Autumn Budget 2018: What are North East businesses predicting?
Next Monday (October 29), the chancellor of the exchequer Philip Hammond is to announce 2018’s Autumn Budget.
With Brexit negotiations looming over us, uncertainty regarding the UK’s economy is being felt more than ever.
This year, the Budget will be delivered on a Monday - however it is usually on a Wednesday, following the Prime Minister’s Questions. It is also earlier in the year so to avoid clashing with crucial Brexit negotiations happening in November.
The chancellor is to update the UK with an outline on tax and spending budgets for the next financial year, beginning April 2019.
But what do North East businesses want Hammond to discuss in next week’s Budget? How could the chancellor help this region? Read on to find out.
Alastair Wilson, Tait Walker
Alastair Wilson is a tax partner at Tait Walker, who said: “This year’s Autumn Budget is sure to be an interesting one as we look towards Brexit and what we need to know ahead of March 29, 2019.
“Businesses need to see some clarity on what the actual impact of Brexit will be on goods and services, in particular the availability and cost. What will encourage overseas-owned businesses to stay in the UK or to invest further?
“Aside from Brexit, we could see a rise in additional taxes that the government needs, which may be hot air rather than an actual help.
“Although there was a manifesto pledge on the increase to £50k of the threshold where a person pays income tax at 40 per cent, we may see that this is delayed to fund tax increases.
“Phillip Hammond has already confirmed that tax increases may be a necessity and this spreads to burden to a small increase for a lot of people.
“Also, the suggestion of a ‘Digital Services Tax’ on the FANGS (Facebook Amazon Netflix Google Starbucks) sounds good for the economy but in practice, it will take years to implement due to requiring a lot of consultation to ensure that it is not impacting UK businesses in an unintended manner.”
Jim Mawdsley, Generator
Jim Mawdsley is the CEO of Generator, which runs Digital Union and Tipping Point. He said: “Generator provides a vital support service to ambitious and innovative North East businesses, some that are starting out on their journeys and others that are taking the next steps to scale up their business.
“A large portion of our work supporting the development and growth of the creative, digital and tech sectors in the region has been possible thanks to European Regional Development Funding.
“In an ideal world, we’d like to see government make more long-term alternative funding available so the growth of the sector, on a regional and national scale, isn’t stifled.
“The business community in the region is also desperate for clarity over Brexit and what a no-deal would mean for the digital sector. It could have significant repercussions and we need to understand how this could potentially impact on exports, IP issues and overseas investment so businesses can prepare accordingly.
“At Generator, we have already taken steps to prepare for the very real possibility that additional alternative funding won’t be an option. It’s a challenge but one we’re ready to embrace.
“We’re confident that the creative, digital and tech industry in the North East, which is one of the fastest growing outside London, is strong enough and dynamic enough to forge ahead and adapt despite the uncertainty around Brexit and public funding.”
Professor Lawrence Bellamy, University of Sunderland
Professor Lawrence Bellamy, who is the Academic Dean, Faculty of Business, Law and Tourism at the University of Sunderland, said: “The strength of manufacturing to the North East needs to be maintained through the unsettling period of Brexit.
“Companies in the sector need to improve their competitiveness and have the confidence to invest. Tax breaks for investment in premises, plant and equipment would help to overcome some of the current confidence issues.
“Manufacturing’s energy bill needs to stay in check for competitiveness, including fuel costs for moving product around. Careful consideration of the tax burden there is necessary.
“The environment is a growing concern for consumers and companies alike and green solutions to operations challenges should be rewarded. Investment in funding for research and development in green-tech can help the environment, drive down future costs and expand this area of industry activity.
“Retail continues to be under pressure from the rise of the internet and changing consumer demands. If towns and cities across the region are going to maintain themselves as attractive and viable then funding to support urban regeneration with mixed leisure, retail and city living should be made available. Pump-priming private investment is important.
“If the Northern powerhouse concept is really going to benefit the North-East then infrastructure improvement is needed. Road, rail and telecommunications investments are critical.”
Dave Gibson, Blu Sky Chartered Accountants
Dave Gibson is the co-founder of Blu Sky Chartered Accountants. He said: “Well, will this be the budget that never was?
“Although Philip Hammond will paint a bold picture and look to reduce economic and taxation uncertainty for the future, we can neither guarantee the impact of Brexit or, indeed if that becomes politically problematic at home, the existence of a Conservative government in the next tax year.
“‘More tax’ is the mantra. But how? Strong rumours persist around a reduction in the VAT registration threshold, possibly halving from its current £85k. There will fairly definitely be further movement to curtail what they see as tax avoidance in the ‘self-employed’ sector (think ‘contractors’) with the dog’s dinner rules applying within the public sector being rolled out to the private sector.
