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Budget 2015: North East business reactions

Following Chancellor George Osborne’s sixth budget, we asked businesses across the North East for their reactions concerning key parts of the statement.

Northern Powerhouse

Mark Hatton, EY’s North East Senior Partner, said:

“The UK’s ability to create a ‘truly national economy’ could rest heavily on the ‘Northern Powerhouse’ delivering for business, so it’s encouraging that the Chancellor has placed more emphasis on taking forward infrastructure plans.

“All eyes will now look to the comprehensive interim report of Transport for the North, which follows-on from the One North report and will expand on earlier plans laid out for ‘HS3’.

“By creating better transport infrastructure across the North – underpinned by innovation, technology and excellent design – the soon-to-be-published plans could enable us to improve productivity and become a more desirable destination for increasingly mobile workers, investors and businesses.

“Following the publication of this strategy, the vital tasks of securing investment and gaining public support will be critical enablers over the coming years. Collaboration and integration involving all stakeholders will be vital, as will healthy scrutiny to ensure the North’s transport network is cost effective, delivered on time and to budget, efficient and, most importantly, a truly integrated part of a long-term, national plan for infrastructure.”

North Sea and Supply chain

Steve Pugh, Group Business Development Manager at Nortech Group said:

“Any help to increase future production and exploration is very positive. This is good news for a lot of North Sea oil producers and the supply chain. Any and all assistance to reduce the tax burden on our sector is very welcome, because the benefits should filter throughout the industry.”

Matthew Hunt, port director at Port of Sunderland, said:

“Anything that can be done to stimulate the development of the oil industry is very much welcome – particularly for the North East. The Budget does lay the foundations for a stronger oil and gas sector, and hopefully we will see the benefit of this at Port of Sunderland.

“However, oil and gas is just one sector, and it is absolutely vital that the region is supported to grow its manufacturing sector, something that benefits the supply chain – including the port – which provides a vital service importing and exporting goods.

“The North East has a strong track record when it comes to balance of trade, and I do hope that the Northern Powerhouse the Chancellor refers to extends its impact to this part of the UK – and in turn bolsters the need for the transit of goods in and out of the region.”

George Rafferty, Chief Executive of NOF Energy, said:

“These measures will be welcomed by the oil & gas industry and will support its role as a key contributor to the economy in terms of energy generation, investment and job creation.

“Providing a more attractive fiscal regime for the sector will help re-establish the competitiveness of the UK oil & gas industry and help stimulate exploration, which is a catalyst for all offshore operations, creating extensive opportunities for companies in the supply chain.

“Coupled with the recommendations of Sir Ian Woods’ report, the commitment of the industry to improve efficiencies and control costs, supported by an agile and innovative supply chain, these measures will provide a more sustainable environment for the sector to operate.”

Tax

Alastair Wilson, tax partner at North East accountancy firm Tait Walker said:

“It’s not that we expected much, but there was very little in the Budget. There were lots of positive “statistics” on the economy to highlight that the economy was stronger than when the coalition came to power, while nothing much new following on from the Autumn Statement for businesses or their owners (and even less which would be considered positive). Plenty of minor changes for business and individuals, yet lacking substance.

“There was also no real clarity on what will happen with the Annual Investment Allowance and what will happen from 31 December 2015. All the talk of a Northern Powerhouse hasn’t been backed up with outcomes for the North East.

“This is disappointing when compared to what has been announced for the North West, Leeds and Sheffield. The North East is getting £1m invested in the Centre for Process Innovation (CPI) at Wilton, but investment in technology company hubs is being focussed away from the North East. However, a welcome measure is the extension of Enterprise Zone in Tees Valley (Prairie).”

David Elliott, Tax Partner at KPMG in Newcastle, said:

“The Chancellor opened this year’s Budget statement with the pronouncement that, “If you back Enterprise, you increase revenue” and he’s done exactly that with a series of measures designed to help boost privately-owned businesses and delivering on businesses’ calls for stability.

“There was lots of positive stuff – from abolishing the annual tax return to the removal of Class 2 National Insurance contributions for the self-employed, and from the doubling of funding to UKTI for supporting exports to China, to the measures designed to raise awareness of and increase ease of access to the R&D Tax Credits regime.

“The region’s SMEs will welcome the announcement that the investment allowance, temporarily set at £500,000, will not reduce to the old amount of £25,000 but the new amount has not yet been set. So, while it was a statement of intent to extend the availability of an increased annual investment allowance, it would have been nice to have certainty around the future level of this allowance as businesses desire certainty before making capital investment decisions.

“However, conversely, there was no standout headline which will knock the socks off the region’s business community.”

Anthony Andreasen, director of corporate tax at Gosforth-based RMT Accountants & Business Advisors, said:

“Technology has made a massive impact on the tax system in recent years, and the introduction of real-time digital tax accounts will be especially welcomed by anyone who currently endures the annual rush to complete their return while still trying to keep their businesses’ operations on track.

“Giving businesses and individuals a far greater degree of flexibility and control over how they report and record their tax affairs will provide a clear imperative to get things done more quickly, and will allow companies additional room to organise their cashflow in the most tax-efficient manner possible.

“With the ever-growing presence of the video game development to the regional knowledge economy, moves to provide further tax incentives for that industry will be very much welcomed in the North East, and our many farming businesses will also be pleased to see that calls for a longer-term view to be taken on their tax affairs have been heard by the Chancellor.”

Bill MacLeod, PwC’s senior partner in Newcastle, said:

“George Osborne has responded to the gauntlet thrown down by industry and the new regulator, with a £1.3bn package which includes a 10% drop in the headline supplementary rate, backdated to January and bringing it down from 62% to 50%. This will be seen as a significant boost to the industry as will news of a 15% cut in PRT to 35%, enhancing support for older fields which will now have a reduced headline tax rate.

“This brings the headline rates for oil and gas fields down from 62% to 50% and 81% to 67.5% for the older fields that are subject to PRT. Investment in seismic surveys in under-explored areas of the UK continental shelf (UKCS) is another area that the Government is investing in, which has been welcomed in the industry for its innovation.

“Offering a 62.5% uplift in CAPEX, the much-trailed Investment Allowance will be another shot in the arm for the industry, encouraging North Sea investment and replacing numerous complex allowances that had previously existed.

“These measures should hold the wolves from the door for now, but if oil prices deteriorate or remain low for longer than firms can bear, then something more radical may need to be done if investment and jobs are to be protected.

“Nevertheless, it’s crucial that these measures aren’t seen as a tax break for oil companies, which will still face a tax rate, in some cases, of more than three times that of other sectors. This simply recognises the changing profile of the UK basin and, in the longer term, will help ensure the best return for the UK taxpayer.”

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