‘Business-friendly’ Budget is welcomed small firms
- Credit: PA
There was relief among small businesses that speculation over a reduction in the VAT threshold proved wide of the mark.
The current threshold will be frozen at £85,000 for the next two years, meaning that more firms will be drawn in than would have been the case with the usual inflation-linked adjustment.
But it had been thought that the Chancellor might lower the threshold, perhaps affecting more than a million small businesses.
Mike Cherry, national chairman at the Federation of Small Businesses (FSB), said: “1.5m modest-earning small firms and the self-employed will be relieved that we have seen off a VAT tax grab that would have caused huge economic damage. Instead, FSB is ready to work with the Treasury to simplify an over-complicated tax that on average takes a business a whole week to administer every year.”
He added: “Overall, this is a business-friendly Budget. The Chancellor’s vision for an inclusive economy includes a set of measures that will boost confidence across the small business community as they face extremely challenging trading conditions.
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“The economic outlook remains extremely troubled, with high costs of doing business and inflationary pressures hitting confidence and deteriorating productivity and growth.
“New public sector headline investment will help, to scale-up the British Business Bank by two thirds as well as in research & development, local infrastructure, SME house-building, broadband and training. This must now be followed by practical detail in an ambitious Industrial Strategy next week.”
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David Burch, director of policy at Essex Chambers of Commerce, also welcomed the news of VAT but expressed disappointment that “there was not more that might be of direct benefit to Essex” in the Budget.
“We obviously welcome the announcement that the VAT threshold will be capped at £85,000, which will be a real benefit to the small businesses that make up the back bone of the Essex economy,” he said.
“Business Rates are a major issue for many businesses, so we welcome the proposals to switch from the Retail Prices Index to the Consumer Prices Index in April 2018.
“This is something that we and the British Chambers of Commerce have been strongly campaigning for and will hopefully bring some relief to the businesses of Essex.”
He added: “Skills are of course highly important and we welcome the continued support for the delivery of Apprenticeships, but we hope that these funds can be used across supply chains and for other quality work place learning.
“The money being given to Further Education Colleges for the development of the proposed new T Levels, along with the proposed National Training Scheme focussing on digital and construction skills is also important in ensuring we have people with the right skills for the future.”
John Dugmore, chief executive of Suffolk Chamber of Commerce: said: “At first glance, this looks like a solid, tactical budget for business. Companies in Suffolk will be encouraged by the Chancellor’s focus on some of the key business basics - rates, roads, and mobile connnectivity.
“Suffolk Chamber is especially pleased with the decision to peg business rates increases to CPI, rather than the higher RPI, but much more needs to be done to reform this up-front tax on our county and nation’s entrepreneurs. We and the whole of the British Chambers of Commerce have been campaigning for wholesale reform and that effort will continue.
“We welcome commitments to delivering road and rail infrastructure, including that between Oxford and Cambridge which may well have a positive impact on Suffolk firms and plans to improve mobile phone signals on key transport corridors, which we hope will include the A14.
“Despite the inclusion of a number of announcements that will support business communities in the short term, more still needs to be done over the coming months to lay the groundwork for a longer-term prosperity, including a successful Brexit transition and an Industrial Strategy that unlocks our county’s capacity for innovation and hard work.”
Carolyn Fairbairn, director-general of the CBI, said: “Against a sombre economic backdrop, the Chancellor today gripped the steering wheel on the UK economy. This is a budget that balances support for people on squeezed incomes with vital action to help grow the UK out of austerity.
“But delivery is everything. Action on business rates, R&D tax credits, the National Productivity Investment Fund and Brexit planning will help firms to invest and grow today against an uncertain Brexit backdrop.
“It was good to see focused investment in the long-term drivers of growth that underpin sustainable prosperity,” she added:
“Additional investment in infrastructure will help tackle regional inequalities. The support for housing supply is critical for people and firms. Metro mayors will also welcome greater options for transport funding, but regions without devolution deals must not be left behind.”
Measures to boost housebuilding, includinig support for smaller building firms, were welcomed by the Federation of Master Builders (FMB).
Brian Berry, chief executive of the FMB, said: “The Government has set itself a new target of building 300,000 new homes a year by the mid-2020s, and today the Chancellor has put small and medium-sized builders at the heart of ambitious plans to tackle the growing housing crisis.
