Autumn Statement 2016: What North West business leaders want to see

Chancellor Philip Hammond is due to give his Autumn Statement this Wednesday (November 23) – the first since the government shakeup that saw Theresa May become Prime Minister in the wake of June’s EU referendum.

With uncertainty very much on the economic menu as 2016 draws to a close and the Government scrambles to get its Brexit papers in order, we spoke to some of the North West’s most prominent business leaders to get a feel for what they want to see in Mr Hammond’s Autumn Statement this week.

Steve Burke, managing director of Skelmersdale-based building and civil engineering company CPUK Group, wants to see more discussion around funding infrastructure projects.

“When he addressed the Conservative conference earlier this year the new Chancellor made some encouraging noises regarding infrastructure projects and house building.

“The autumn statement is the place where he needs to translate that noise into hard, tangible policies that will deliver more work for the construction sector and get Britain building.

“The Chancellor has made a good start with changes in planning rules to encourage more building on brownfield sites and a £5bn fund to help small family firms build 325,000 new homes by 2020.

“We would now like to see the autumn statement talk in more detail about funding for infrastructure projects – getting long delayed plans finally off the drawing board.

“There has been uncertainty since the Brexit vote. Loosening the purse strings to stimulate economic activity could play a strong role in easing that uncertainty.

“We would also like to see the recent encouraging signs around the future of the Northern Powerhouse also translated into deeds. It is time to end the rhetoric and to start delivering tangible projects.

“If that doesn’t happen then there is a real danger that the momentum will begin to fall away and the Powerhouse will be fuelled by nothing more than hot air.”

Murray Patt, founder of Manchester-based accountants Alexander Knight & Co, is hoping for the “most uninteresting” Autumn Statement in two decades.

“The biggest thing that business needs in this year’s autumn statement is… nothing at all. We simply need some stability. If I were the Chancellor I’d be very reluctant to make any changes to the way we’re doing business in the UK, unless it’s a simple, fast and easy announcement like a further corporation tax reduction. The last thing business needs is something else to debate over in parliament or any more onerous red tape introduced.

“It’s really important now, given that he’s new to the role in a new Government cabinet, that the Chancellor focuses on communicating to the world that the British economy has been in good shape over the last twelve months. Despite the international and European political excitement, most clients and I hope and expect it to be the most uninteresting Autumn Statement in twenty years in terms of business and it makes sense to not tinker with anything for psychological reasons more than anything else.

“Events in the US and the precarious nature of our position over Brexit means that businesses are facing uncertain times. The good thing is that it’s not for the first time. Political and economic events of the past decade have made most established SME’s streetwise and I would argue that we’re all in pretty robust shape, agile and enterprising enough to cope with whatever the politicians throw at us. The message from businesses quite simply is: don’t rock the boat.”

Philip Brennan, head of Chester-based Businesscomparison.com, wants to know how the government plans to match EU funding as the UK prepares to withdraw from the bloc.

“The budget in March was branded by many as leaning in favour of small businesses, however much has happened since then with Brexit, a fall in interest rates and a predicted spike in inflation.

“I’d like to see small and medium sized businesses adequately supported at this time of transition. Incentives that encourage investment such as the Northern Powerhouse and regional business hubs need to be backed in this statement.

“New research has forecast that SMEs will contribute £217bn to the UK economy by 2020. This can’t be taken for granted though and small firms must continue to be supported with low business rates and tougher laws on late payments and delayed invoices.

“Investment in supporting British manufacturing is more important than ever before and there needs to be clarification about how EU funding for businesses will be matched in the future.”

Rachel Marsdin, tax partner at regional accountancy and business advisory firm Moore and Smalley, believes the Chancellor needs to help the government reconnect with small businesses.

“George Osborne’s tenure as chancellor was marked by policies to attract large business to invest in the UK. That needs to continue, but the new chancellor Philip Hammond also needs to do something to encourage small, owner-managed businesses which have been somewhat neglected during the Osborne years in my opinion.

