A round-up from our MD Gary Keating
Of course, the Autumn Budget is to be taken in the context of the last 18 months of significant spending to support jobs and businesses over the pandemic. However, it appears that several things we’d hoped to see will be at best delayed until the Spring Budget. Here’s my thoughts on the key areas from last week’s budget for businesses and economic growth for our region.
Business rates:
There was an announcement of a consultation on technical changes to the way the tax works but no reduction in the levy in general. However, a 50 percent business rates discount for companies in the retail, hospitality, and leisure sectors was announced, lasting for one year and up to a maximum of £110,000 is welcomed to help those businesses recover properly, especially considering a potential increase of social distancing restrictions over this winter.
More extensions of pandemic support:
The Recovery Loan Scheme, which offers loans of up to £10m to businesses struggling because of the pandemic, has been extended to next June. We’ve seen some great uses for these loans by businesses choosing to pivot their services during the pandemic, implementing new systems or investing in operational developments to see the business safely into the future. What’s important is having a plan to deploy those loans in a way that can be tested, measured and allow the business to repay with confidence.
During the pandemic, the hospitality industry has benefited from a reduced VAT rate of 5 percent on supplies relating to hospitality, accommodation and admission to certain attractions. From 1st October 2021, this rate was increased to 12.5 percent (until 31 March 2022). But the hospitality industry is still struggling, it would have been good to see an announcement of an extension to the 12.5 percent VAT rate beyond 31 March 2022 – again considering the potential re-instatement of social distancing rules over the winter which will impede recovery.
Minimum wage:
Confirmed prior to the budget, any increase in minimum wage brings challenges for businesses. How do they cover the extra costs? Do they pass on some of the cost to their customers? Without doubt, the minimum wage needs to be increased to reach levels of a fair living wage and businesses need to look at how they prepare for this to go higher and across all age brackets, not just the latest announcement for those aged 23-plus to increase to £9.50 an hour. But even more than that, employers need to make their companies an enticing place to work. They must ensure the recruitment, retention and wellbeing of staff through strong work-place cultures and reward programmes, rather than relying on salaries.
Spending to attract investment:
The Treasury has said it is spending £1.4bn to “spur a wave of investment in the UK’s most innovative sectors”, with examples cited being life sciences and the automotive industry, including investments connected to the production of electric vehicles in regions such as the north-east and the Midlands. A parallel commitment would see money spent to bring “the best foreign talent” to the UK. This latter scheme was first unveiled in January last year, and only part of the money for investment is new. But much of this is concentrated on big business and with SMEs making up a significant proportion of our business community, will this filter down to them? One thing that is clearly gaining momentum is the interest of our businesses on creating a green economy, committing to a much bigger impact than just the greenwashing often seen by large corporations.
Two-thirds of UK businesses urged the chancellor to focus the budget on attracting investment into the UK, wanting him to encourage initiatives that will fast-track the country’s transition to a greener economy, according to the EY consulting group. Some 55% of the 1,000-plus firms surveyed said Sunak should use tax incentives to encourage green tech or carbon taxes, or both. Financial incentives for SMEs to develop their environmental and social governance (ESG) performance, initiatives for sustainable projects and becoming a certified B Corporation would have been welcomed. Bristol could be a hub for businesses who are willing to balance purpose with profit for the benefit of the whole community and we now look to next year’s budget while we continue to find solutions at a local level.
One final thing that was an obvious omission for me was an Online Sales Tax which, coupled with a reduction in business rates, could have helped level the playing field between large online retailers and bricks-and-mortar retail businesses. The decline of the high street as shoppers switched to online alternatives was already a concern before the pandemic and, whilst many SMEs pivoted to offer online purchasing and delivery options during the pandemic, big businesses like Amazon certainly have profited significantly in comparison. In the run up to the March 2021 budget, there were reports that the Chancellor was considering a 2 percent online sales tax, but these proposals were later shelved until Autumn 2021 and now look to be shelved until the Spring Budget at the earliest.
