‘More tinkering than changes’ – corporate financier gives his view

IN the first Conservative budget for 18 years, described by Chancellor George Osborne as a “big budget with big ambitions to secure Britain’s future”, Andrew Moss, head of DSG’s corporate finance team, gives his reaction.

“There were no huge surprises as was predicted, albeit the increase in dividend tax was unexpected,” said Mr Moss, who works closely with SMEs and start-ups. “It was a chance for Osborne to make his mark but it was more tinkering than major changes.”

Delivering a boost for SMEs, the Chancellor pledged that the Annual Investment Allowance will be set at its highest ever permanent level at £200,000.

Mr Osborne said that the allowance, which was previously increased temporarily, will be set permanently at this figure from January 2016.

Moss said: “I would have liked to have seen this a little higher, it is to drop from £500,000 to £200,000 which is still a good level for SMEs but not so good for major manufacturers. However, being a permanent change, it does take away the uncertainty for companies of when to make an investment if they want to benefit from the allowance.”

The Budget also saw the creation of a new compulsory National Living Wage, with a goal of £9 per hour by 2020.

Mr Osborne said six million people on the minimum wage would benefit from the pay rise, which will begin at £7.20 per hour from April 2016 – up 11% from the current level of £6.50.

“This seems to suggest that this is going to replace the minimum wage, so this could have a substantial impact on SMEs,” said Mr Moss.

“Take an SME which employs two people on minimum wage, that cost will rise by £10,000 over the next five years. As start-ups and smaller SMEs can rely on minimum wage employees, this could cause problems for fledgling businesses.”

Responding to Mr Osborne’s plans to cut corporation taxes to 18% by 2020 – the lowest in the G20, in what he described as “an advert to tell the world Britain is open for business”, Mr Moss said: “I think this is a good thing, the reduction in the rate is good but for SMEs it is countered by the rise in dividend tax, which was unexpected and I’m sure will be unwelcome for the SME sector.”

The Chancellor also announced plans to fund apprenticeships through a levy on large businesses, claiming that there are still too many large companies that “leave the training to others and take a free ride on the system”.

Revenue from the levy will help fund all post-16 apprenticeships in England and provide financial support for Mr Osborne’s election promise to create three million apprenticeships by 2020.

“Apprenticeships had been a key focus of the coalition and continue to be so under the Tory majority,” commented Moss. “The cost of employment can be a major deterrent for young and growing businesses so if the levy on larger employers is used to provide further support to SMEs who wish to take on apprentices, particularly those under 25, this can only be a good thing although it is effectively a further tax on larger companies.”