main rate will be reduced to 15% for ‘bricks and mortar’ retailers and e-commerce specialists will have to pay VAT at a higher rate of 22.5%.
“[Regarding a potential drop in corporation tax] Both George Osborne and Philip Hammond have previously declared their desires to see the UK become ‘the best place in the world to launch a business’.
“Although there is a lot of uncertainty over Brexit, it’s unlikely there will be any change to existing plans to maintain the small companies’ rate of corporation tax at 19%. However, the final proposed tax cut to 17% from 2020 may not ultimately go ahead due to the perceived impact this will have on Treasury revenues.”
Jonathan Richards, CEO of HR software provider breatheHR
“With the growing uncertainty around Brexit and what the deal for the UK will look like, it’s likely this year’s Autumn Budget will be short-term tinkering, rather than long-term and strategic.
“There are a number of initiatives that have been touted, such as the ‘Amazon tax’, whereby internet companies are taxed on their revenue rather than their profits. This may help boost much-needed funding to the NHS, but will make an already complicated tax system even more so for struggling small business owners.
“What’s more, we are at a crucial period where the UK needs to focus on growth and this approach will hit small high-street retailers who also trade online doubly hard if they receive no relief in business rates.
“In addition, scrapping tax relief for this sector could put budding entrepreneurs off starting their own company or make investors reluctant to back young businesses, just when the economy needs them the most. The chancellor must restore faith in small business owners by offering support and investment, not harming our SME economic engine.”
Paul Falvey, tax partner at accountancy and business advisory firm BDO LLP
“Imposing major new taxes on digital companies before Brexit will create a further risk to international trade and add to Brexit uncertainties; however there is strong political momentum and public pressure to increase taxes on these businesses.
“Tougher rules on intra-group royalty payments are already drafted, so the Chancellor may continue with the tough talking but in practice he’s unlikely to go much further before the OECD or EU finalise their new tax policies.
“After four consultations on the gig economy in 2018, most would welcome the Government aligning income tax, NIC and employment laws. Hammond could extend the rules for off-payroll workers to private sector businesses - but some contractors would lose out.
“So the most we should expect before Brexit is progress towards clarifying who should be treated as an employee – perhaps a ‘statutory employment status test’.
“There is public support for action on single-use plastic. Therefore, Hammond may announce eye-catching taxes addressing consumer waste – perhaps a coffee cup tax. But expected consultations on wider taxes on plastic use are likely to be of more interest to manufacturers and retailers.
“With Brexit on the Chancellor’s mind, I expect moves to enhance the UK’s tax reliefs for intangible fixed assets and, possibly, a promise to support the UK financial services sector through VAT changes if they prove necessary.”
Rich Turner, vice president for the EMEA region at IT company CyberArk
“Last year’s budget saw a healthy and much needed investment into Britain’s booming tech sector, with a £75m funding boost into AI research. Separately, the government announced a £1.9bn investment into a cyber security export strategy to better protect government systems.
“But it’s not simply a question of investment in bits, bytes and the latest new technology, crucial though that is. What is just as important is to invest in the people that underpin both the development and the implementation of new technologies. Even in the age of robotics, this must be a focus for businesses and government alike, year in, year out.
“It is now no longer good enough to just be the ‘storage specialist’ or the ‘sysadmin’ – IT professionals must adopt a broad range of skills to combat sophisticated cybercrime as new technologies enter our work and lives. With a recent report by (ISC)2 revealing that organisations globally are experiencing a damaging cybersecurity workforce ‘gap’ of 2.9 million employees today, we look forward to seeing a strong commitment made by the Chancellor to further investments into technology skills.
“This year, he must further bolster IT security spend across our public services, as well as investing even more into training the next generation of ‘all-rounder’ IT professionals – the future of many businesses, and indeed the economy at large, depends upon it.”
Antony Edwards, COO of digital automation intelligence specialist Eggplant
“It’s likely that this is going to be a weird budget. On the one hand, the government desperately wants to talk about growth and encouraging business–especially trade. However, it needs to be very prudent because we’re still unsure what’s going to happen post-March.
“With so much talk about big companies moving out of the UK, jobs will be top of the agenda. This is likely to equate to some benefits for businesses. Reducing corporate tax rates is going to be difficult in the current climate, so we’re expecting to see benefits in more specific ways. We’ll likely also see a lot of talk about internships and apprenticeships.
“In terms of technology, it is likely to be popular because it doesn’t face the same trade issues physical goods have. So, we’re expecting a lot of news about tech exports.
“Although the government like to talk about technology, it doesn’t really help the sector directly. The main impact it has is indirect, for example, if they mess around with banks they consequently buy less software, similar with the retail industry. However, we are expecting to see an increase in infrastructure spending.”
Richard Green, CEO of event promotion platform Evvnt
“One of the underlying frustrations facing most tech startups has been the lack of information or guidance that has been provided regarding Brexit. Over the past few months in particular, investors and entrepreneurs alike have become notably restrained, preferring not to commit to any big decisions until they have a better understand of what Brexit could mean for them.
