Autumn Budget 2018: North East businesses react

Yesterday (October 29), the last Autumn Budget before Brexit was announced to the public.

But what did you think of Hammond’s vision and financial outlines for the future of the economy?

We caught up with some of the North East’s businesses on how they reacted to what the chancellor had to say.

Mike Parker, Schools North East

North East schools

Following the announcement from Hammond that there is to be £400m funding for schools to ‘buy the little extras they need’, Mike Parker, director of Schools North East, said: “The chancellor started his Budget off in jovial fashion declaring he was ‘Phil the Fiscal’ but his crass comments on funding the ‘little things’ in education is more akin to Phil the Flippant.

“His comments deny the depth of underfunding in schools, forcing them to write to parents to beg for support and seeing teachers made redundant, curriculum narrowing and slashing the vital enrichment in schools that support the most deprived.

“It is also striking that the chancellor is more committed to filling holes in the road than he is to filling the holes in education with the announcement of a £420m ‘pothole’ fund.

“No Head will turn their nose up at this one-off handout but it’s time Philip Hammond went back to school to see at first hand the funding crisis and its impact on all children, especially those the Prime Minister’s social mobility drive is intended to benefit.

“A longer term, properly resourced plan is urgently needed to more adequately support schools in these austere times for education.”

Children’s mental health

On the announcement of improving access to Children and Young Peoples’ Mental Health services, Parker added: “Schools North East strongly backs the creation of a Children and Young Peoples’ Mental Health Crisis Service in every part of the country.

“This is a huge area of concern for school leaders who are seeing children presenting with more difficult and complex problems than ever before.

“It is essential that a greater focus is placed on the causes of children’s’ mental health problems, some of which are inextricably linked to the higher stakes nature of current education policy.

“Prevention is vital as this will reduce the cost of funding the symptoms of mental ill health run the long term.”

“Schools North East launched the UK’s first and only schools-led mental health commission - Healthy MindED - in response to demand from schools in our region for support, and together we are committed to improving the mental health of children across our region.”

Dr Lynne McKenna, University of Sunderland

Dr Lynne McKenna is the Dean of the Faculty of Education and Society, from the University of Sunderland. She said: “Eight years of austerity cuts to education and social services have had a significant impact on provision and more importantly, on outcomes for children, young people and their families.

“Early Years, SEND (Special Educational Needs and Disability) School funding, Post-16 funding, closure of youth services and cuts to the social care budget have and continue to be considerably affected.

“While the Chancellor pledges a £400m payment to schools, this amounts to only £10k for primary schools and £50k for secondary. This will hardly have any impact and for primaries would not fund half a support staff post. So we have to question whether this is indeed an extra resource at all.”

Professor Lawrence Bellamy, University of Sunderland

Professor Lawrence Bellamy is the academic dean of the Faculty of Business, Law and Tourism at the University of Sunderland.

He commented: “The Budget did provide some benefits for small firms. These are the backbone of the British economy and need to be nurtured.

“National Insurance, investment taxation threshold up to £1m, fuel duty freeze and lower fees contribution for apprenticeships are a mixture of controlling costs and tentative encouragement for investment in skills and facilities.

“Retail, which continues to suffer from internet shopping and consumer habits can benefit from structural investment in towns and cities of £675m total and lower rates for small shops.

“This will help a few areas on the edge with good planning. However this represents a small sum in relation to the seismic shift in the sector required to realign with the new ways of trading.

“Infrastructure investment did not address the specific needs of regions with headline projects. Bold strokes are required and a little more of the same won’t be enough to drive growth. However, the detail is yet to be revealed and the cited £420m for potholes only represents a treatment of a previous problem.

“The Northern Powerhouse and Midlands Engine and increased investment was noted, with intentions to support R&D and particular areas to assist productivity.

“However for the NE then further specific commitments would have been helpful to address the manufacturing confidence issues surrounding the Brexit uncertainties.

“Overall the budget helpfully acknowledged the areas which are of concern; skills, infrastructure, regional challenges, retail and small firms, but does not represent a fundamental shift for any, it’s a relatively small ‘giveaway’.”

Alastair Wilson, Tait Walker

Alastair Wilson is a tax partner at Tait Walker. He said: “It’s clear that the government had taken on board some of the key concerns of both the electorate and business with increased funding for Brexit negotiations, a real focus on mental wellbeing, supporting our veterans, education improvement, plans for a modernised NHS…

“There were positives and negatives for the North East region, with some helpful measures that will genuinely benefit our local businesses and communities, including £400m for schools nationally, the confirmation of £14m to redevelop South Tees around SSI and a further £16.5m to Tees Valley as part of the ‘Transforming Cities’ initiative.

