Budget 2010: Entrepreneurs’ reactions

Entrepreneurs cast their verdict on Osborne's austerity Budget

It’s safe to say that entrepreneurs were bracing themselves for George Osborne’s austerity Budget. However, now that the suspense is over, ‘it could have been much worse’ seems to be the general consensus among the business community. In fact, many business owners have commended the chancellor, whose acknowledgement of the key role that entrepreneurs will play in driving the economic recovery has gone down particularly well. Meanwhile, the rise on capital gains tax for higher rate taxpayers to 28% was nowhere near as bad as expected, and the extension of Entrepreneurs’ Relief, to give entrepreneurs a rate of 10% on their first £5m of gains over a lifetime, certainly sugared the pill for business owners. The chancellor called his first Budget “unavoidable” and “tough but fair”, while the CBI said Osborne had managed to achieve his twin objectives of “setting out a credible plan for the public finances and producing a convincing growth strategy for the longer term”. We asked some of the UK’s finest entrepreneurs to tell us what they thought of the announcements, and how the measures will affect their businesses.

Overall impressions:
James Caan, dragon and founder of Hamilton Bradshaw:

“This is the most aggressive Budget I have witnessed in my lifetime. At £155billion, or 11% of GDP the UK faces the highest budget deficit of the G20 leading economies. It is essential that the deficit is tackled as quickly as possible, and that the government’s plan in the Budget reflects a clear need to rebalance the economy towards sustainable private sector growth.”

Matt McNeill, CEO, Sign-up.to:

“I thought the Budget was good overall. It was shockingly sensible. Finally we have a government that realises small businesses are a good way out of the mess.”

Simon Lawrence, CEO, Information Arts:

“The emergency Budget is well balanced and contains a lot of good news for small businesses. I am pleased to see corporation tax decreasing progressively and the National Insurance increases Labour introduced being reversed. Perhaps most crucially for nurturing enterprise and entrepreneurs in the UK the government is extending the capital gains tax exemptions. Overall there is lots of positive news, especially considering the state of the public purse and the need for difficult decisions to be made.”

Julie Meyer, CEO, Ariadne Capital:

“Overall I think it was interesting. The central core of the belief behind the Budget seems to be that the private sector is going to drive the recovery – that an inflated state hinders growth. “It strikes me that there’s a real desire to reign in and live within our means. You have to have some faith in the chancellor that he’s looked at the whole problem and done what has to be done. He’s trying to avoid a debt crisis where people are unwilling to lend to the UK and restore confidence in UK currency – that’s exactly what we should be doing right now – wean people off the state. It’s a good step in the right direction.”

Charlie Mullins, managing director, Pimlico Plumbers:

“The next five or six years are going to be hard graft for all of us, make no mistake about it. However, this is a budget that pulls everyone together to face the battle ahead. More than just revealing tax rises and spending cuts I got a feeling that the aim is to pull as many people back into the economy and make sure that everyone has to play their part. From the Queen to the bankers and the civil servants to the benefit scroungers, everyone will have to deal with a hit to their pocket and purses. Hopefully the cuts to benefits will encourage some people back into work rather than staying on benefit because it gives them a better wage packet at the end of the week.”

Mitesh Soma, CEO, Chemist Direct:

“I think it’s key that the government has identified that businesses are the lifeline of our country. The government has played a balancing act; they haven’t just gone after one set of people. We were all expecting the worst but it hasn’t been as bad as perhaps expected.”

Jos White, co-founder, Message Labs and Notion Capital:

“Overall, the budget is not as bad as I had feared and it does provide some nice protections and incentives for entrepreneurs. The reduction in corporation tax will certainly go down well with businesses, and some of the tax measures will incentivise budding entrepreneurs to take that first step. But it is a great shame the government has missed the opportunity to make the UK a hotbed for investment. The government should have looked at the complete picture in order to build the ecosystem required to support smaller and growing businesses. In taking a piecemeal approach which penalises early stage seed and venture capital investors, the government has sucked some of the life out of entrepreneurial growth and success.”

On increasing VAT to 20%:
James Caan:

“VAT is historically a low hanging fruit, and it’s no surprise to see it increased to 20%.However, at 17.5% it is already at the top-end of UK acceptability. From a business perspective, it hits SMEs much harder, as they do not have the reserves to absorb the practical and admin costs of implementing pricing and accounting changes. Changes last year are believed on average to have cost £1500 per business to implement. The government needs to think hard about the impact this is going to have on SMEs.”

Matt McNeill:

“VAT won’t affect us too much and I don’t think the effect on the economy will be devastating.”

Charlie Mullins:

“I’ve said it before and I haven’t changed my mind VAT was a ‘no brainer’ of a rise – it had to happen. I’m like everyone else I’m sure given the straight choice of keeping more of the proceeds of my, and my company’s work I’m always going go for keeping more. But this time round it just isn’t that simple – the decision is about staying in business or going out of business and that’s why I’m 100% behind the rise in VAT, to be honest I thought it would have gone up tonight!”

David Hathiramani, director, ASuitThatFits.com

“With the VAT rise, I’m happy  we have got a bit of time to consider it, and make sure it all gets arranged properly (until January 2011). It will affect all companies equally which is good, but it will probably have some affect on consumer spending, so we will have to work harder to meet our targets.” “I thought the Budget was good overall. It was shockingly sensible. Finally we have a government that realises small businesses are a good way out of the mess.”

Mitesh Soma:

“The VAT is a fair tax; we had to do something and this tax will affect people in a fair way, rather than just penalising one set of people.

