BUSINESSES around Peterborough have been studying this week’s budget online and trying to work out how the chancellor’s announcements will affect them.
Peterboroughbusiness.co.uk is bringing you all the reaction to the budget from the city’s accountants and business leaders, who have been telling us what they think the changes will mean for the Peterborough economy.
Kevin Edwards, tax partner at the Peterborough office of MacIntyre Hudson, the top 20 accountancy firm, has reacted positively to topline analysis of today’s budget.
“The reduction in Corporation tax rates and the changes to EIS, R&D tax credits for SMEs and the extension of Entrepreneurs’ Relief to £10 million all sound like joined up thinking for smaller and medium-sized, entrepreneurial companies.
“The Plan for Growth offers some very useful access to finance measures for SMEs. However, it was disappointing to hear that Peterborough will not be classed as one of the Government’s Enterprise Zones to attract more manufacturing businesses to the city – let’s hope we will be included in the 10 to be announced later on in the summer.
“We’re delighted to see that the Time to Pay scheme is continuing and that UKTI will be offering more support to SMEs who want to export. Increasing numbers of our clients are looking to expand their business that way, so this is a very welcome measure.”
Ken Craig from Rawlinsons said, “Against a background of rising inflation, considerable public debt and borrowing requirements, George Osborne has stepped up to the plate today to confirm his changes to the UK tax system. Prior to the event we were advised that he would be confirming significant increases to personal allowances, taking steps to help with rising petrol prices and perhaps simplifying the tax system, in particular a possible merger of National Insurance and Income Tax.”
Simon Chaplin, managing director of Greenstones, said, “For Greenstones customers, namely the small owner managed business, there are not really any new surprises following today’s budget. Whilst the government’s agenda is clearly one of growth the announcements made will do little to counteract the cuts in public services and government contracts for businesses. Consumers will be hard hit suffering from high inflation, petrol prices, job losses and static wages.”
Nino Pucacco partner at Peterborough accountants P&A Accountancy Services said, “There are some very welcome headline-grabbing announcements in this budget, but the devil is always in the detail, and things are rarely as rosy as chancellors paint them in their speeches. But even if the details turn out not to be too devilish, we shouldn’t get carried away, since the underlying message is that there are two brutal truths.
“The first brutal truth is that the public finances are still in a mess, and soon the huge tax burden and spending cuts announced long before today are really going to start hurting. In fact for some local people the pain is going to be excruciating as their jobs go, their public sector contracts disappear, their businesses fail, and the benefits system no longer gives them what they need. And if they work hard and manage to avoid all of that, they could find the taxman taking up to 60p in income tax from every extra pound they earn.
“The second brutal truth is that it is businesses and not budgets that offer us the best hope of putting things right by replacing the jobs and wealth lost, and generating the extra taxes needed to pay for everything. Mr Osborne billed it as a ‘budget for growth’ but in reality budget measure such as relaxing planning restrictions, setting up new enterprise zones and cutting corporation tax rates will only ever help a bit. It is how businesses respond that really matters, since they are the real engine of growth. So the region’s job and wealth-creating businesses need to stand up and be counted by taking urgent action to make it happen.
“Despite the promises of simplification in the future, the 2011 tax regime is hideously complicated and contains a huge number of pitfalls for the unwary. The good news though is that it now also allows the really well advised to make some very big tax savings. And that’s why we’ve launched our free 2011 Tax Minimisation Review service for businesses and individuals – to make sure that no-one suffers by paying a single penny more than their fair share of tax.”
Chris Haworth, head of commercial, Carter Jonas, said, “The announcement that the default presumption is in favour of development is good news, but it is very difficult to see how this squares with the Localism agenda.
“We still have the situation where local councillors now stand fully responsible to the electorate for any development proposals in their area and even a small vociferous minority can derail these.
“Until we get more clarity on how the localism agenda will work in practice, and particularly how it will work where cross-boundary development is involved, I am still not convinced that current policy will deliver the commercial and residential development that is much needed to regenerate an economy that has been through the worst recession in living memory.”
John Bridge OBE, chief executive of Peterborough Chamber of Commerce, said, “Today’s announcements will, on the whole, be met positively by business. The additional decrease in corporation tax will be welcomed, while the promise of no new regulation for firms with fewer than ten staff over the next three years is equally positive. Red tape continues to be an issue for business owners who simply don’t have the time or the inclination to sit down and get their head around onerous new rules and regulation.
