Devolved Nations businesses feel the strain as Autumn Statement fails to land

Following Jeremy Hunt’s Autumn Statement, announced yesterday afternoon, small business and startup leaders across the UK are hurriedly absorbing changes that could impact their bottom-lines and future growth prospects. But, exclusive research for Startups.co.uk reveals a troubling gulf between the optimism felt in the traditional startup environment of London, and the wider mood among business leaders in the devolved nations of Scotland, Wales and Northern Ireland.

Despite some welcome breaks for businesses announced by the Chancellor, there have been muted, or even outright scornful, reactions from among politicians in the devolved nations who’ve felt their communities and industries have been badly let down.

Amid an ongoing inflationary and cost-of-living crisis, it’s an era of catastrophic pressure for businesses. Our research has found a vast gap in the stated mental health of business leaders in Scotland, Northern Ireland and Wales, versus those in London and other regions whose optimism seems to be growing ahead of a crucial election year.

The regional mental health gap for business leaders

This month, Startups.co.uk surveyed 546 business owners, CEOs, and C-suite executives from across the UK and a representative sample of industries to understand their outlooks and focuses for the year ahead.

An extraordinary difference in the stated mental health and optimism of these business leaders has emerged from our research, depending on where their businesses are based.

From our research, we’ve learned:

• Business leaders in Scotland are nearly half as likely to have a good sense of mental health, versus those in London (32% vs 62%)
• 8% of Scottish business leaders describe their mental outlook as ‘poor’, while 5% in London would say the same
• 33% of Welsh business leaders, and 40% of Northern Irish business leaders have a good mental health outlook, vs 62% saying the same in London
• Away from the devolved nations, there’s a troubling picture in England’s North East and South West, which have the highest rates of business leaders describing heir mental health as ‘poor’

This gap between the mental wellbeing experienced in the traditionally high growth business environment of London, and that in the devolved nations, is also translating to a big difference in the sense of optimism for the year ahead.

According to our research, in London, 73% of business leaders feel ‘highly optimistic’ about their prospects for growth, while in Northern Ireland, just 50% would say the same. In fact, Northern Irish business leaders revealed the worst sense of business pessimism of any region in the UK, with 20% saying they felt ‘not optimistic’ about prospects for the year ahead, versus just 7% saying the same in London.

In Scotland, 53% of business leaders told us they felt optimistic for the year ahead, while 13% felt ‘not optimistic’. For Welsh businesses, these figures were 58% and 4%, respectively.

Scornful reaction in Scotland

Scotland’s Deputy First Minister, Shona Robison, didn’t mince her words in response to Jeremy Hunt’s plan, publishing a scathing response the same afternoon.

“Today’s Autumn Statement from the UK Government has delivered what is the worst case scenario for Scotland’s finances,” Robison stated. “Scotland needed a fair deal on investment for infrastructure, public services and pay deals – the UK Government has let Scotland down on every count.”

Some of the Chancellor’s pro-business measures have been warmly welcomed by the business community, such as the permanent enshrinement of full expensing, a freeze to business rates, and a further extension to the R&D tax credits scheme. However, Robison argues that for Scottish businesses, far more support is needed.

“Some of the measures for businesses are positive,” Robison conceded in her response to the statement. “But they come in the face of UK growth having been projected downwards as a result of Brexit and the UK Government’s mismanagement of the economy.”

Arran Dewar is an executive director at SIS Ventures, a subsidiary of Social Investment Scotland (SIS). The group provides tools and mission-aligned investment to help early-stage businesses grow. Speaking to Startups.co.uk following the Autumn Statement, Dewar told us:

“It’s encouraging to see the UK Government prioritising investment into start-ups, scale-ups and spin-outs. As the Chancellor has rightly said, innovation is the key to our future success as a nation. However, it is vital that the benefit of this investment is felt across the UK, not just within the Golden Triangle. Scotland has a rich reputation for innovation, going back generations, but we’ll only continue to produce world-leading inventions if our entrepreneurs and scientists secure access to the funding they require to translate innovative ideas into game-changing businesses.”

Scottish business leaders impacted by higher taxation loophole

In Scotland, there’s an unusual tax anomaly for higher earners that could continue to give CEOs and business leaders cause for pessimism for the year ahead. This higher taxation loophole wasn’t addressed by Jeremy Hunt’s Autumn Statement, though the issue first arose after income tax decisions were devolved to Holyrood.

In the Statement, the Treasury made no changes so that national insurance thresholds in Scotland would be linked to income tax thresholds in Scotland. The latter are higher than they are in the rest of the UK.

If you’re a higher earner in Scotland (making over £43,663 a year), you’ll pay an eye-watering 52% on earnings up to £50,270. In the rest of the UK, you’d pay a lower rate of 30% tax on the same.

Potential disappointment for Welsh and Northern Irish businesses

In a Welsh Government response to the UK Autumn Statement, Rebecca Evans MS, Minister for Finance and Local Government, had little time for Hunt’s measures to support regional businesses.

“The announcements today for businesses in Wales are tokenistic and a distraction from the wider and much larger issues the UK Government has presided over,” Evans said in a statement published the same day as the Chancellor’s announcement. “It has failed to provide the conditions for economic growth and has created a poor environment for investment.”

From our survey, 21% of Welsh business leaders told us that improved access to capital and funding would be their most welcomed form of government assistance. Away from the investment hubs of London and the south east, a dearth in business financing support could prove an extraordinary pressure for struggling SMEs in Wales.

For Northern Ireland, there’s an additional pressure in that much of the £75m allocated to Northern Ireland from the Autumn Statement will be used to reduce Stormont’s overspend. This puts a limit on how much can be used to support public services and critical infrastructure that small businesses may rely on for a wider environment of growth and regional optimism.

Business appetite for change in an election year

The muted outlook of business leaders in the devolved regions, versus that of their equivalents in London, could yet cause further grief for a Conservative government in an upcoming election year.

From our survey, a consistent 50% of business respondents in Scotland, Wales and Northern Ireland all told us that the right package of business incentives could influence their voting intentions in the next election.

Above all other potential business incentives, access to capital and funding stood out as the key ask, with 25% of all survey respondents (UK-wide) telling us this is what they needed most, and could have the biggest influence on their vote.

With Jeremy Hunt’s Autumn Statement believed by some to be a starter’s pistol on an imminent election, it’s a crunch time for political leaders on both sides of the aisle to find the right package of head-turning policies to help resolve the business optimism gap that has emerged across the UK.