Nicko Williamson, managing director, Climatecars:

“I think raising VAT is a good measure because we need to reduce the deficit and get back on track. The Budget could have been a lot worse. “The VAT rise shouldn’t affect us too much, although we’re reliant on other businesses so it depends how it affects them. Generally companies don’t cut out using taxis so we should be relatively unaffected. Overall it’s a tightening but I think it’s a positive step. Reducing the deficit will be good for trade.” On increasing capital gains tax for higher rate tax payers to 28% and increasing entrepreneurs’ relief to £5m: James Caan: “This is going to be controversial and a difficult decision for the government to make, because it is a tax typically aimed at both the more affluent and the business community. It is a bold decision by the government because it is essentially a tax increase on those who are needed to invest in the private sector, create jobs, and who will ultimately drive the recovery. Nevertheless, when you are staring down the barrel of a £155billion deficit and a swelling debt burden, tough decisions need to be made.” David Hathiramani: “We wanted to introduce a company share scheme, which would be affected by this if there is no provision for share schemes in the small print. However, it won’t stop us doing it, even though it will be less of a sweetener for our employees. “With Entrepreneurs’ Relief, it is a positive thing, although maybe it would have been nicer to have relief that helps companies get to that point, rather than just at the end. Even so, it is still a welcome and positive thing.” Matt McNeill: “An increase in capital gains tax will bite us later on, but it’s only fair that we all bear the burden. Overall it will benefit us in the future, it was good to see Osborne acknowledging what is needed. The Entrepreneurs’ Relief increase will help encourage people to invest in the UK.” Julie Meyer: “From my perspective I believe we should be providing as much taper relief and keeping CGT as low as possible. Osborne clearly believes it needs to be a bit higher than I do but he has better information so I respect that. I do think, as you can see in so many elements of the government’s approach, there’s a recognition that the private sector is going to drive the economy. Government can’t drive growth because they can’t create revenue. Mitesh Soma: “The capital gains rise is not that bad. It could have been worse. Nobody likes budgets when they need to raise more revenue. The Entrepreneurs’ Relief extension from £2m to £5m is positive.” Jos White: “The government has been far more restrained than everyone expected on CGT. But how the government treats investors is a huge part of the equation as investors have a vital role in the ecosystem that entrepreneurs and small businesses operate in. “If you sweeten the pill for entrepreneurs but punish those who invest in them you aren’t going to help businesses grow, in fact you are more likely to stifle them. This is the second CGT rise in three years, hitting investors with an overall tax rise of 18%. Combined with the strict regulations coming out of Europe there is a risk that investment will be directed into other areas or the funds will move elsewhere.” Nicko Williamson: “I am pleased with the extended Entrepreneurs’ Relief on capital gains tax, as a country we want to encourage entrepreneurs and small businesses.” On NI breaks for start-ups outside of London and the South East: David Hathiramani: “It would have been great if we had it too (we’re in London), but I have always thought it’s good to support other areas to promote enterprise and investment across the country.” Matt McNeill: “With regards to the National Insurance holiday for other regions, I would hope that it would help those areas, it will be interesting to see how it works out.” Mitesh Soma: “The NI holiday outside London is good if it can help generate more jobs – anything to boost employment and the economy.” Nicko Williamson: “It’s an interesting idea. Obviously it would have been great it we could have it too, but it will be good for stimulating growth in the north.” On reducing the small firms’ rate of corporation tax from 21% to 20%: Matt McNeill: “Cutting the corporation tax was a good move to encourage further investment. Over the long term, cuts in corporation tax will help us to invest in our business.” Nicko Williamson: “Corporation tax reduction is positive for businesses, although we don’t pay it because we are still in the early stages, so at the moment it will not affect us.” On the decision to abolish Regional Development Agencies: Graham Grover, CFO, JAOtech: “On a personal note I have dealt with SEEDA on various levels and the abolition of regional development agencies is a shame – though I am interested to see whether their function will be carried out through other agencies.” Julie Meyer: “What we’ve done is create a very well-meaning layer of fat in the system. There’s an enormous informal human network at this point. Everybody talks about business. It’s not as if outside of the RDAs nobody knows where to go. In every family there are uncles, nieces, sisters, brothers – informal ways of helping people. “I just don’t think that we need all of that money and infrastructure and fat to stimulate business because we’re quite good at that in this country anyway. It’s not as if we don’t create global leaders. It’s not as though we don’t have informal networks of business people that can help. All due respect to the government agencies, but the people who create global leading firms don’t say thank God for government agencies.” Nicko Williamson: “I have never come into contact with RDAs, although I am all for abolishing unnecessary quangos.” On extending the Enterprise Finance Guarantee (EFG) scheme by £200m: Nicko Williamson: “There is not enough access to loans out there. As a small business, banks won’t touch you. We looked at the EFG but we weren’t eligible so it won’t work for us. They should push banks to lend, especially the state-owned banks.” Kate Craig-Wood, founder Memset: “Osborne talked of extending the Enterprise Finance Guarantee scheme. However, the EFG is broken! It was supposed to help banks lend to entrepreneurs without requiring large personal guarantees, but the banks are not honouring that and still will not share any of the risk. The EFG needs fixing before it gets extended.” Graham Grover: “The Enterprise Financial Guarantee increase looks the most interesting for companies like ours. The banks are just too risk averse at the moment and this affects fast growth companies like ours who require funding. If the government is willing to offset this risk then hopefully this will stimulate banks to fund more fast growth and start up businesses.”

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