Lancashire business react to Spring Budget
Interest rates have been reduced as part of a range of measures to help businesses struggling during the coronavirus outbreak, while chancellor Rishi Sunak also announced reduced Enterpreneur's Relief and increased taxes to help curb excessive packaging in his Spring Budget.
Tracy Button, tax consultant at Haworths Chartered Accountants, said: “With analysts warning that the Coronavirus could create economic uncertainty and instability on a scale not seen since the 2008 financial crisis, today’s Budget was one of two halves – the emergency Budget in response to the Coronavirus and a Budget focused on Britain’s future. As a result, it contained a plethora of lending incentives and cuts that SMEs were keen to see and that ensure we have a package of measures and turnkey solutions in place to drive continued innovation, investment and trade.
“The Bank of England’s decision to slash interest rates to just 0.25% is a significant step to shore up the economy by providing an immediate incentive to boost confidence and cashflows. To support the financial security of our business community, the Chancellor’s commitment to also deliver generous guarantees to banks – which gives them real confidence to lend to SMEs – was combined with £billions in new loans and grants to support smaller organisations.
“As expected, Entrepreneurs’ Relief saw the lifetime limit scaled back from £10m to just £1m, which was by far one, if not the, biggest tax reform to be revealed. The Employment Allowance also increased to £4,000, Business Rates were abolished for smaller retailers and expanded to include hospitality, leisure, cinemas and music venues, together with an increase to National Living Wage – of all which directly impact our SME client base.”
The government pledged £500m of investment in fast-charging infrastructure for electric vehicles and a doubling of energy innovation R&D funding. Ged Ennis of the Low Carbon Energy Company said: "If the UK is to achieve its net zero ambitions, significant expenditure on new technologies and charging infrastructure for low and zero emissions is going to be needed for decades. Today's budget announcement is a very welcome and important near-term commitment to the sort of spending that will be required."
Tony Medcalf, tax partner at MHA Moore and Smalley in Lancashire, said: "Coronavirus stole the show at this budget, but the short term cashflow support announced for businesses, such as allowing businesses to defer tax payments and access to emergency loans, is a hugely positive step for owner-managed businesses.
"In any other year, the record infrastructure spending would have been the main talking point, but this will take time to trickle through and business owners are rightly more concerned with the short term. Many of our own clients will welcome the action taken to abolish business rates for one year for smaller retail, leisure and hospitality businesses. It will be interesting to see what happens to these business rates once the coronavirus crisis is over.
“Some of the other big action today actually happened outside the budget with the Bank of England’s decision to cut interest rates back to historic lows and make extra money available for the banking sector to lend to businesses and the latter will certainly be welcomed by the SME community."
Jane Parry, managing partner of PM+M, said: "This morning’s announcement by the Bank of England that it was cutting interest rates to shore up the economy amid the coronavirus outbreak was welcome news. It was needed and the 0.5% cut was bigger than the 0.25% that was expected. It seemed to reassure the markets with a slight uplift in leading FTSE share prices.
"I’m not sure he really had much option after official figures showed that GDP growth flatlined in January even before the virus hit Europe. This all added fuel to the fire and fanned the fears that the UK economy is in a weak position as we head into what could well be the worst phase of the virus outbreak.
"His comments around falls in demand and the issues with the supply chain were candid but also intentionally positive about it being a temporary situation. The Bank’s intention to free up billions of pounds of extra lending power to help banks support firms, the government’s flexibility around sick workers accessing benefits and statutory sick pay as well deferred tax payments and its £500m hardship fund for local councils during the crisis were all good to hear. However, his intention to help retail and leisure businesses with a rateable value below £51,000 via a temporary halt on business rates was a bold move. These measures, with a combined value of £30bn, are what both businesses and the public need to hear and will improve confidence over the coming months.
"What was notable was the chancellor not telling us how this will be funded, with the likelihood of it coming from an increase in borrowing.
"Sunak stuck to the Tories’ fiscal manifesto promises not to raise income tax, national insurance or VAT and its plans to increase the national insurance threshold to £9,500 in 2020 with the ultimate ambition of raising it to £12,500. This will cost around £2bn a year and nearly 30 million workers are expected to be around £100 a year better off. All good but not a shock as he was never going to risk reneging on these pledges or upsetting the electorate.
"There was speculation that he was going to cut corporation tax from 19% to 17% but in the end he kept it at the existing rate which I think I was probably the right decision in the current climate and the challenges we face.
"The Conservative’s manifesto pledge to invest billions in infrastructure including transforming rail in the north and midlands, as well as better bus services and broadband in every home was, not surprisingly, mentioned with much enthusiasm. I don’t think he would have dared going back on this so close to election after the prime minister placed so much emphasis on rebalancing the UK’s economy during his campaign. The announcement of a £5bn package to roll out high-speed broadband to remote parts of the UK and a £1bn agreement with the mobile phone industry to boost 4G coverage to 95% of the country in the next five years is a gamechanger and can’t come soon enough.
"Throughout his speech, the chancellor kept returning to his new catchphrase ‘we are getting it done’. Buzzwords and straplines are all well and good but as they say: only time will tell."
Ian Cass, managing director of the Forum of Private Business, said: "Several of the announcements from Chancellor are in line with the wish list that we set out. In particular the commitment to accelerate investment on rural broadband connectivity, the investment in infrastructure, long term in the railways and in the shorter term our roads and also addressing the imbalance in the North/South economies is well overdue, like moving treasury jobs out of London and is something we have been asking for."
Glenn Bemment, regional director at Lloyds Bank Commercial Banking, said: “Measures announced in today’s Budget to introduce a new economic campus in the North, alongside ‘London-style’ transport packages worth £4.2billion and a £1billion boost for the Transforming Cities fund to support local transport in cities including Preston, are all so crucial. These improvements, alongside those to road, rail, broadband and research will certainly help to bring greater prosperity to the region.”
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