Katie Barker looks at the announcements in the chancellor’s autumn statement, the initial reaction from SMEs and asks what they mean for the industry’s small businesses.
- Initial reactions to the statement
- Some positive steps taken by the chancellor
- Other aspects less well received
- Missed opportunities to help SMEs
As the announcements from the chancellor’s autumn statement are debated and digested, it seems that on initial reactions his most popular step was to scrap the planned 3p a litre fuel duty increase. But what about the rest of the statement?
Increases in personal tax allowances, £5 billion in capital spending projects and a tenfold increase in the Annual Investment Allowance – what do these new measures mean for the industry’s SMEs?
Initial reactions to the statement
“While the proposed investment into public sector construction projects – such as the 120,000 new homes and expansion to schools and academies – will not directly affect us, there are some elements of the autumn statement that will impact on us as an SME,” says Ken Smith, managing director of Gateshead-based bespoke joinery company Crafted & Co.
“Working nationwide, delivering to our different projects across the UK has become very costly as the price of fuel continues to surge.
“Cancelling the 3p rise in January will not only relieve pressure on already cash-strapped consumers, but will save businesses the worry of yet another increase in travel costs. The proposed improvements to the A1 in key sections will also help us with commuting to our projects in London.”
Some positive steps taken by the Chancellor
And he is not the only one to acknowledge some positive steps made in the autumn statement; D-Drill managing director Julie White saw lots to be optimistic about in the chancellor’s speech.
“As an SME, there were positives to come out of the statement – especially when you think that the chancellor is sticking to his austerity plan with very little room for manoeuvre,” she says.
“We want to see construction growing and I hope that this statement – with its promise of £5bn in infrastructure spending – will get Britain building again.
“That money has to be channelled towards so-called shovel-ready projects because we need to get the industry working now or I fear we will lose more skilled people and we will never get them back,” she says.
Although both Mr Smith and Ms White are happy to see increased spending aimed at the industry, others are wary about how long the investment will take to reach SMEs.
“In terms of the impact on transport, an extra £2bn for roads and the extension of the Northern Line are welcome, but how quickly this trickles down the supply chain to SMEs remains to be seen,” says Speechly Bircham partner Steven Carey.
“We need to get the industry working now or I fear we will lose more skilled people”
Julie White, D-Drill
The tenfold increase in Annual Investment Allowances from £25,000 to £250,000 was also welcome news to SMEs. “I like the idea of encouraging businesses to invest in plant and machinery as that can help growth, and I’m also very much in favour of encouraging enterprise through lower tax rates,” says Ms White.
Lower business taxes and the increase in personal tax allowances were generally well received. “The increase in personal tax allowance will benefit our young apprentices on lower incomes who are choosing to learn a trade instead of going to university, but typically earn less while they learn,” says Mr Smith.
“Although an additional £235 is a marginal amount, the total increase of £1,335 next year will make a huge difference.”
Other aspects less well received
While a number of positives have emerged, other announcements were less well received. “The decision to move procurement of projects from individual councils, NHS trusts and fire authorities back to central government will create problems for SMEs,” says Speechly Bircham partner Meriel Bennett.
“Firstly, if procurement is centralised, the chances are that the evaluation will put less weighting on local suppliers. This contrasts with programmes such as Building Schools for the Future, where local supply chains and local apprenticeships were strongly encouraged.
“Secondly, centralised procurement is bound to result in larger-scale projects, which again will play into the hands of the national players, rather than local suppliers.”
Missed opportunities to help SMEs
Other companies lamented what they saw as missed opportunities in the autumn statement. “What is desperately needed is more cash in the economy,” says Sporn Construction director Robin Sporn.
“An easy and effective way of doing this is to reduce the rate of VAT on RMI work to 5 per cent. Reliable studies have shown that in the first year alone this would provide an economic stimulus of £1.7bn and create around 26,000 jobs, rising to £20bn and 100,000 jobs by 2020.”
“The decision to move procurement of projects back to central government will create problems for SMEs”
Meriel Bennett, Speechly Bircham
Ms White believes the chancellor missed a trick by not providing more encouragement to firms to recruit apprentices. “We need to do everything we can to keep hold of our skilled workers and also encourage more people into our industry,” she says.
“I am a big believer in apprentices and I would like to have seen the government give a national insurance holiday for employers for each apprentice they take on.”
While the details of the autumn statement will become clearer over the next weeks and months, the fact that the economy is expected to continue struggling dominates SME business thinking.
“Since its peak in 2007, the industry has shrunk by approximately 15 per cent; this is reflected by numerous high profile insolvencies,” says Mr Carey.
“The chancellor has been forced to concede that we are in for a further five years of austerity and his comforting words on increased capital spending in general and his spotlight on the Infrastructures Guarantee Scheme are hardly earth-shattering.
“This statement indicates that there are still very tough times ahead – not only for SMEs – but for the sector in general.”