Member Article

Budget could help North East businesses

North East cities will need to bid for a portion of single funding pot, under proposals set out by Lord Heseltine and confirmed by George Osborne this week.

In his Budget speech, the Chancellor gave a nod to North East private sector firms, applauding the region for its job creation growth.

Speaking from the Tees Valley Unlimited’s Budget Live event, LEP managing director, Stephen Catchpole said: “The Chancellor was left with little room for manoeuvre in many ways because of the national economic situation.

“There was a few interesting points, such as the boost for infrastructure; a boost for housing in the mortgage guarantee schemes; a boost for businesses in terms of corporation tax cuts, and the national insurance allowance for small businesses.

On Mr Osborne’s signal to follow Lord Heseltine’s ‘No Stone Unturned’ review and introduce a single pot of money for cities to bid on, Mr Catchpole added: “I’m delighted to see that this is going to come to us - of course, the detail remains to be seen.

“This format with one pot of money, where we can match it with local sums or raise it from European contributions, sounds really good.

“We’d use it to invest in opportunities that create more jobs and GVA. It could help with training; be invested in infrastructure or, put it towards helping the Enterprise Zone. The key to this to leverage more money from it.”

Alastair Thomson, North East Chairman of the IoD and Dean of Teesside University Business School, said The Chancellor’s announcements were broadly good news for business.

Commenting on the National Insurance payments cut for business, he said: “If businesses think they can’t quite make a return on a project, or they haven’t quite got enough, this bit might bridge the gap - and that’s the difference between going ahead with a project and not going ahead with a project.

“We’re not talking about the Government paying full wages, we’re talking about the 10% that we would have paid in National Insurance contributions.

“In this economy, many decisions are marginal decisions, and I think this will prove to be a very significant piece of support, particularly for small businesses.”

Alastair welcomed the announcement of £3bn infrastructure spending, and said this gave investors confidence.

The North East narrowly missed out on being part of the £1bn carbon capture and storage programme, that the Chancellor referred to at the dispatch box.

Teesside Low Carbon was named as one of two “reserve” projects, while projects in Scotland and Yorkshire were chosen as the preferred bidders.

Capital allowances were announced for ultra low emissions vehicles, in a move that should benefit the region’s low carbon vehicle manufacturing.

Elsewhere in his budget, Mr Osborne announced that ceramics businesses would be exempt from the Climate Change Levy on energy costs, and Alastair hoped this would extend to other energy-intensive industries in the region.

CBI regional director Sarah Green said the Chancellor had done a good job under difficult circumstances.

She said: “In particular, we welcome the announcements around housing as this is a good way to kickstart the economy. It doesn’t have quite the same delay as perhaps road spending does.

“We also welcome the broader measures on infrastructure spending, and the mention that there would be investigations into why there was such delays in making it happen.”

Sarah said the reduction in corporation tax would be particularly welcome in the North East as the region looks to attract inward investment.

She added: “We know that in the North East we’ve got the sites, the skills and the people to make growth happen if people are looking to invest in the UK.

David Elliott, head of Tax at KPMG in the North East, suggested it was a “carrot and stick” budget.

He said: “The ‘carrots’ were a corporation tax rate cut, a national insurance allowance for small businesses, an extension of the CGT holiday for investment in start-up businesses and an extension of the creative sector tax reliefs.

“The ‘very large stick’ comes in the form of a raft of anti-avoidance measures. These include the widely anticipate General Anti-Abuse Rule plus details of rules on the government only awarding procurement contracts to business that are compliant on tax.

“The Chancellor sent out a strong signal that he wants more investment in the SME sector, signalling the vital role they have to play in getting the economy back on to its feet. Extending the Seed Enterprise Investment Scheme is clearly welcome, and abolishing stamp duty for AIM listed companies sends out a message that the AIM market is the place to list and raise finance for fast growing companies. It will be interesting to see if the measure encourages the North East’s high growth firms to list on the junior market.

“The measures announced to promote the infrastructure and housing markets should help the North East construction industry and wider supply chain. The ‘Help to Buy’ programme is truly innovative, assisting new builds and the wider housing market, and must benefit the region’s general economic wellbeing.”

This was posted in Bdaily's Members' News section by Tom Keighley .