“More generally, I’d like to see the Government introduce new measures that help tech businesses access overseas opportunities.
“In my experience, there is a clear appetite from international companies to form new partnerships with tech businesses here in the UK, and this is something the Government should be taking advantage of as it cultivates an image of ‘Brand Britain’.
“Funds and initiatives dedicated to startups seeking to establish an overseas presence would provide a much-needed boost to UK tech companies.”
Jordan Morrow, global head of data literacy at software firm Qlik
“The uncertainty surrounding Brexit and the country’s weak productivity growth are a black cloud looming above British businesses. In recent Budgets, the Government announced investments in a number of technologies to drive productivity and growth in the UK: Osborne highlighted the power of big data, while Hammond announced billions of pounds of investment in AI.
“However, these tools are only powerful in the hands of those that know how to use them. With just one in five UK workers not confident in their ability to read, understand and communicate with data, British businesses aren’t in the position to harness its opportunity.
“And the opportunity is massive. According to the Data Literacy Index, organisations with a strong corporate Data Literacy have a 3-5% higher enterprise value - a potential increase for large enterprises of between $320 and $534 million. And it improves all metrics of corporate performance, including productivity and revenue growth.
“Investing in new technologies and highly-technical skills isn’t enough for the UK to take advantage of the Fourth Industrial Revolution. Data will be its universal language, and the Chancellor must make a firm commitment to upskilling all UK workers in data literacy so they can harness existing investments by better interpreting, analysing and interrogating data for more robust business outcomes.
“Furthermore, as technologies such as AI take hold of every aspect of our lives, having the data skills to be able to ask questions of data without the restrictions dictated by machines will be key to future proofing the UK’s workforce across every industry.”
On supporting SMEs
Will Sweeney, senior tax technical manager at accountants Menzies LLP
“Since its introduction in 1994, EIS (Enterprise Investment Scheme) has gradually grown in popularity. However, a complex set of conditions apply which have made the scheme difficult, and slow, to access.
“Simplifying the scheme could encourage investment at a critical time for early-stage or growing businesses.
“The Government is keen to find a way to channel funds into innovation-led businesses, despite their slightly riskier profile. A new EIS fund could facilitate this, whilst rewarding those investors who choose to participate.
“As well as offering the standard EIS tax savings upfront, the fund proposed by the Government would offer additional tax relief to investors who are willing to provide funds over a longer holding period.
“Further measures, including the reform of company tax relief for intangible assets such as IP rights, and the extension of Entrepreneur’s Relief for business owners aiming to sell up would also serve to demonstrate that the UK is open for business.”
Antoine Baschiera, CEO of startup rating agency Early Metrics
“During the latest party conferences, Theresa May pledged to end austerity and reduce taxes. We hope this will translate into lower taxes and greater support for SMEs. However, with pressure rising to raise extra funds for the NHS and the police, it seems unlikely that any further funds will be allocated to help startups.
“As big corporates are likely to be hurt the most by Brexit, we hope the Chancellor will continue to recognise the value of and provide support to SMEs, who currently employ 60% of all private sector workers.
“We hope there will be no further cuts to the tax-free dividend allowance for company directors, as this was already majorly hit in the 2017 budget.
“It will be interesting to see whether the tax relief on investments made through the SEIS or EIS scheme will change. It’s important that the UK government keeps encouraging investments in startups but with May’s plan to increase funding for the NHS, these tax reliefs may suffer.”
Chris Vincent, managing director of flooring business V4 Wood Flooring
“There are two key ways that the Chancellor can help the SMEs, which are the lifeblood of our economy.
“Business rates are crippling small businesses, not just in the retail sector although that is badly hit. My own business rates are astronomically high and when my new design centre opens will be even higher. I question what bang I get for my buck? High business rates are also affecting the retailers I work with.
“The Chancellor needs to cut the business rate dramatically or scrap it and devise a new system that is not a handicap to smaller, independent shops and traders.
“I’d also like to see a further reduction in corporation tax. We need to be competitive post-Brexit and businesses need money to invest to create employment. More employment leads to more tax in the coffers and less welfare spending. There are also large corporations that are, legally if not morally, paying far less tax than should be their dues. Clamping down on this would put significant sums into the Chancellor’s coffers.
“I hope the Chancellor is a good friend to SMEs and the high street in his Budget.”
Ivo Weevers, CEO of bookkeeping automation platform Albert
“F! business” were Boris Johnson’s words this summer. It underpins the Conservative’s view on business in times the country probably needs courageous and hard-working entrepreneurship more than empty words by politicians.
“Media speculation suggests the Chancellor will use the budget to target people who set themselves up as private companies to take on work, by extending ‘off-payroll’ changes to the private sector. Hammond believes a third of people claiming self-employed status as a ‘personal service company’ (PSC) are “synthetic” self-employed and are actually full employees who should pay more tax (IR35). This is counter-intuitive and will lay an unnecessary regulatory burden on both businesses and the self-employed.
“Since 2001, there has been a 41% increase in the number of self-employed and freelance professionals. The surge can be largely attributed to the UK’s post-recession economy, which has forced businesses in a range of sectors to become more risk-averse - increasingly nurturing relationships with the two-million-strong freelance community rather than hiring full-time staff.