“The 1p reduction in fuel duty and deferral of the planned increase is a positive step that shows the government understands the challenges facing businesses and individuals in relation to the high cost of fuel.
“On the whole, a positive, forward-looking budget that signals the Chancellor is starting to listen to the needs of business. But it’s not all positive for Cambridgeshire will no official confirmation of an enterprise zone to help generate funds for the Enterprise Partnership to use to tackle barriers to growth in our area, while the tax on jobs, being the rest of the national insurance contributions rise facing employers from April, remains.”
Amrita Parker, Peterborough branch chairman, Federation of Small Businesses, said, “The chancellor has said that this budget would be a ‘Budget for Growth’ and in part that is what we have – however, there are vital components missing for small firms to create jobs.
“We are pleased that the chancellor has introduced a fuel duty stabiliser; has committed to cutting fuel duty and has introduced 21 new Enterprise Zones. This will provide much needed stability for struggling small businesses.
“The government has committed to cutting red tape, but we believe new employment laws will still come into force in this year, which could hinder businesses from taking on staff.
“The biggest opportunity missing from this budget is by not extending the NICs holiday nationwide to existing businesses, which would really have provided incentives for small firms to take on more staff.
“The unpredictable nature of fuel prices damages growth for businesses across the UK – with a recent FSB survey showing that 62 per cent of businesses are increasing prices, one in 10 laying off staff, a quarter freezing wages and 36 per cent reducing investment.
“The FSB has long called for the re-introduction of Enterprise Zones across the UK and the announcement that 21 are to be created is good news. However, with unemployment at 2.5 million the FSB is disappointed that the government has not extended its National Insurance Contributions (NICs) holiday to existing businesses – this is a missed opportunity. This policy would have been cheaper to implement than keeping people on benefits.
“The extension of the Enterprise Investment Scheme and the doubling of Entrepreneurs Relief to £10 million will provide a much needed shot in the arm for entrepreneurship in the UK. Small businesses are key to innovation and the 200 per cent increase in SME R&D is welcomed.
“For small independent retailers struggling with inflation and other VAT rises, the further 12 month extension to Small Business Rate Relief for properties with a rateable value below £6,000 will help greatly.
“Almost seven in 10 apprenticeships currently take place within small firms and so the plan to add an additional 50,000 apprenticeships is a significant development for the small business community and young people alike.
“The FSB also welcomes moves to reduce the main rate of Corporation Tax over the next three years, but is disappointed that there was no mention of how the small business rate of 21 per cent would be affected.
“We are pleased that the government understands that the burden of regulation hinders businesses across the UK and that it has imposed a three year moratorium on new regulation for micro-firms. This will give the smallest firms the confidence to employ more staff without having to worry about constant changes in employment law. But, the government needs to look at extending this to all small firms to really open up an environment for businesses to take on more staff.”
Andrew Smith, chief economist at KPMG in the UK, said, “Last year was the preview, this year austerity is for real with tax rises and spending cuts each of 1% of GDP. Today’s concessions are small beer by comparison with this squeeze.
“The surprise was the cut in fuel duty – financed by the North Sea supplementary charge – aimed at the headlines but nevertheless still welcome to struggling consumers.
“You have to remember we are in uncharted policy waters with effectively zero interest rates. The chancellor’s strategy relies on monetary policy remaining loose to offset the tight fiscal stance – but this is outside his control and the MPC is becoming increasingly concerned about above target inflation.
“And unfortunately for Mr Osborne, it is the wrong kind of inflation – which is pushing up government spending faster than receipts. Combined with a lower profile for growth in the short-term, there is already some slippage in the deficit reduction programme before it has really begun.
“Without being able to pull the fiscal demand levers, this ‘budget for growth’ is relying on low-cost measures designed to improve the working of the economy. While welcome, supply-side improvements are no quick fix and take time and persisitence to come to fruition.
“The fall in fourth quarter output has had a knock-on effect on the economic forecast for this year and next, but growth is projected to get back on track further out. To date, though, there is little evidence of the promised rebalancing of the economy. Consumer spending is certainly taking a back seat – this year’s forecast increase has been halved – but exports and business investment have yet to take off. A triumph of hope over experience?”