“We need to encourage the grafters in our SME community to have the confidence to make moves on investment. If I were him, I would start with increasing the annual investment allowance for SMEs, which has shrunk back down to £200k after being as high as £500k in recent years. This will increase the tax relief available on big capital investments and give those businesses certainty. It would be good to see investment in plant and machinery removed from business rate calculations altogether, or perhaps some enhanced capital allowances for SME investment more generally.

“To be fair, Mr Hammond has the almost impossible job of trying to inspire business confidence when nobody yet knows what Brexit is going to look like. There’s also uncertainty over exchange rates, interest rates and inflation. For the time-being we’re still a member of the EU, which means he can’t anything that would contravene the rules on state-aid.

“Mr Hammond is known to be a cautious politician, but he has to be bold. We need bigger and better ideas to get these businesses investing for the long-term. Give us security and confidence to get growing.”

Carl Williams, managing partner in the North West for professional services network Grant Thornton, hopes Mr Hammond will take the opportunity to drive spending into regional road and rail infrastructure.

“With recent decisions on Hinkley Point, the third runway at Heathrow and HS2 we’ve seen a bold commitment to internationally significant infrastructure projects. But while the government should be commended for making progress with these schemes, we’re unlikely to see ‘shovels in the ground’ for some time.

“Landmark infrastructure projects may take the headlines, but to many they are an abstract and distant prospect. People want to feel the government is working for them here and now.

“I hope – and expect – that Philip Hammond will seize the opportunity to channel spending into regional road and rail improvements. Improving day to day commuting conditions would be universally popular with both businesses and the general public in the North West and, crucially, work could get underway without delay.

“While I doubt that we will see ‘fiscal policy reset’ like the new chancellor may have suggested, it is also his opportunity to shore up business confidence following the decision to leave the EU, with enterprise-friendly policies.

“We would like to see Annual Investment Allowance back at £500k, the small business rate relief cut-off point raised from £15k to £25k and a reduction in the employer class 1 National Insurance Contribution rate.

“At Grant Thornton we’ve always maintained that SMEs are the key to a vibrant economy – both in the North West and the UK as a whole. Measures to simplify our overly complex taxation system and unlock entrepreneurial potential are long overdue.”

Ken O’Toole, CEO of Manchester Airport, said investing in transport will ultimately unlock economic productivity.

“The Autumn Statement gives Government an opportunity to demonstrate its commitment to driving economic growth, at the same time as maintaining the global competitiveness of the country as a whole.

“Investment in transport infrastructure is key to raising productivity in all parts of the country and will be central to the success of a new Industrial Strategy for the UK.

“The Government’s renewed support for the Northern Powerhouse project is also welcome and we urge it to underpin that commitment with financial backing for large-scale projects that will deliver transformational benefits to the North.

“Specifically, announcements around HS2 phase two and the proposed Northern Powerhouse Rail network - running east to west - would deliver a clear signal that the Government is serious about driving Northern growth and re-balancing the UK. Setting a clear timetable for delivery would be welcomed and would demonstrate continued commitment to this project.

“Following the vote to leave the European Union, there has to be a focus on improving trade ties with key global markets, especially those outside of Europe, and so it follows that measures should be taken to encourage new direct connections to these parts of the world.

“One such measure would be the reform of Air Passenger Duty, which continues to serve as a tax on both trade and tourism. If the Government isn’t going to cut APD significantly to boost connectivity with international markets, it must look at innovative ways to encourage more new services. Connectivity to these markets is vital to the success of the Northern Powerhouse, and the Government isn’t doing enough to support the development of new services from UK airports. One solution for Government is to consider an APD ‘holiday’ on new long haul services to encourage airlines to establish routes to important international markets.”

James Dow, founder of advisory business Dow Schofield Watts, wants the government to slash VAT in response to the falling pound.

“As Philip Hammond was previously Secretary of State for Transport I expect that the focus will be on spending on significant transport infrastructure projects to boost the construction industry.

