Autumn Budget 2017: Reactions from the business community
With no big business announcements, could Philip Hammond's latest Budget still be deemed business-friendly? Entrepreneurs and experts discuss
Following the last ever spring Budget announcement just 7 months or so ago (see what entrepreneurs thought of the announcements then here), there has been a rather lukewarm build up to this month’s Budget.
After several big mistakes and U-turns both by George Osborne and current chancellor of the exchequer Philip Hammond, it was anticipated that the Treasury’s motto for today would be one of caution, with the government promising to “adopt a balanced approach”…
And it seems the predictions were correct. There were no big shocks when it comes to business, or unanticipated announcements. But regardless, there will still be impacts on business owners day-to-day.
So what does the entrepreneurial community think of the increased investment in tech scale-ups and changes to the Enterprise Investment Scheme?
We’ve collated feedback below from business owners and experts to see what you really think of today’s key measures.
Are the Tory government doing enough to support small businesses?
On the £3bn Brexit fund
Martin Hook, managing director, Ayming:
“With talks in stalemate and rumours circling regarding the Prime Minister’s authority, the government has a responsibility to instil confidence in British businesses across all sectors. Manufacturing businesses need to know if they can keep exporting, UK airlines could end up grounded and supply chain issues are becoming more and more real. There is now an increasingly likely possibility of the introduction of tariffs to UK goods and services which could throw some businesses into the red.
“More than anything, businesses need security. Recent GDP figures clearly indicate investments are being put on hold. Some of our private equity clients are showing real concern over the extent to which things have slowed down.”
David Jinks MILT, head of consumer research, ParcelCompare:
“Of course ParcelCompare is concerned about the impact of Britain experiencing a ‘hard Brexit’ and losing the benefits of the Single Market. That would increase the cost of exporting items considerably.
“As such we question why the Chancellor has felt the need to set aside £3bn for Brexit preparations? We trust this is not as an emergency slush fund should the UK crash out of the EU without a satisfactory trading deal.”
On increased tech scale-up investment
Fergus Caheny, head of the technology group, Smith & Williamson:
“In the Budget, Mr Hammond announced:
- £75m for artificial intelligence
- £400m for electric car charge points
- £100m to boost clean car purchases
- £160m for next-generation 5G mobile networks across the UK
“These amounts are not enough by comparison to what is really needed.
“Of course, any amount is welcome as it puts the issues front and centre. However, the aim seems to be to grab headlines, rather than have a material effect. Looking at AI, the UK has a commercial and technical advantage over most countries: the investment levels need to reflect this to ensure and maintain our competitive advantage.”
“When you consider the hundreds of millions that Google annually invests in its Deepmind AI program, the government cannot sensibly think £75m will achieve this aim.”
Doug Monro, co-founder, Adzuna:
“One of the most heartening aspects of Hammond’s Budget speech today was his commitment to jobs of the future, with £500m earmarked for projects around AI, 5G and fibre broadband and a stated desire to help tech start-ups reach scale. Britain is at the forefront of tech development and the intention to maintain and enhance this position is welcome.”
Matthew Adam, chief executive officer, We Are Digital:
“The Chancellor has said that a new high-tech business is founded in the UK every hour, which he wants to increase to every half hour. It is imperative we support this growth through the announced £500m investment in artificial intelligence, to 5G and full-fibre broadband.
“However, to bridge the need for the 1.2 million new technical and digitally skilled people which are required by 2022, we must create and support retraining opportunities across society to make the UK truly digital.”
On doubling the Enterprise Investment Scheme (EIS) for “knowledge intensive” companies
Genevieve Moore, partner and head of corporate tax, Blick Rothenberg:
“Hammond’s comments on ensuring Enterprise Investment Scheme (EIS) tax relief is not used to evade tax indicates that further anti-avoidance legislation may be introduced.
“The devil will be in the detail but we do hope any changes will not make an already complex tax incentive even more complicated, as the incentives available through EIS really help growing and start up UK businesses secure finance to fund growth and development.”
Les Cameron, head of technical, Prudential:
“The announcement that the Enterprise Investment Scheme (EIS) level is increasing for investment in some companies will be good news to some savers. However, the old adage that the tax tail shouldn’t wag the investment dog should be remembered – the risk being undertaken has got to be appropriate for the client.
“The tax treatment of EISs is very generous reflecting what should be a higher-risk profile on your investment so it will be interesting to see what measures are introduced to deal with the use of them for low risk capital preservation.”
David Mott, managing partner, Oxford Capital and chair of the BVCA Venture Capital Committee:
“EIS is rocket fuel for entrepreneurs – it helps brilliant new businesses take flight. The chancellor’s announcement will help get more money to the most ambitious entrepreneurs looking to scale up their businesses and build global leaders in the UK.
“For EIS investors, this means they can continue to support companies providing patient capital and generate returns through the company’s life cycle.”
On the increase to R & D tax relief
Mark Tighe, CEO, Catax:
“The increase in the Research and Development Expenditure Credit from 11% to 12% is a crucial step forward for UK research and development.
“With Brexit looming ever closer, the need for the UK to position itself as a major centre for global R&D has never been more important.
“An increase to 15% would have been a far more robust statement of intent, and many in the industry had quietly been hoping for it, but a rise to 12% should be applauded.
“While this rate increase is targeted at large companies, it is also available to SMEs that are in receipt of state aid for their R&D – through grants, for example. Unfortunately, this is an area of tax relief that is often overlooked and under-claimed.”
Duncan Cheatle, founder, The Supper Club:
“Whilst we welcome moves to lessen the impact of Business Rate rises it’s disappointing that the R&D tax credit increase hasn’t been applied to the SME scheme. As we pointed out in our special report last year, Britain has a complicated tax code which does not distinguish between SMEs and multinationals or recognise the impact of small businesses on job and wealth creation.
“While the UK is a great place to start a business, with over 600,000 founded last year, only a small proportion of that succeed in scaling. If the UK tax regime is to adapt to a 21st century economy once we leave the EU, its reforms must be as enterprise driven as our fast-growth companies.”
On more regional investment
Doug Monro, co-founder, Adzuna:
“Money allocated to help transform cities outside the capital will also help keep the Northern Powerhouse and the Midlands Engine in full operational order. For the UK jobs market to hit top speed, all of our regions need to fire on all cylinders and further investment will help oil the wheels.”
On reforms to the VAT registration threshold
Mike Cherry, National Chairman, Federation of Small Businesses (FSB):
“1.5 million modest-earning small firms and the self-employed will be relieved that we have seen off a VAT tax grab that would have caused huge economic damage. Instead, FSB is ready to work with the Treasury to simplify an over-complicated tax that on average takes a business a whole week to administer every year.”
Craig Harman, tax specialist, Perrys Chartered Accountants:
“Small business owners will be pleased to note that speculation regarding a decrease in the VAT registration threshold did not come to fruition. It was anticipated the chancellor would look to bring the UK in line with other EU countries, however this will be consulted on instead and may result in changes over the next couple of years. Any decrease in the threshold could place a significant tax and compliance burden on the smallest businesses.”
Christoph Rieche, cofounder and CEO, iwoca:
“Small businesses across Britain will be relieved that the Chancellor is not reducing the VAT threshold in his latest Budget and also promises more support for R&D. There was no mention, however, of measures to reverse the contraction in net lending to microbusinesses since 2011, a period in which big corporations have massively benefitted from quantitative easing.
“At iwoca, we are concerned that microbusinesses will miss out again if the RBS Alternative Remedies Package funds are not directed where they are needed most, to the innovative, alternative lenders that have the interests of small businesses at the heart of what they do.”