“The Chancellor appears to be putting his money where his mouth is with the announcement of £44bn of capital funding, loans and guarantees. In particular, a further £1.5bn for the Home Building Fund to be targeted specifically at SME housebuilders can play a significant role in channelling crucial funding to this sector.”
Stephen Herring, head of taxation at the Institute of Directors, said: “When it comes to tax, the Chancellor has avoided many of the ‘own goals’ scored in recent Budgets and has sensibly resisted the calls for the VAT threshold to be slashed and targeted business tax reliefs to be repeated or curtailed.
“Business leaders will be disappointed by the failure to increase business rates reliefs for SMEs hit by the recent valuation hike and by the failure to re-instate the Annual Investment Allowance to £500,000 or more – the only significant tax relief for mid-sized businesses.
“On the other hand, the decision to double the Enterprise Investment Scheme annual allowance, if invested in knowledge-intensive companies, and proposals to clarify the position of pension funds for such investment within their portfolios will be warmly welcomed.
“The Chancellor should also have focussed upon enhancing the UK’s post-Brexit global trading focus by reducing the rate of Airline Passenger Duty on long-haul flights to no more than the amount levied by our major competing European economies.”
Key announcements for businesses and the economy included:
•Office for Budget Responsibility forecasts that a further 600,000 people will be in work by 2022 but revised
down its forecast for GDP growth to 1.5% in 2017, 1.4% in 2018, 1.3% in both 2019 and 2020, before picking back up to 1.5% in 2021 and 1.6% in 2022. In the spring budget the forecast for 2017 was 2%, with 1.6% in 2018, 1.7% in 2019 and 1.9% in 2020.
•The OBR predicts inflation will peak at 3% this quarter before falling back towards its 2% target over the next year.
•Government debt is expected to peak this year and then gradually fall as a share of GDP. Borrowing is forecast to be £49.9bn this year - £8.4bn lower than forecast at the Spring Budget - and is then predicted to fall in every year of the forecast from £39.5bn next year to £25.6bn in 2022/23, to reach its lowest level in 20 years.
•Borrowing as a percentage of GDP is expected to fall from 2.4% this year to 1.9% next year, then 1.6%, 1.5% and 1.3% in subsequent yeas, reaching 1.1% in 2022/23. The OBR forecast the structural deficit to be 1.3% of GDP in Debt will peak at 86.5% of GDP this year, then fall to 86.4% next year; then 86.1%, 83.1% and 79.3% in subsequent years, reaching 79.1% in 2022/23.
•The National Productivity Investment Fund is to be extended for a further year and expanded to more than £31bn, a further £2.3bn has been allocated for investment in research and development, and the main R&D tax credit increased to 12%.
•The Government will invest £500mn in a range of technological initiatives ranging from artificial intelligence, to 5G and full fibre broadband and an Action Plan will be published to unlock over £20bn of new investment in UK scale-up businesses.
•There will be a new partnership between Government, the CBI and the TUC to “set the strategic direction” for a National Retraining Scheme to boost digital skills and support expansion of the construction sector. Immediate investment of £30 million in the development of digital skills distance learning courses,
•A new £1.7bn Transforming Cities Fund will deliver local transport priorities, with half to be shared by the six areas with elected metro mayors and the rest open to competition by other cities in England.
•The National Living Wage will rise in April 2018 by 4.4%, from £7.50 an hour to £7.83.
•The Income Tx-free personal allowance will rise to £11,850 and the higher rate threshold to £46,350 in April 2018, leaving the typical basic rate tax payer £1,075 a year better off compared to 2010.
•The tobacco duty escalator will continue at inflation plus 2%, with an additional 1% duty on hand rolling tobacco this year. There will be legislation to increase duty on high-strength low-quality alcohol from 2019 but duties on other ciders, wines, spirits and beer will be frozen.
•Short-haul Air Passenger Duty rates and long-haul economy rates to be frozen, paid for by an increase on Premium class tickets and on private jets.
•The fuel duty rise for both petrol and diesel which had been scheduled for April is cancelled.
•At least £44bn of capital funding, loans and guarantees will be made available oover five years to support house-building and deliver 300,000 new homes a year.
•Cash for house-building will include a £630m small sites fund; £2.7bn to more than double the Housing Infrastructure Fund; £400m for estate regeneration, a £1.1bn fund to unlock strategic sites, £8bn of new financial guarantees to support private house-building, and an additional £34m to develop construction skills.