“What I would like to see is a 5% cut in the rate of VAT. This could completely remove the negative impacts from the recent devaluation of Sterling. Furthermore, it would stimulate spending and would be very significant for lower income households.

“On a lighter note, for catchphrase bingo, I fully expect we will hear the phrase that Britain is ‘open for business’ more than once. Does that mean pre-Brexit we were shut?”

Mike Perls, North West chair of the Institute of Directors, thinks the chancellor should commit to the Northern Powerhouse and address the skills gap.

“The Autumn Statement provides a moment for the Government to show a decisive and clear direction to the business community in the North. Our business leaders are becoming experts at living with political uncertainty. We can’t know yet the future shape of the UK’s relationship with the EU, or the direction in which Donald Trump will take America, but we do know that the North West’s economic fortunes are dependent on our companies continuing to show confidence in their investment decisions.

“The Government needs to use the Autumn Statement to reaffirm their commitment to both the Northern Powerhouse and the North’s place in the emerging industrial strategy.

“It is also clear that the skills gap is a key area that needs unlocking to allow our growth sectors to fulfil their potential. Any positive announcements within this area, alongside further infrastructure announcements, will be seen as significant by the North West business community. We believe that future industrial strategy must be grounded in talent development to facilitate the productivity gains to take the region forward.

“Positivity had been returning to companies over the summer, with UK-wide members of the Institute of Directors reporting growing economic optimism between July and September, but IOD member research has shown firms’ expectations for the next 12 months fell back dramatically in October. This Autumn statement provides the ideal moment to arrest that trend and bring a new mood of positivity to our business community here in the North West.”

Phil Whitehurst, partner at law firm DTM Legal, thinks tax cuts are unlikely.

“The Chancellor’s focus has to be one of ‘steadying the ship’ after Brexit.

“I personally support the view that this year’s Autumn Statement will be more like a post-election budget, setting out the new government’s economic objectives and policy rather than containing significant measures. Although this will give the Chancellor some leeway for increased borrowing (which I would expect he will announce), Mr Hammond has already indicated that one fiscal event in the form of the budget is sufficient and the practice of the Autumn Statement rivalling this is something to move away from.

“During the Conservative Party Conference this year, Hammond suggested we may see modest investment in infrastructure, particularly in the smaller “shovel ready” projects that generate a faster return on investment. I hope this will see further investment in smaller house building firms and a slight increase in public spending in some way.

“Realistically there seems to be very little scope for tax cuts. The Chancellor has already indicated he will abandon Osborne’s original plans to slash corporation tax to 15% and I imagine income tax rates will be unchanged to comply with existing manifesto pledges.

“Many individuals hope Hammond will highlight the need to continue down the road of simplification of our tax system and the development of the “Making Tax Digital” plan. We may also see some specific tax reliefs, for example caps on business property relief for inheritance tax and changes to residence relief. In terms of specifics, I wouldn’t be surprised to see a rethink on the landlord tax and lifetime ISA and perhaps even leaving behind plans to reform pension tax relief.”

John Lyon, managing director of Lancaster accountants ICS Accounting, is looking primarily to the proposed IR35 reforms

“The key focus for us, as an accountancy firm which deals largely with personal service companies, are the proposed IR35 reforms. This will potentially have a huge impact on contractors around the UK working within the public sector.

“The IR35 consultation closed in August and the changes are expected to be rolled out in April 2017. The Autumn Statement should confirm what is happening, but then we will all need to be a little patient and wait until December 5 for the exact details of what is planned, as that is when the draft legislation is set to be released.

“Due to the belief that there is widespread non-compliance with the current legislation, going forward determining IR35 will no longer be the responsibility of the PSC (the contractor themselves), but the responsibility of the entity which pays the PSC for engagements within the public sector.

“Although there will be an online tool available to these companies which will lead them to a decision about the IR35 status, there is inevitably the risk that they will naturally err on the side of caution when it comes to making a final decision, as they will want to avoid any possibility of making the wrong call.

