Business leaders hail Chancellor’s strategy - but question impact of National Living Wage

John Dugmore, chief executive of Suffolk Chamber of Commerce.

John Dugmore, chief executive of Suffolk Chamber of Commerce. - Credit: Lucy Taylor

Business leaders yesterday gave the first Conservative Budget in nearly 20 years a broadly positive reception – but with some fears being expressed over the cost implications of the new National Living Wage.

David Burch, director of policy at Essex Chambers of Commerce.

David Burch, director of policy at Essex Chambers of Commerce. - Credit: Archant

Further cuts in Corporation Tax and a new anti-avoidance clampdown - which besides protecting revenue for the Treasury also prevents unfair competition from firms not paying UK taxes – were among the measures welcomed.

The Government’s strategy of spending cuts to help wipe out the deficit was also well received although, in East Anglia, the emphasis on the “Northern Powerhouse” within plans for English devolution was also an area of concern.

Chris Soule, Suffolk branch chairman for the Federation of Small Businesses (FSB), said: “The Chancellor is right to continue to focus on reducing the budget deficit and has made some tough decisions to reach his goals. For businesses, the Budget contained a mixed bag of proposals, some of which will prove challenging for our members.

“We can hope that the devolution of powers alluded to by the Chancellor will also come Suffolk’s way and we will expect and hope that local government leaders will focus on finding the best and most cost effective way of driving up the services standards we need to support us as we lead the country on growing a strong economy.”

Salena Dawson, FSB regional chairman for East Anglia, said the National Living Wage would pose “significant challenges” for many small firms, particularly in the hopsitality, retail and social care sectors.

“We have been supportive of gradual increases in the National Minimum Wage in recent years, to reflect the improvement in the economy. However, we believe annual increases should be set according to the recommendations of the independent Low Pay Commission (LPC).

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“We support the idea of giving employers a clearer indication of where minimum wages are heading in the medium term, but we note this move risks undermining the independent status of the commission.”

The increase in the Employment Allowance to £3,000 is welcome but, for many small businesses, it was unlikely to fully off-set the increase in costs represented by National Living Wage rate for over25s, she added.

John Dugmore, chief executive of Suffolk Chamber of Commerce, said firms would be keen to hear more detail on the plans for a new National Living Wage and the impact this would have on businesses, large and small.

Firms would welcome the cut in Corporation Tax, from 20% to 19% in 2017 and then to 18% in 2020, and also the further £7.2billion clampdown on tax avoidance and evasion, said Mr Dugmore.

But he added: “We await further detail about where this extra income for the government will be invested in the coming months and years ahead.

“It is important to recognise that while measures such as the no rise in fuel duty are good news, we need to see further announcements of long term investment in key infrastructure such as the A14 in Suffolk.”

David Burch, director of policy at Essex Chambers of Commerce, said it has been “generally a very positive budget” for businesses.”

“The reductions in Corporation Tax are, of course, extremely welcome as was the new Annual Investment Allowance,” he said. “The proposed lower National Insurance contributions for small businesses are very welcome and I think that generally businesses will appreciate why we have moved to a National Living Wage.”

Essex Chambers would also be interested in details of the plans for new enterprise zones for smaller towns which could be of real benefit for the county.

However, he added: “One disappointment though was around the Northern Powerhouse and the devolution of power from Westminster and Whitehall.

“This is something that we very much support and we would like to see Essex be given the opportunity to enjoy the same powers and benefits that some of the northern cities will now enjoy. We will continue to lobby our MPs to see this extended to Essex.”

John Cridland, director general of the CBI, said: “This is a double edged Budget for business. Firms will welcome measures to balance the books and boost investment, but they will be concerned by legislating for wage increases they may not be able to deliver.

“Firms have been unwavering in their support for the Chancellor’s deficit reduction plans and will welcome the clarity that the new fiscal rules provide. Other standout measures include making the Annual Investment Allowance permanent at £200,000, which the CBI called for, as well much-needed investment in our roads network.

“The further reduction in Corporation Tax is a welcome surprise but tax reductions for employers don’t appear to match the businesses most affected by a rise to £7.20 in the National Minimum Wage next April – a 7% increase.

“The CBI supports a higher skilled, higher wage economy, but legislating for a living wage does not reflect businesses’ ability to pay. This is taking a big gamble that the labour market can absorb year-on-year increases of an average of 6%.

“Firms want to play their part in training up more apprentices but an apprentice levy is a blunt tool,” he added. “A volunteer army is always better than conscription but the CBI will work with the Government to make the best effect of this measure.”

Henry Robinson, president of the County Land & Business Association, said the Budget represented a major blow to small unincorporated businesses which faced an increase in costs as a result of the National Living Wage while getting no benefit from the reduction in Corporation Tax.

“The Chancellor stated in the Budget that the new compulsory National Living Wage will be paid for by decreases in Corporation Tax,” he said. “There are hundreds of thousands of family businesses in rural England and Wales that are unincorporated and therefore are taxed on higher tax rates.

“Farmers and other rural businesses are presented with significant inflation in their wage costs and the cut in corporation tax that is supposed to pay for it will not benefit them.

“We now need an urgent plan for how to ensure rural businesses are not left behind and jobs in rural communities are not put at risk.”