“Tax band increases may be frozen, and the employers NI allowance scaled back. It’s also probable that there will be further cuts in pensions tax relief.
“For those looking to start a business, attract investment, grow and sell, there will possibly be bad news around an EIS tax allowances cut, and a further increase in dividend tax.
“Hopefully he’s not listening to some idiots called The Resolution Foundation who are shouting to scrap entrepreneurs relief. Unlikely as ER is being looked at as part of a wider review around supporting reliefs in the business lifecycle.”
Tim McElwaine, UNW
Tim McElwaine is tax senior manager at UNW. He commented: “This Budget will take place in conditions of unusually high economic uncertainty because of the ongoing Brexit negotiations, which seem likely to be reaching the final crunch point at around the same time.
“The Chancellor will have to find some more money for the NHS following Theresa May’s announcement in June, perhaps raising some taxes to support this, and other public services are also showing signs of strain after years of austerity.
“He will undoubtedly have warm words for business, but may defer big decisions and changes until the outcome of the Brexit negotiations is known.”
James Robson, Entrepreneurs’ Forum
James Robson is the chairman of the Entrepreneurs’ Forum. He said: “This is the most crucial and important Budget to date, as it will be the last before Brexit.
“Entrepreneurial businesses are the key drivers for the economy as they are the companies that are creating the jobs and contributing to the exchequer.
“Business needs a strong and reassuring Budget by the Chancellor, which will deliver a renewed sense of confidence and optimism as we head towards uncertain times.
“Creating a favourable environment for entrepreneurs is essential and would create more businesses, while encouraging more investment in the entrepreneurial companies that are needed to strengthen our economy and prop-up our dipping growth projections.
“The also needs to be consideration of the export potential from North East companies to emerging regions of the world, with the hope that government continues to support SMEs through the good work of DIT across the whole the North East.”
Chris McDonald, Materials Processing Institute
Chris McDonald is CEO of the Materials Processing Institute, who said: “A continued commitment to investment in R&D is a necessity, which will position the UK in line with other advanced economies’ R&D pledges.
“The Chancellor outlined an ambitious starting point in his autumn statement last November, with his spending pledge and the rise in R&D tax credits for businesses, which needs to be accelerated, especially with our impending exit from the European Union.
“The UK must remain at the forefront of and have sufficient access to cutting-edge innovation and technologies, which will drive growth and productivity at a time of such economic uncertainty. Investment in R&D is crucial for the UK’s success post-Brexit.”
Kevin Brown, Pacifica Group
Kevin Brown is the group managing director of Pacifica Group, and said: “Embracing and moving toward alternative and renewable heating systems is necessary if the government wants to hit its carbon targets.
“The effective implementation of this kind of technology will reduce the reliance of less energy efficient means of energy, while, in many instances, delivering significant financial gains through measures such as the Renewable Heating Incentive (RHI) to local authorities and organisations.
“These systems are also supporting the most vulnerable in society and go a long way to tackling fuel poverty, which is another area where Government support is required.
“There must also be additional funding to companies that are investing in upskilling adults to create a highly skilled workforce. There are firms that want to create career progression for its team, but lack the means to do this.
“By providing governmental aid, the UK could set the standard for training and development. Continued support and financial backing of such initiatives and technologies is a must for the Chancellor.”
Steve Grant, TTE
Steve Grant is the managing director of TTE, who said: “It was positive to hear the Chancellor recently announce changes to the Apprenticeship Levy, but greater support is needed to ensure that UK industry can develop a workforce that will ensure the country can continue to compete on a global stage.
“Enabling large firms to transfer up to a quarter of their levy funds to members of their supply chain will benefit a wider spectrum of industry, but the Government has to support employers and training providers to better communicate and apply the process.
“More reform is needed in the Budget to ensure the Apprenticeship Levy doesn’t become a lost opportunity. The fact that around two thirds of the money raised by the levy remains unspent since it was introduced last year is very disappointing and will have a knock-on effect on workforce development at this crucial time in the UK’s economic development.”
Lee Watson, Clive Owen LLP
Theresa May hinted at tax increases earlier this year, so the Budget may contain some tax rises, predicts Lee Watson, Clive Owen LLP’s tax director.
He said: “It wouldn’t be surprising to see the proposed reduction in corporation tax to 17 per cent being dropped with the current rate of 19 per cent retained.
“It also wouldn’t be beyond the realms of possibility that dividend tax rates could increase which would impact upon several of our clients. Similarly, where a business owner sells a business, they can potentially claim a tax rate of 10 per cent on the capital gain, on up-to £10m of gain. It would not be surprising to see this £10m limit cut.
“Clearly, HM Treasury needs to bear in mind the unknown impact of Brexit on the economy so must balance any tax rises with promises to spend taxes on the NHS and transport links.
