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Budget 2016: More reaction from businesses in London and the South East

Here’s the second part of our round-up of what business leaders in London and the South East are saying about yesterday’s Budget announcement.

Much like the snap reactions yesterday, feedback from business leaders and SMEs has focused on the raft of tax and business rates reforms that the Chancellor hopes will support the UK’s small business community.

However, some businesses are already voicing concerns about the impact that forced academisation of all of the UK’s schools will have on skills priorities and workforce in the coming decades.

You can find the first part of our Budget reaction coverage here.

Taxes and business rates

Luke Davis, IW Capital

“The Spring Budget undoubtedly delivered some positive news for small businesses, creating an ecosystem that encourages new business birthrates and support for our micro-business economy.

“Changes to the small business rates relief will reportedly mean 600,000 small firms do not have to pay any business rates from next year. However, the numbers are slightly off given there are 5.4 million SMEs in the UK.

“Together they account for 99% of the private sector and contribute a massive £1.8 trillion to the UK economy. Many of these SMEs – particularly stage two businesses looking to upscale – did not receive the support they need.

“While I welcome these new reforms, I fear that this may increase the number of small businesses struggling to upscale, in turn leading to higher death rates for poorly financed SMEs. It’s surprising as just 13 months ago David Cameron acknowledged that “many fast-growing firms find it hard to access finance”, resulting in a £1 billion funding gap.

“One good thing that may in the long-run shine a light on UK small business is changes to Capital Gains Tax (CGT). Specifically, Osborne announced that as of April 2016 CGT rates will fall from 28% to 20%, which is positive for investors generally, but it also provides greater incentive for them to take advantage of one of the tax reliefs offered by the Enterprise Investment Scheme (EIS).”

Mark Roy at ReAD Group

“One felt a sense that George Osborne was putting the finishing touches to his application for the job next door. No fuel or insurance hikes but a sugar tax, finally! Has Jolly George just shotgunned his moniker onto the letterbox of No.10?

“I’m struggling to work out how George Osborne has managed to pull off what is essentially a pretty tax neutral budget. However, he seems to have predicated the whole budget on the anticipation of getting a further 9 billion from currently recalcitrant multinationals.

“But, and it is big ‘but’, the Government’s track record of actually delivering on these new fundraising initiatives post budget is not overly good. They had prepped the ground for tax levy rises on both fuel duty and insurance premiums but didn’t take advantage. Curious.

“We welcome reforms to business rates, which have been needed for decades, however George missed the opportunity to radically overhaul the system and align business rates to turnover and create a much more balanced and fair way to raise these funds.

“Clearly, the significant drop in CGT is to be welcomed and is a truly significant move for spurring on a genuinely entrepreneurial investment and involvement. I think this will lift the UK SME marketplace right into the cross-hairs of an investor’s radar.

“The devil is of course in the detail. I rather suspect that unless he can demonstrate better than expected tax receipts and their ability to collect them, this might unravel in the coming days.”

Martin Campbell at Ormsby Street

“I’ve been critical of support for small businesses in previous Budgets, but at first glance, this is arguably the best small business Budget that George Osborne has delivered.

“While ‘tax break for the digital age’ is really only a (great) soundbite, a tax break for those that rent out their spare bedroom via the internet, there were a number of measures that will help UK SMEs.

“The reduction of commercial stamp duty for small firms, reduction of corporation tax and 600,000 small businesses to be taken out of business rates, will lead to significant savings for many, money that can be used for growth.”

“As a firm believer in Britain’s membership of the EU – and Managing Director of a company where 25% of the staff are from other EU countries – I was pleased to see George Osborne mention the Office for Budget Responsibility’s report that stated that Brexit would lead to ‘disruptive uncertainty’.

“I would have liked to have seen more on this though –a Brexit will be one of the most significant events to ever impact the UK economy and the effect on small businesses could be truly profound, so where was the clear and considered rationale to stay? And where was any reference to a contingency plan should it go ahead?”

Craig Hughes, Director and Tax Specialist at Menzies LLP

Commenting on the George Osborne’s reduction of Capital Gains Tax (CGT), from 28% to 20% for the higher rate and from 18% to 10% for lower rate taxpayers, Craig said: “The Chancellor’s missed a trick here. With the gulf between CGT and Income Tax now even wider, we may see more money being parked in private companies and a short-term reduction in deal making activity that could stifle economic growth.

“A reduction in CGT is good news for private investors and could spark increased Angel investment in SMEs. However, this was the perfect opportunity for the Government to revitalise the stagnant housing market - excluding the proceeds of property sales from the new reduced rates of CGT will only serve in encouraging owners to hold on to their assets for longer.”

Touching upon the reduction in Corporation Tax, he added: “This is a nice bit of posturing from the Chancellor, and sends a message to the rest of the world that the UK is well and truly ‘open for business’.

“For many SMEs this may provide the confidence boost they need to pursue growth and invest in what is currently an uncertain political climate nearing the EU referendum.”

Academies

Richard Freeman of Always Possible

“The huge bombshell about the forced academisation of 15,632 schools in the next four years is as relevant to the small business sector as any other.

“The marketisation of education is being accelerated at a pace and has big implications on local skills development, procurement opportunities and the strength of local government.

“One of the biggest barriers that growing SMEs face is access to local talent, and skilled entry-level staff from the area that they can bring into their businesses. Academies – with more flexibility around curriculum – might be better placed to work with the local business sector to develop clearer programmes of vocational and critical-thinking education.

“With every school operating as an autonomous academy, or part of a academy chain, the relationships between education and commerce will get much closer in a number of ways (from sponsorship to services and outsourcing).

“The biggest risk, and it is big, is the rapid shrinking of an effective local government. Whilst this is clearly the ideological prize for George Osborne, what well-managed local education authorities provide is a joined-up approach to how schools and colleges work in partnership with the wider local economic eco-system.

“There are lots of unknowns, and education, aspiration and skills development are critical things with which to gamble.”

Chris Coopey, Carpenter Box

“Wednesday’s budget was broadly positive, particularly for small businesses and included a number of surprises such as the sugar levy, the new ISA model and reductions in Corporation Tax, Business Rates and Stamp Duty on commercial property.

“For the manufacturing and engineering sector the changes were pretty agnostic, however, one announcement may have a fundamental effect on the ability of the sector to deal with its skills deficit - all state schools would by 2020 have to become, or have plans to become, Academy schools.

“Academy schools are effectively self managing and independent of local government, but funded directly from central government. The good and the bad news is that they can make many decisions around the priorities they follow by themselves.

“That may be useful, but when the nation has a strategic need to produce more engineers it is a potential problem, unless the Government decides to target and point all of those schools in a particular direction.

“For the manufacturing, engineering and technology sector, central government needs to target and fund such schools not only to deliver a STEM biased curriculum, but one with an appropriate vocational slant.

“This should equip young people with the skills needed by businesses in future. The resultant quality of Engineering Apprentices going into schemes funded by the new Apprenticeship Levy would then improve.

“So, if the Government is still interested in orchestrating the ‘March of the Makers’, it should grasp the opportunity to meet one of the fundamental aims of our national educational system, which is to make sure that enough young people are given the opportunity to attain the qualifications and motivation to join a sector where one of the main barriers to growth has been a long standing skills shortage.”

How do you feel?

Now that we’ve had over 24 hours to chew over George Osborne’s announcement yesterday, how do you feel?

Will the Chancellor’s bussiness rates or tax reforms be a benefit or a hindrance to your businesses? Has Osborne gone far enough in supporting small businesses?

Let us know what your views are in the comments below.

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