Member Article

Summer Budget: South East businesses react to the Chancellor’s statement

Today the Chancellor of the Exchequer, George Osborne, unveiled the first Conservative Budget in 19 years. In his first statement without the Liberal Democrats, Osborne covered a variety hotly-discussed topics including inheritance tax, non-doms and the minimum wage.

The Chancellor has maintained his stance on eradicating the deficit by 2018 by putting caps on benefits and promising to crack down on tax avoidance. However, with “just under half” of the planned cuts unveiled, the media has been left guessing as to where the government will source the remaining £20bn needed to bring the UK back into the black.

We spoke to businesses across the South East about today’s Summer Budget, and what the new measures will mean for the region.

Fuel Duty

Alistair Bingle, Managing Director at family owned removals company, Chessington-based Bishop’s Move reflects on the freeze on fuel duty:

“The announcement on fuel duty is yet another very welcome surprise to the removals industry. This confirms that this has been a very successful Summer Budget for both the UK housing market and the haulage industry.

“Let’s not forget this also follows much needed stamp duty reform in the Autumn Statement. The fuel duty freeze gives industries, such as haulage, the breathing space in which to plan and grow over the next 18 months and thus, create more job opportunities.

“The housing market is now firmly placed on a sound footing to get people moving now which will ignite the economy at just the right time.”

Minimum Wage

Helen Reynolds, CEO of RIDA, an investment house specialising in the recruitment industry based in Chichester, is hoping the rise in minimum wage combined with the increased Personal Allowance will boost the number of graduates entering the nursing and teaching industries,

“The headline “Britain deserves a pay rise” will see an increase in the threshold at which the 40% rate kicks will go up to £43,000. This will see 800,000 of some of Britain’s key workers drop out of the higher rate of income tax. At present, around a quarter of teachers and 1 in 10 nurses pay the higher rate of tax.

“Today’s changes will see many key workers better off and could go some way to increasing the number of graduates entering the nursing and teaching profession. Add the fact that the Personal Allowance will go up to £11,000 from next year, workers will on the whole be better off after today.”

“With both child tax credits and working tax credits being cut, the burden may fall on employers to raise wages to compensate workers for lost tax credits.

“Employers who pay minimum wage cannot afford higher wages, with many small businesses struggling to keep their heads above water. Any wages rises will invariably mean cutting staff which could have a domino effect on local economies - fewer jobs, higher unemployment, and less disposable income to spend on goods and services.”

Non-doms

For Alison Cartin, associate director at London-headquartered law firm, Berwin Leighton Paisner, the clarity on non-doms is a step in the right direction:

Alison Cartin, associate director, says: “There are extensive changes to the non-domicile status, which will have a significant impact on long-term UK resident non-doms. It may nevertheless be a relief to the globally wealthy and their advisers to see some clear, balanced thinking on this, in light of the press around the time of the election.”

Neal Todd, Partner at Berwin Leighton Paisner (pictured above) believes the Chancellor may have jumped the gun with the introduction of stricter penalties for tax planning that conflicts with the General Anti-Abuse Rule:

“It is disappointing that the Chancellor has seen to fit to introduce penalties for tax planning that falls foul of the GAAR. The GAAR has only recently been introduced to the UK tax system (it became law in 2013) and its ambit is wide and uncertain.

“No case involved in the GAAR has yet come before the UK courts and it seems very premature for the government to be adding back bone to a weapon that has yet to be judicially tested.”

Cutting the deficit

Jovan Pavlicevic, director of Farringdon-based Evergreen, a financial payroll company, which works closely with SMEs across the country, believes the recruitment sector will be hit hard by Osborne’s measures to cut the deficit:

“The Chancellor has put together a sturdy plan to tackle the deficit, but whilst there are benefits in store for some sectors, we feel that the recruitment sector in particular will be hit by the new policies.”

Housing

Thomas Villeneuve (pictured above), CEO and Founder of London-based flatsharing network Weroom:

“Britain is in the midst of a housing crisis and today the number of people in privately rented accommodation in the UK has never been higher. In today’s Budget, George Osborne failed to address how the government will be providing support to the ever increasing number of people renting and flatsharing. The government should be introducing long-term solutions which make life easier, and cheaper for flatsharers and renters whilst providing them security of tenure.

“In a recent study, we found that 55 per cent of UK voters would be happy to never buy a home if stricter rent controls were introduced, with many even calling for a dedicated Renting Minister. Brits are moving away from the idea of property ownership and renting is becoming a long term property solution for many.

“Whilst it does not seem that the prospect of a Renting Minister will be introduced in the short term, with rents rising disproportionately across the UK, the government needs to fundamentally address how to regulate the renting market and make it affordable and secure for Brits.”

The London property market and economy will be hit by the move on non-doms, according to leading property expert Nicholas Leeming, chairman of national estate agents Jackson-Stops & Staff, with 44 offices nationwide, including London. He said: “ It is vital that the capital retains its attraction to non doms.

“The stricter rules being applied to non doms, while having some merit, will inevitably further dampen demand from international buyers in central London where the market for higher valued properties has already slowed sharply following last year’s changes in stamp duty. This will affect the London economy, impacting restaurants, clubs and retail in prime central London.”

Robert Bartlett (pictured above), Group CEO of Chestertons, commented: “It is fair to say that the immediate post-election property market surge that some pundits predicted would result from the Conservatives achieving a majority for the first time since the 1990s has not materialised – especially in London, and most notably absent in prime central areas.

“This Budget is the Chancellor’s first opportunity to do something about plateauing markets and the increasing numbers of would-be buyers finding themselves unable to transition from renting to owning their own homes. To that end there are some encouraging measures in this Budget, not least the commitment to helping first-time buyers and the goal of delivering more new homes by freeing up public land, streamlining planning and incentivising developers. A better supply of good quality homes is what the lettings and sales markets both urgently need, especially in London, so we look forward to seeing the positive impacts these policies can bring.”

Inheritance tax

London - Ed Heaton, Heaton & Partners, is pleased with the Chancellor’s plans to increase the allowance on inheritance tax:

“I think this is a positive and refreshing move by George Osborne. Inheritance tax has been stuck in a time warp for far too long whilst the elderly have increasingly been required to squander their savings and assets in their old age to pay for the failings of the state, which they so generously supported in the past. This goes some way to redressing the balance.”

“The changes to mortgage tax relief for buy-to-let landlords will particularly hit those owning properties in prime central London, where the sums involved are very high and the yields extremely low. Notwithstanding this, if one accepts the Bank of England’s arguments, then the proposed changes are probably a proportional response to the issue. It might even help release a little more prime stock in central London to the market in the next year or so, although this might be wishful thinking.”

Vince McLoughlin, partner at business & tax advisory firm, Russell New also believes the freezing of inheritance tax is a positive move for the property industry:

“The problem with inheritance tax is that many individuals caught under the £325,000 threshold feel they are leaving a relatively modest inheritance to their family and yet it is subject to a tax which is seen by many as intended to target wealthier people. The freezing of the IHT threshold coupled with rising house prices throughout large parts of the UK have made the current inheritance tax threshold somewhat inadequate and it’s the right time for a change. This is a tax which hits people who have worked hard throughout their lives and who simply want to provide for their children after they die. Building up a legacy for our children and grandchildren is one of the reasons we go to work in the morning.

“By announcing that the threshold will be raised, middle-class families who are not mega-rich should be able to leave their house to their children without having 40% taken off the value.”

This was posted in Bdaily's Members' News section by Ellen Forster .