County responds to Chancellor's Autumn Statement
David Bennett of Moore and Smalley Chartered Accountants sets the scene:
“By the time George Osborne stood up to deliver his autumn statement, most of the ‘bad news’ was hardly news at all. The policy of reducing the budget deficit remains firmly in place, with continuing low interest rates being the chancellor’s main objective.
“Good news for Lancashire in the chancellor’s autumn statement is the confirmation of enterprise zones for the BAE Systems sites at Warton and Samlesbury.The zones will give tax breaks through capital expenditure and other incentives to encourage businesses to locate in these areas. Confirmation of these enterprise zones for the BAE sites is welcome because they will act as an economic stimulus.
“I also believe the Chancellor’s continuing focus on keeping interest rates low will benefit SMEs. There will be no tax cuts, but if interest rates are kept low this will have a cost-saving effect for businesses.”
On the announcement of a £20bn National Loan Guarantee Scheme that will see the government underwriting bank lending to smaller businesses he added: “This will enable the banks to be confident about lending to businesses with turnover of £50m or less, and this should reduce the cost of borrowing for smaller and mid-sized businesses.
“A new Seed Enterprise Investment Scheme was also announced, which is designed to help new business start-ups by giving investors a tax break of up to 50 per cent. Details of qualifying businesses will be announced next week and this information will be worth looking out for.
“In addition, the government has published its national infrastructure plan detailing 500 road, rail and digital infrastructure projects over the next 10 years and while capital investment is always welcome it will take some time to filter through.”
“However, the chancellor confirmed that the government’s debt reduction programme will take two years longer to achieve than originally anticipate, but it is hoped that it will not affect global market confidence in the UK economy or hit the chancellor’s low interest rates strategy.”
In conclusion, he added: “Although there were reports that we were heading for a double dip recession, the forecasts today announced by the Office of Budget Responsibility (OBR) do indicate some level of growth albeit at a moderate level.
“It will continue to be challenging times in the next twelve months but there are still opportunities. However, it is vital that owners have the right financial systems in place and management information to help them take their business forward.”
Jane Parry of PM+M Chartered Accountants said the Chancellor was ‘missing the point’ on SME lending.
She said: “Smaller businesses - the kind that make up the life-blood of the Lancashire economy - may find little relief in the Chancellor’s revised growth measures.
“There were no earth-shattering surprises when it came to the frankly grim official growth forecasts, but the business community was hoping Mr Osborne would provide a real solution to the issue of providing access to funding for the SME sector. Sadly this hasn’t materialised.
“While he talked for some time on igniting the flow of credit to businesses and providing a lifeline with the National Loan Guarantee Scheme for businesses with a turnover of up to £50m, the emphasis seemed to be on the interest rate reductions this could achieve for those businesses.
“In reality, reducing the interest rates will probably have little impact for local SME’s. The key issue they face is in persuading banks to lend to them at all, partly because of security (although the existing Enterprise Finance Guarantee scheme already goes some way to address this) but more relevantly because their business forecasts just don’t look that good.
“Full details of the National Loan Guarantee Scheme have yet to be released and it is to be hoped that it will provide more than just interest rate enhancements if it is to succeed in unlocking bank funding for struggling SME’s.
“There were, however, some positives, and confirmation of the Lancashire enterprise zone is good news, as is the extension to the suggested programme of infrastructure projects.
“Those planning on starting up a business will draw positives from the proposed new 50% income tax relief for investors, but the devil will be in the detail, as with many of the other policies outlined.”
Mike Damms of East Lancashire Chamber of Commerce was cautious, but pleased that manufacturing was at the fore of government thinking.
He said: “The statement was very much as expected – a balancing act between cost controls, protecting the UK’s credit rating and trying to encourage growth – all in a precarious European and wider economic environment.
“However, a considerable positive for Lancashire is that manufacturing is seen as a major piece of the solution – and it’s something we’re rather good at.”
Martin Newsholme of KPMG also questioned the benefits offered by the Chancellor.
He said: “Whilst Lancashire’s Enterprize Zones are welcome, it is still the case there is no tax relief on buildings or structures, so accordingly this round of Enterprise Zones is less generous than the 1980s/1990s version and it is questionable whether a timing difference will alter investment decisions.”
Karl Vella MBE, owner of autobody repair company the Karl Vella Group, spoke on the scrapping of the next proposed rise in fuel duty.
He said: “I welcome the scrapping of the planned 3p rise in fuel duty. As a business which relies heavily on transport, not just directly but indirectly, anything which reduces the burden on businesses and families is to be welcome.
"I was also pleased to see the credit easing programme to underwrite up to £40bn in low-interest loans to small and medium-sized firms, and the £1bn business finance partnership to help raise money for medium-sized firms.
"We need to get the economy moving again and that will only happen if companies are given as much help as possible to allow them to expand and grow.
"However, we need to understand that at the moment, it's still very tough out there and businesses will, despite what the Government does, continue to find it tough for a while to come before we finally reach calmer waters."
Neil Sevitt, of RSM Tenon, believes that, on balance, the Autumn Statement has been good news for the county’s business community, but that it hasn’t gone far enough.
He said: “‘The Autumn Statement has largely been good news. The confirmation that Enterprise Zones are to be established in Lancashire is very welcome for the local economy.
“We also welcome the announcement that the Chancellor will make it easier for SMEs to access loans, as research carried out by RSM Tenon revealed that nearly three-quarters of entrepreneurs in the north thought that a lack of bank funding was a major problem preventing entrepreneurial growth in the UK.
“Proposals to simplify regulations for SMEs to take on new employees is also good news. However we don’t think the Government has gone far enough, and we continue to campaign for tax relief to be given to entrepreneurs that take on additional staff. SMEs are a crucial part of the economy in the north, and introducing incentives for creating new jobs will help them to expand and prosper more easily in a difficult economy.”
Nadeem Hussain, of Pierce, said that the announcements lacked any immediate impact for county business.
“Some of the measures outlined, like the credit easing proposals, are welcome albeit overdue, but the Government has itself acknowledged that it will take a few months before businesses feel the benefit.
“Some kind of immediate stimulus to get people to spend some money would have been welcomed, such as a temporary fall in VAT. January and February can be very poor months for many businesses and there is nothing in this announcement that will address any immediate issues.
“The infrastructure announcements are to be welcomed, but again will take some time to get going, in some cases many years. However, there have been other changes announced that are likely to have an earlier impact – a reduction in corporation tax to 25 per cent for large companies, and measures to encourage the setting up of new business through the enterprise investment scheme relief will impact favourably in the short term.”
Simon Ainsworth of Napthens solicitors spoke of the proposed stimulus to the housing sector.
He said: “A 50 per cent discount for social tenants buying their properties is to be welcomed, but will not have an immediate impact on the wider market place. There will be no chain of buyers involved, for instance, with no further purchases to help the marketplace move forwards. Benefits will come further down the line when these property owners decide to sell their property and move on.
“The Chancellor’s mortgage indemnity scheme, however, is likely to have more of an effect, allowing people to buy properties with a much lower deposit. On a purchase of £100,000 this will make a real difference – potentially a £5,000 deposit as opposed to much higher deposits currently needed. This is likely to help the housing market more generally, with a chain of sales often tied into the purchase of a first time buyer property. I look forward to seeing how these policies will play out over the next few months.”