Good news for business?
The Chancellor’s budget proved a mixed bag for businesses around our region, with some positive and surprising measures alongside some which underwhelmed:
- An extra £3bn per year in ‘capital spend’ for infrastructure projects, beginning in 2015/2016;
We have for some considerable time advocated for greater levels of infrastructure spending in our representations to decision makers. We remain dissatisfied with the comparatively low level of investment from Government in Northern infrastructure, and believe this deficiency will continue to have a profound impact on our economy. We welcome increased capital spend in this area but are underwhelmed by these figures, which when compared to the cost of a single project in central London appear insignificant. London’s Crossrail project, for example, has a headline cost of £16bn. More importantly it is unacceptable that this investment should be delayed a further two years, minimising the potential impact on growth.
- Making the UK tax system the most competitive in the G20 by reducing the main rate of corporation tax to 20 per cent – the joint lowest level in the G20;
This is positive and fair, however is unlikely to have a material or immediate bearing on growth. Corporation tax is a tax on profits and so is unlikely to produce any impact on job creation or business start-ups, and will only make a limited impression upon investment decisions. We welcome the Government’s efforts to make the UK the most competitive and attractive business destination in the world, which targets greater levels of inward investment from overseas. We would, however, like to see further movement on taxes which directly affect the day-to-day business of British companies, in particular the abatement of recent increases in business rates.
- Giving businesses and charities entitlement to a £2000 per year employment allowance towards their employer National Insurance Contribution (NICs) bill, from April 2014, to reduce the cost of hiring staff;
This is a positive announcement, for which we have long campaigned, and which was included in our Chamber’s pre-Budget letter to the Chancellor. We are delighted that Mr Osborne has responded positively to our recommendation. It is precisely the type of initiative which will help stimulate new employment and growth. The fact that this will have the most significant impact upon small businesses is also to be commended and we now strongly recommend that the Government, as a matter of great urgency, frame eligibility criteria and the specifics of this initiative so that it can have an immediate and as wide as possible impact. We have long argued that NICs represent a perverse disincentive to company expansion and we hope that this Employers NI abatement will be further expanded in the future to progressively remove this costly and illogical jobs tax.
- A £5.4 billion package of financial support to tackle long-term problems in the housing market including the launch of Help to Buy - which offers two schemes aimed at helping those who want to get on, or move up, the housing ladder.
We view it as a positive that the Government is seeking to address the country’s chronic housing shortage and stimulate the construction industry. This sector has represented a significant drag on the British economy, which in turn impacts upon a long supply chain of contractors, suppliers and manufacturers. The Government is right to address this, and, combined with a house building programme announced in the Autumn Statement last year, this scheme will help contribute towards easing the problem.
- Taking forward Lord Heseltine’s recommendation on the creation of a Single Local Growth Fund;
This is positive, and the competitive nature of the single-pot funding should create an incentive for underperforming Local Enterprise Partnerships to refocus on more ambitious plans to stimulate local growth. Government must ensure that this approach does not allow particular regions to lag behind, particularly where this may exacerbate existing inconsistencies. Questions remain over what decisions should be made locally, and as to the delivery capability and capacity of existing local organisations.
What wasn’t mentioned:
The Chancellor failed to make mention of export support, an area which we believe should be key to our shared efforts to promote growth. With both domestic consumption and Government investment limited international trade represents the greatest opportunity for our country to achieve a sustainable recovery. It is particularly important that emphasis should be given to assisting first-time exporters and to the development of additional world markets outside of the EU. As ever, the Chamber is here to help and is significantly expanding its own support offer to exporters. However, Government support for struggling exporters will also be necessary, and should be prioritised.
Access to finance was mentioned briefly in the Chancellor’s speech and is dealt with to some extent in the full Budget Report. However, progress on the Business Bank has been slow, the funding for lending scheme has not fully delivered, and serious concerns remain over the Government’s commitment to solving the ongoing problem of making affordable funding available for SME’s. We highlighted, in our letter to the Chancellor, a particular problem around the marketing of Government finance schemes. There has been no satisfactory solution to this problem and we will continue to seek clarity from Government over their willingness and determination to tackle this issue.
Britain’s economic future is not as bleak as many newspapers and pundits would have you believe and there are many reasons to remain optimistic. We are successfully diversifying our export markets, remain an attractive destination for inward investment and are home to some of the most advanced and innovative companies in the world. However, we should not be complacent and we cannot afford to take our eye off the ball. The Chamber will continue to lobby for the best possible business environment, and through discussions with you, our members, will refine our policy agenda to seek measures to support Mid Yorkshire businesses to stimulate employment, explore new markets and secure improved economic prosperity for our region.