“With the seemingly ongoing uncertainty over Brexit, this is a trend that is likely to continue and if hiring self-employed workers is helping big companies mitigate risk, shouldn’t the government be doing more to help rather than hinder the self-employed? IR35 is a flawed and unwarranted tax ruling and will only serve to damage the self-employed who are increasingly underpinning the economy.”
Dr Zain Sikafi, CEO of private counselling business Mynurva
“As with all major fiscal statements, the NHS is a prominent discussion point. At a time when our public health services are struggling to meet patient demand, the Chancellor has alluded to a potential increase in taxes to help meet the Government’s target to increase NHS funding by an extra £20 billion a year by 2023. While this may provide some relief, a cash injection is not likely to deliver the long-term relief to the NHS.
“Importantly, the rise of HealthTech has brought with it new innovations and digital solutions that can vastly improve efficiency and provide more cost-effective frontline services. These innovations are being led by startups.
“As such, entrepreneurs in this space need to be offered the support to effectively scale-up and grow, while NHS leaders must continue to take an open approach to potential new technologies that could improve patient care and reduce expenditure. The upcoming Autumn Budget is a fantastic opportunity to support startups in the HealthTech space.”
Ritam Gandhi, director at app developer Studio Graphene
“The UK is globally renowned for its bustling community of tech startups, and part of this can be credited to the Government’s efforts to support entrepreneurs and early-stage businesses.
“Tax-efficient investment schemes such as EIS and SEIS have proven effective in promoting private investment into scaling SMEs, and this Autumn Budget is an ideal opportunity to ensure these schemes are being used to their full potential.
“In the Spring Statement earlier in the year, the Chancellor mentioned plans for a knowledge intensive EIS fund structure, which would encourage investment into early-stage firms deemed highly innovative.
“Hopefully more details of this will be provided on Monday as we must encourage talented individuals to take the leap into the world of entrepreneurship, and support mechanisms such as this are very important in this regard.”
Rob O’Donovan, CEO of HR software business CharlieHR
“There is speculation that the Government will take advantage of small businesses to create £1.5bn for the budget - making it harder to grow when you’re most vulnerable to failure. Rather than taking a swing at large companies who often take the piss.
“Currently, small companies only have to charge VAT if their turnover tops £85,000 a year, but this may be lowered to just £43,000. This impacts over half a million companies in the UK. The Government will take this cash, adding a huge administrative burden to businesses that are far more at risk of failing.
“HMRC does not make admin easy, and for the businesses hit by the changing VAT rules, they will not necessarily be in the position to turn to an accountant for support. With so many variants that can affect young companies in continued uncertainty, the Government should be doing everything possible to support entrepreneurship in the UK, rather than provide unwanted headaches to Founders trying to find their feet.”
On Social Care, Skills and Infrastructure
Richard Bradley, managing director for the UK and Ireland at staffing firm Kelly
“The question we should be posing here is: is London changing fast enough for the new generation of skilled workers and young professionals that our clients need to employ?
“Rents in the city are rocketing and this is fundamentally making it more difficult for new talent to make a life in London and in greater London. Perhaps this wouldn’t be felt so acutely if our transport network was cheaper and more reliable.
“It is a well-documented fact that the cost of strikes cost the London economy millions of pounds last year which is unsurprising if our talented people aren’t able to get to work.
“The drain of our best and brightest talent to other less expensive cities is also a threat. With skilled immigration lower than in past years we need to constantly strive to make London one of the most attractive places to live and work by reducing the current level of uncertainty. London has always been a brilliant city in which to live and work but we need to work harder to make it as competitive as it can be.”
Jonny Bottomley, CEO at home care company edyn.care
“On Monday 29th October, exactly five months before the official Brexit date, Philip Hammond will present his 2018 Budget to the House of Commons and the British public. One which is set to see Mrs May’s pledge to end eight years of cuts and the Chancellor’s desire to balance the books collide.
“The two opposing positions are simply incompatible unless some tough decisions are made. This Budget is set up to be a meeting of rhetoric and reality. As the CQC’s “State of Care” report confirmed, the pressures on our social care system have become ever more intense.
“The lack of funding and the rise in demand has forced Local Authorities to provide care and support to fewer people and concentrate on those with the highest levels of needs. This should be alarming to all, in its present state, the system is simply not fit to provide high-quality care and is built to help the elderly survive, not flourish. Last month, the Government announced a short terms cash injection of £240 million for social care to ease the pressure this winter. However, it is short-term stop gaps that fail address the long-term issues the industry faces.
“By 2019-20 we can expect the funding gap to increase to £2.2-£2.5 billion. Before transformational reform can be implemented this gap must be closed. As many in the care sector have been pressing for, the government needs to find a long-term funding social for social care.
“In this Budget I would like to see money set aside for an independent body tasked with modelling the amount of funding needed by social care in the future and ensuring funding keeps pace with need as articulated in the ‘Long-term funding of adult social care’ green paper and an increased down payment on reducing the current funding gap.”