Budget offers platform for growth – business leaders

BUSINESS leaders in the West Midlands have given their approval to the growth measures outlined in George Osborne’s first Budget, claiming they will lay the foundations for a private-sector led recovery.

Many acknowledged that the Chancellor had had a lot of tough decisions to make but most were grateful for the clear indications on the way the budget deficit was to be tackled and for providing business with a stable platform on which to plan ahead.

Mike Dell, president of the Black Country Chamber of Commerce, said: “We welcome the departmental budget cuts of 25% over four years and the decision to implement a pay freeze to public sector workers earning over £21,000, particularly as the private sector has already adjusted business to address unaffordable costs.”

However, he said he believed the lack of a decision on closing public sector final salary pension schemes was a missed opportunity and would have preferred immediate action on this rather than have to wait for John Hutton’s review.

“As a region, we rely too heavily on public sector employment, which is not sustainable,” he said.

“The economy does need to be rebalanced and we broadly welcome the moves to encourage private sector business to be established in areas where there is high public sector employment.

“However, whilst we welcome the tax exemptions for start-ups, we must ensure that there is appropriate support for those businesses as they start to grow and take on more employees. Currently, there is substantial support for new businesses, but nothing for firms after 18 months to three years, which is the point where many businesses fail.”

He said the chamber accepted that the VAT increase was an equitable way of raising taxes and brought the UK into line with the rest of Europe.

He said the delay in the increase would allow businesses time to plan and could also stimulate demand over the next six months.

“One increase is preferable to a phased increase, which would have created additional complications and burdens on business,” said Mr Dell.

He said the chamber also welcomed the moves on job creation, something which was expected to benefit many firms in the Black Country.

“It is pleasing to hear that the Government plan to boost job creation across all sectors. To aid this, we welcome corporation tax being cut from 28% to 24% in the next four years; this will clearly benefit all businesses and give them an opportunity to plan for the future.

“The decision to reduce small companies’ corporation tax to 20% next year will also greatly benefit the many small businesses we have in the local area,” he said.

However, he said there was disappointment that the Chancellor had not fully reversed the 1% increase in employer and employee National Insurance contributions and further guidance on this was needed urgently.

Despite the reductions to Annual Investment Allowance and Capital Allowances for plant and machinery, he said manufacturers in the area would still be okay.

“These allowances are a necessary incentive to investment for the manufacturing sector that would not be achieved simply by a reduction in the headline rate of Corporation Tax,” he added.

Another positive step was the five year plan to reform Corporation Tax, although Mr Dell said the decision to extend the Enterprise Loan Guarantee Scheme needed further evaluation, as currently the personal guarantees required of small business owners made it very difficult for them to benefit from it.

He concluded: “The Budget has not been as severe for business as first anticipated; it has been a decisive Budget that should be welcomed. The worst of the Budget could have been realised in the form of the increase in Capital Gains Tax, which is not as bad as originally envisioned; the increase over the next four years will give business the opportunity to plan going forward.”

Businesses in Coventry and Warwickshire welcomed the Chancellor’s stimulus for companies to grow and create jobs.

Dianne Williams, director of operations at the chamber, said: “There is naturally concern when public spending is being cut to this degree and we will have to wait to see the knock-on effect that will have.

“But it’s absolutely crucial that businesses are given the freedom to grow and create new jobs, and for those who are out of work to be able to start businesses. That seemed to be the overriding message from this Budget.”

The chamber assembled a panel of leading figures from across Coventry and Warwickshire to gauge opinion on what the Budget measures would mean for the area.

Property expert Harvey Williams said: “While we didn’t want a rise in Capital Gains Tax, it could have been worse and gone up to an even higher level.”

Tracey Barker, of recruitment firm Blue Arrow, said: “There are key benefits to the changes in the NI threshold and relief for new businesses taking on new staff. Public sector workers will be looking to bring their career forward and this may encourage them to set up a new business.”

Sandra Garlick, of De Marco Hunter Solicitors, said: “The VAT rise will have implications but I was pleased to see support for jobs. I am, however, concerned about the raising of the retirement age to 66 because I fear it could stifle job creation for the under 24s.”

Amrik Bhabra, of IT company ADECS, said: “There is encouragement for new businesses and it’s vital that we begin to balance the economy.”

Sarah Shipman, of Spencer Gardner Dickins, said: “This was pretty good news in terms of business and was encouraging to see the Corporation Tax rate reduced. We were concerned that they may increase the small companies’ rate so we are pleased to see that is coming down. That said, businesses will be disappointed with the changes in their capital allowance.”

Bob Wildman, of Travel De Courcey, said: “We welcome the fact that he is going to leave transport alone. However, they are asking Local Authorities to reduce costs and this is where most transport budgets lie, so they will inevitably be cut.”

Birmingham Chamber of Commerce said the Budget underlined the seriousness of the current economic situation and reflected the coalition Government’s earlier commitment to balance the books by 2014/15.

Katie Teasdale, head of policy for the chamber, left, said businesses would have to take the VAT rise on the chin as it was inevitable there would be a negative impact on retailers.

However, she said estimates that the increase would swell Treasury coffers by £12bn could not be overlooked.

Elsewhere, she said the Chancellor had been right to emphasise that recovery depended on the UK being ‘open for business’.

“The Chancellor’s decision to outline his five year plan for the UK’s tax regime, particularly around Corporation Tax is to be welcomed.

“Changes to Capital Gain Tax must avoid harming entrepreneurial activity and business investment in the medium to long-term,” she said.

She said the chamber was pleased capital investment allowances had been retained – albeit reduced from 2012.

“This will support niche manufacturing in our region- and allow them to plan their investment strategies over the next 18 months,” she added.

Ms Teasdale said the compromise reached on NI contributions was not all the chamber had hoped for, however, the decision to exempt start-ups from NI payments for their first 10 workers would help new businesses survive what was a rocky period.

“We remain to be convinced that this will serve as a silver bullet for job creation in our region. Of more importance, will be cutting regulation, employment legislation and keeping on track with planned corporation taxation cuts,” she added.

John Rider, Institute of Directors West Midlands chairman, said the message from the region was: “We need jobs, jobs, jobs”.

“While we are broadly encouraged by the support for the SME sector we are very concerned about the impact that forthcoming job cuts in the public sector in the West Midlands is going to have,” he said.

“It is a big ask for SMEs to take up the slack. It should be noted that a lot of new companies fail – up to 40% in the first two years – and so it is really the established businesses with growth potential that we must look to for job creation.”

In the West Midlands he said the focus had to be on inward investment to help create jobs, skills and graduate retention.

In a snap survey of more than 1,200 IoD members taken within an hour of the Chancellor’s speech, 45% said the Budget would have a negative effect on the UK economy and only 12% thought it would have a positive impact on reducing the fiscal deficit.

“We would have liked to have heard more on deficit reduction but it looks as though we will have to wait until the Autumn Spending Review,” said Mr Rider.

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