“Sunderland and Middlesbrough will also benefit from the £115m that has been committed to fund Digital Catapult which has bases in both cities.

“Some tax measures to encourage investment were very welcome, including the increase in the Annual Investment Allowance from £200k to £1m for two years from January 2019.

“Whilst this will encourage investment, we’ve had similar rules before and the AIA can be more complex to administer and utilise than businesses often realise, so care with timing investment is needed to maximise the impact.

“The big headline for an overall ‘tax boost’ for businesses came from the Structures and Buildings Allowance, a two per cent reduction per annum for construction, land alteration and improvement cost of new non-residential structures and buildings will come as a welcome relief.

“This is partially reintroducing the benefit we used to have from Industrial Buildings Allowances - but potentially with a wider scope. This is however being paid for by a reduction in capital allowances elsewhere, so may be cost neutral (or just a cost) for more businesses than the new reliefs assist.”

Rosemary Anderson, Clive Owen LLP

Rosemary Anderson is a partner at Clive Owen LLP, who said: “This came across as a fair Budget continuing the theme of closing loopholes that are open to abuse.

“It’s welcome news that the entrepreneurs’ relief is currently staying; the expansion of the qualification period to two years shows a commitment to preventing potential abuse while supporting genuine entrepreneurs.

“The Chancellor responded to people’s concerns with the introduction of the UK services digital tax, aimed at the largest tech companies and the IR35 restrictions being expanded into the private sector.

“The Annual Investment Allowance increase will stimulate business capital investment and is to be welcomed as is the very positive personal tax announcements, which will put more money in the pockets of many people and stimulate spending and the wider economy.”

Kelly Green, Lloyds Bank Commercial Banking North East

Kelly Green is the regional director for the North East of Lloyds Bank Commercial Banking, and said: “The Chancellor’s decision to cut business rates for smaller high street operators by a third will be welcomed by many our region’s SME retailers.

“Local commercial centres such as Newcastle have been hit by a string of recent store closures, and savings here will not only support the day-to-day cost of doing business but could also free-up cash flow for investment in developing crucial skills and tackling low productivity - both ongoing challenges for businesses in the North East.”

Steve Grant, TTE

Steve Grant is the managing director of Teesside-based training provider TTE. He commented: “This is a welcome measure which provides an incentive for smaller businesses to invest in apprenticeships.

“Anything which encourages a company to provide a young person with the opportunity of employment and to learn new skills is certainly a step in the right direction.

“I am pleased that the chancellor has recognised the important part apprentices play in supporting the economy and I hope many more smaller firms will now be able to benefit.”

Helen Golightly, North East Local Enterprise Partnership (LEP)

Helen Golightly is chief executive of the North East Local Enterprise Partnership (LEP), and said: “The chancellor has set out a Budget targeting a wide range of issues using the extra cash available as a result of lower than expected spending and higher tax receipts.

“The Office for Budget Responsibility (OBR) sets out a challenging growth environment over the next few years, although expects further growth in employment.

“The Budget is based on a scenario of a smooth Brexit, which is important for the North East. But the Chancellor has set out plans for a second Budget should there be a no deal and has provided more resources for departments to prepare.

“Alongside big political priorities on Universal Credit and mental health, in this environment he has aimed to build confidence amongst businesses. We welcome a number of positive amendments to business taxes, the introduction of additional business support services and action to address the costs of apprenticeships.

“Increasing productivity through investment in infrastructure, new technologies and innovation, skills and housing continues to be a strong focus and we welcome the extension of the National Productivity Investment Fund and the Industrial Strategy Challenge Fund; key resources for delivery of the Industrial Strategy.

“For the North East, the extension of the Transforming Cities Fund and the roads budget offers opportunities for new investment in our local transport infrastructure and road connectivity across the north.

“We are also pleased to see a group of significant technology projects where the North East has an interest, including the planned investment into the Made Smarter programme on industrial digitalisation, the Stephenson Challenge, which focuses on electric motor technology and has been led by partners from the North East, and the confirmed extension to the resources for the North East Digital Catapult Centre.

“As the Borderland project moves forward the commitment to improving full fibre internet connectivity to rural areas should offer an opportunity for the North East.”

Sandra Thompson, EY

Sandra Thompson is North East managing partner for EY. She said: “Here in the North East we enjoyed two special mentions in the chancellor’s Budget - and both were for Tees Valley.