“Given that Brexit is nearing, we would hope that the government would continue to invest in research and development tax relief to reward companies advancing knowledge in technological and scientific fields, as this will continue to attract inward investment from non-UK companies as well as rewarding those companies already operating in the UK.”
Paul Gibson, Active Chartered Financial Planners
Paul Gibson FPFS, Cert II (MP & ER), director and chartered financial planner at Active Chartered Financial Planners, said: “There have been a lot of changes introduced in the past couple of years, so my hope is that the Chancellor will leave some of the key legislation surrounding pensions as they are.
“Specifically, I think tax relief, annual allowance and lifetime allowance need to stay at the current levels. In recent years, both annual allowance and lifetime allowance have been reduced substantially, and this, coupled with the implications of Brexit, has caused significant unrest to those who are planning for their retirement.
“The Chancellor must take into consideration that we need a period of stability to allow people to invest and plan for the future.”
Claire Preston, Sound Training
Claire Preston is CEO of Sound Training. She commented: “As a literacy training provider in the education sector, I hope to see a focus on educational spending in the upcoming budget.
“More specifically, there needs to be a bigger focus on social mobility, understanding it and how we can combat it through education.
“The government has plans to deliver its social mobility and opportunity areas plans to locations including Blackpool, Bradford and Derby, which is fantastic, and our company is already working on some exciting literacy projects in two opportunity areas.
“However, we need to see similar measures carried out across the UK, so that there are no discrepancies when it comes to different regions.
“Targeting higher levels of social mobility can be achieved through collaborating and working closely with schools. If the government spends more money at this level, and more funding is secured for other projects, we can arm disadvantaged children and young adults with the tools they need to thrive in the future.”
Greg Hare, Baldwins Accountants
Greg Hare said: “This Budget needs to increase the ‘tax take’ and beyond the usual increases on alcohol and tobacco there will need to be further tax raising measures.
“A tax on digital or ‘online’ activities is ‘a racing certainty’, but will need to protect high street ‘bricks and mortar’ operators with digital revenue; other ‘new taxes’ are unlikely, so existing taxes will be tweaked to raise more.
“Restriction of relief for pension contributions, to basic rate tax and/or a reduction in lifetime allowances and abolition/reduction of the benefits of Entrepreneurs Relief are possibilities.
“An income tax increase is unlikely (although effective), but a freeze on personal allowances and tax rate bands is a possibility. If government goes ‘full term’, there is time to deliver the manifesto promise of a £12,500 personal allowance, post-Brexit finances permitting.
“Support for business innovation and investment is vital for our economy so expect the Chancellor to provide further funding for skills training and financial support for the green energy, technical and digital media sectors.
“There may be some tweaking to qualifying conditions for various investment reliefs (Enterprise Investment Scheme etc.) but expect these to remain in place to encourage investment in the ‘grass roots’ of the economy.”
Bob Borthwick, Scott Bros
Bob Borthwick is the commercial manager of Teesside-based recycling company Scott Bros. He said: “I’d urge the Chancellor to provide greater clarity on the whole issue surrounding the recycling of plastics.
“The public has seen how much damage this throw-away culture is having on our oceans, rivers and countryside and I think it is the ideal time for the government to act and further incentivise the whole recycling culture.
“I’d like to see Philip Hammond introduce greater tax incentives to allow companies to invest in the latest technologies. This will allow more plastics to be recycled more efficiently in the UK which would drastically reduce the volume which currently ends up in landfill.
“Stronger incentives should also be put in place to encourage the manufacturers to produce better designed plastics which are more easily recyclable.”
Helen Golightly, North East Local Enterprise Partnership (LEP)
Helen Golightly is the chief executive of the North East LEP. She said: “This budget will be a key moment for government to send a strong message about the importance of the North East economy and North East business to UK Plc, as the UK approaches its departure from the European Union.
“The region continues to generate ‘more and better’ jobs and improve productivity, and it is important that this momentum continues into the future.
“In addition to doing a deal which retains access to key European markets and skills and facilitates trade, there are opportunities through the Industrial Strategy to invest in North East innovation and support North East businesses to adopt digital technologies to strengthen our regional competitiveness.
“This will give confidence to businesses working in sectors that currently have the strongest links to the European Union.
“We also know that many smaller businesses have yet to prepare for Brexit and confirming business support arrangements through any transition period would be welcome.”
Andrew Mitchell, The North East Fund Limited
Andrew Mitchell is CEO of the The North East Fund. He commented: “SMEs are crucial to the health of both the nation and the North East, and can become the real driving force behind future economic growth here despite Brexit uncertainty.”
We would love to hear your thoughts on next week’s Autumn Budget, so tweet us @BdailyNorthEast and have your say.
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