“This means that contractors will potentially be worse off, as it might make contracting in the public sector a far less attractive option. It may also be the case that this begins with the public sector and then at a later date they might roll it out into the private sector.”

Christine Hewson, partner and head of corporate tax in the North for professional services firm KPMG, wants the government to combat slow economic growth through fiscal policy.

“This Autumn Statement marks the first major fiscal event since the UK voted to leave the EU. The North West’s business leaders are waiting for the Chancellor, in his first opportunity post appointment to spell out the direction of the country’s fiscal policy and put in place measures that will help the UK economy to seize the opportunities, and cope with turbulence, that the Brexit negotiation process will bring.

“Our expectations are for the economy to grow at a slower pace in the coming years so I’m looking for an indication of willingness from the Government to use fiscal policy to stimulate economic growth and consolidate the UK’s position as an attractive place for global investors to do business.

“Our client surveys consistently show that companies look for stability, predictability and certainty, both in economic (including tax) and political terms when it comes to deciding where to do business. The UK was previously one of the most attractive locations but whilst uncertainty over a post-Brexit UK remains, we may find companies more reluctant to invest.

“From a tax perspective, the recent commitment by Philip Hammond to continue reducing the headline corporation tax rate to 17% by 2020 is a good start – indicating the UK remains an attractive place to do business and is open to investment. However, we would ask that the Government go further by publishing a clear tax roadmap of likely changes ahead as it is crucial that business sees a firmer commitment from the Government to a clearly defined path of future tax changes ahead in order to effectively and confidently plan their investment strategies.

“In keeping with the Government’s aim to reinforce the UK as a leader in tech innovation and in light of Brexit, we may well see announcements designed to further encourage R&D and incentivise spending in this area.

“This could involve further support of education and training, as well as maintaining grant funding to ensure UK based scientists and engineers can continue to participate in global research projects; continued support for the R&D and Patent Box incentives and a commitment to ensuring that these remain competitive against a background of reducing rates of corporation tax; and encouraging investment in innovation and infrastructure by increasing incentives relating to capital investment in R&D and manufacturing.”

Ed Dwan, partner and head of accountancy firm BDO in the North West, has three big points on his Autumn Statement wishlist

“While the Chancellor’s immediate focus will be on steadying the political ship and protecting our Brexit negotiation position, he should not ignore the pressing issues that are affecting individuals and businesses that drive the UK’s economy.

“To truly create an economy that ‘works for all’, here are the top three things we would like to see in Hammond’s speech.

2020 moratorium on new tax changes

“Tax complexity and red tape is the single biggest obstacle to growth for UK businesses. If Hammond cannot commit to new tax legislation or reliefs to support businesses, he should announce a moratorium until 2020 on any changes that do not simplify tax. This will allow the Treasury to focus on Brexit, and business leaders to focus on growing their businesses for the long term.”

Supporting working parents

“BDO supports the CBI’s calls for extending the child care support given to parents with children under school age. Currently providing 15 hours free childcare for all children aged three and four, the Government should expand childcare (from one to four year olds) to bridge the gap from the end of parental leave and school age. Although a big expenditure for the Treasury (estimated £2bn), this would ensure that far fewer parents, particularly women, are lost from the workforce and help reduce skill shortages. With more parents encouraged to return to work sooner, far fewer will have a significant gap in their careers which will help to reduce the gender pay gap in the long term.”

Address the ‘gig economy’

“The recent Uber case has highlighted how the UK tax system is failing to keep up to date with working patterns and new business models disrupting markets. The Government must address these ‘gig economy’ issues and the long running self-employment v employment saga by cutting through the maze of employment law. Creating a simple opt-in/opt-out approach will give individuals the choice of their employment status and provide certainty in the long term for businesses. This would, of course, require equalising the rates of employed and self-employed national insurance and apply some form of employers NIC so that there is little or no financial differential.”

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