In a Budget that seems light on detail, the chancellor made several announcements that were initially well received by the industry’s SMEs. But in practice how much difference will they really make? Katie Barker finds out.
- Tinkering around the edges
- Personal and corporation tax ‘irrelevant’
- Housing and infrastructure mixed bag
- What’s missing?
The ‘aspiration nation’ Budget is unlikely to result in weeks of damaging headlines like last year’s pasty tax and cut in top rate of income tax did, but it also won’t give the industry’s SMEs the kick-start to growth many had been hoping for.
Although the chancellor did make several announcements that will come as good news to small businesses across the country, it lacked the investment, incentives and detail needed to really make a difference.
Tinkering around the edges
One of the headline-grabbing announcements was the new employment allowance, available from April 2014, which will take the first £2,000 off the employer National Insurance bill of every company.
It will mean 450,000 SMEs across all sectors of the economy will pay no jobs tax at all, with 98 per cent of the benefit of this new allowance going directly to SMEs, according to Mr Osborne.
“The £2,000 employer National Insurance credit will have a minimal impact on our business, giving us a £2,000 per annum benefit,” says Crofton Design director Steve Hale. “It will be micro businesses employing one or two people that will see the most benefit.”
Robin Sporn, director at SME contracting company Sporn Construction, adds that while the credit is welcome, it’s a drop in the ocean for companies such as his.
“The £2,000 employment allowance is good for SMEs, but not a preferable alternative to a growth stimulus and will do nothing to alleviate a depressed construction SME sector,” he says. “It’s all just tinkering around the edges.”
“The £2,000 employer national insurance credit will have a minimal impact on our business”
Steve Hale, Crofton
The chancellor also announced that the government is cancelling the rise in fuel duty planned for September. “Scrapping the planned fuel duty rise is welcome and at least prevents this cost increasing,” Mr Sporn says.
Personal and corporation tax ‘irrelevant’
When it came to the adjustments to personal and corporation tax, several SMEs felt it was of little real consequence to the everyday running of their businesses.
“As a firm specialising in heritage contracting and private client work, there wasn’t much in the Budget that was of direct relevance to our sector,” says specialist contractor William Anelay chairman Charles Anelay.
“The adjustments to corporation tax and personal tax are beneficial for us the same as everyone else, but I understand there is a significant rise in business rates coming and nothing was mentioned about that,” he says.
While Mr Hale believes it is big business that will benefit from the cut to corporation tax. “The 1 percentage point reduction in corporation tax will have minimal impact on our business and will give us as couple of thousand pounds worth of benefit per year at best,” he says. “Big businesses with tens of millions of pounds of profit will benefit the most from this measure.”
Housing and infrastructure mixed bag
The major announcements around housing and infrastructure also initially seemed positive for the industry’s small businesses: £3bn extra each year for infrastructure projects, a new Help to Buy scheme aiming to use shared equity to help people buy property, and the expansion of the Build to Rent scheme.
But the fact that infrastructure spending does not begin until 2015 lessens the impact of that announcement for smaller firms.
“It’s a shame that the increase in infrastructure spending does not kick in until 2015 – the industry really needs this work to start now,” Mr Hale says. But he is more positive about the potential for the housing announcements.
“The measures announced to improve the flow of credit for the purchase of new homes will almost certainly generate work for our business in the medium term,” he says. “This is as long as the planning system can begin to work efficiently to allow schemes to be released for development.”
This work will only benefit suppliers and subcontractors that can win contracts and work as part of those projects. For SMEs such as Sporn Construction, even the housing announcements will have little effect on business.
“The housing and infrastructure announcements will filter down to some of the industry’s SMEs, such as those working in carpentry or bricklaying who might win some of the work when it comes, but as an SME main contractor this won’t benefit us,” Mr Sporn says.
It is unlikely to make any difference to Mr Anelay’s business either, but he would welcome anything that might have a positive impact on the industry as a whole.
“The boosts to infrastructure investment are unlikely to affect us, but if that feeds into a more generally positive approach to capital projects, then it might be good,” he says.
Sustainability and green building was one area many were hoping to see more announcements on in this Budget, but even the Green Deal, the government’s flagship low-carbon policy, didn’t get so much as a mention by the chancellor.
“I felt there was a big missed opportunity around the Green Deal,” Mr Sporn says. “Local authorities and housing associations seem to be the only ones who have heard of it so far, and the Budget would have been a perfect opportunity to raise its profile among the general public.
“We would definitely benefit from Green Deal work as a business, so we’d like to have seen more made of it in the Budget,” he says.
There is often a sense of an opportunity missed after big announcements and there was certainly a sense of disappointment after this year’s Budget that the chancellor had missed his last chance to stimulate the construction industry during this parliament.
“There was a big missed opportunity around the Green Deal. The Budget would have been a perfect opportunity to raise its profile”
Robin Sporn, Sporn Construction
“Many in the industry have never known it as hard as this, profits are practically non-existent so cash is king and everyone is stretching their payment terms,” Mr Sporn says. “But this wasn’t a Budget to stimulate the construction industry.
“Overall the feeling was one of disappointment; the few minor announcements that help us are welcome, but a lot of this Budget was rhetoric and repetition.”
While Mr Arenlay is concerned that with most of the spending promised for years to come, it may never materialise. “Anything that is going to help keep the delicate balance between deficit reduction and growth has to be constructive,” he says.
“Unfortunately, we remain rather sceptical because a lot of the actual money is not going to appear until next year, and previous evidence seems to be that there is rather more announcing than spending in these initiatives.”