“It is telling that those areas that have agreed devo deal and Metro Mayors do seem to find themselves particularly singled out for extra pots of money at the Budget.

“Plans for a Special Economic Area covering the South Tees Development Corporation site and up to £14m in funding was one fillip, designed to help the STDC to undertake early redevelopment of a part of the site and attract new business and investment.

“The extension of the Transforming Cities Fund by a year will see Tees Valley benefit to the tune of £16.5m. It is just one of just three Northern cities to get this bonus as a result of having devolution and metro mayors in place.

“More broadly, commitment to the Northern Powerhouse concept and crucially, to the delivery of Northern Power Rail was most certainly reinforced.

“The fact that the government plans to publish what it calls a ‘refreshed’ Northern Powerhouse Strategy next year demonstrates renewed commitment to the importance of improving productivity.

“I am hopeful that - in response to and recognition of previous criticisms - the North East will feature more prominently in its renewed strategic plans.

“Crucially, Northern Powerhouse Rail gets a special mention from the Chancellor, with direct recognition of how it will transform the economic geography of the North and a pledge of a further £37m on top of previous commitments to support its development.

“But growth and prosperity come not just from major infrastructure and connecting towns to city centres but also by creating sustainable eco systems within our regions towns as well.

“It’s an issue that Hammond is clearly also grappling with when it comes to the question of what should be done with our High Streets – many regional towns have seen the make-up of their high streets change so much that there is clearly no going back and that is having considerable impact of local communities and economies.

“In recognition, Hammond is looking to cut business rate bills by one-third for retail properties with a rateable value below £51k, but also free up local councils’ ability to repurpose properties to residential, establishing what he calls a new mixed‑use business model on the high street.

“Overall, some good reinforcements in commitment to supporting the North - the key now is to get on and make it happen.”

Jonathan Walker, North East England Chamber of Commerce

Jonathan Walker is an assistant director of North East England Chamber of Commerce, who said: “We are pleased the Chancellor has listened to our calls to improve local business conditions in our region and welcome the business rate relief for town centre retailers as well as the future High Street fund.

“The decision to half the apprenticeship cost of training for SMEs is also good news and is an endorsement of what was contained in our submission to the Treasury.

“Our businesses need to have a good infrastructure to succeed and grow so the announcement of £37m to develop plans for Northern Powerhouse Rail is welcome. Government now needs to commit to backing the full proposals as they come forwards.

“We have worked hard over the past year to support workers’ mental health and welcome the investment in services to provide help for this important area of employees’ well-being.

“Developing the South Tees site is a complex, long term project and so new funding is a useful start to attract new businesses to the area.

“Sadly, the major omission was support for exporters in the context of Brexit. We called for additional support for companies to break into new markets and strengthen our export performance.

“The Chancellor also missed the opportunity to improve regional competitiveness by not reforming Air Passenger Duty.”

Karl Pemberton, Active Chartered Financial Planners

Karl Pemberton is managing director of Active Chartered Financial Planners, and said: “Overall, it was a positive Budget. The increase in tax allowances and personal allowances is fantastic.

“Pensions appear to be untouched, which is great from a financial planning perspective, and something we were really hoping for.

“Of course, the devil is in the detail, and it will be interesting to see how the facts unfold during the next few weeks and months. All in all though, very little negativity and a lot to be pleased about.”

Donna Bulmer, Haines Watts

Donna Bulmer is managing partner for Haines Watts’ Newcastle and Darlington offices, who added: “Chancellor Philip Hammond announced a budget intended to be for ‘the strivers, the grafters and the carers’. This led to a raft of announcements focused on NHS, housing and, crucially, SME businesses and entrepreneurship.

“Extending startup loan funding to 2021, and not abolishing entrepreneur’s relief but extending the minimum qualifying period from 12 months to two years will provide a welcome boost.

“The annual investment allowance (AIA) will also rise from £200k to £1m for two years. This allows businesses to benefit from a deduction of the full cost of qualifying additions in year (up to £1m), giving businesses the opportunity to gain full relief in the year they make investments.

“From October 2018, businesses will also be able to deduct two per cent of the cost of any new non-residential structures and buildings from their profits before they pay tax.

“Plans to cut the apprenticeship levy in half - from 10 per cent to five per cent - for some employers will be well received, and £1bn of business bank guarantees to revive SME house builders, coupled with £675m of co-funding to invest in improvements and re-development of high streets and housing development could also have significant effects on the shape of struggling local high streets.

“We’ve also got a commemorative 50p coin to look forward to! So far, so encouraging…”