We take a look at what George Osborne's Summer Budget means for small business owners
Last Wednesday, George Osborne stepped up to the dispatch box and delivered the government’s summer budget – and the first fully Conservative budget in 19 years.
Many of the announcements were predicted accurately in advance – particularly the cuts to welfare. But there were some surprises – including the details of a new living wage. Our recent Bristol Media Barometer study showed a reduction in business confidence this year, which many attributed to the forthcoming election. With this in mind, we wanted to take a look at the picture that has emerged from the budget and see how it might impact our members and the creative industries in South West.
As ever, there are two sides to every story. With this budget, we found a number of areas pertinent to SMEs (which make up 60% of our members) and several other announcements relevant to companies and investment more generally in the South West region.
The business and SME outlook
As you might expect from a Conservative budget, there was much that aimed to benefit businesses.
One of the headline moves was a reduction in corporation tax – due to reduce to 19 per cent in 2017 and 18 per cent in 2020. The government estimates this will benefit more than a million businesses of all sizes. Whilst this is something our members will undoubtedly welcome, there are concerns around changes to how dividends are taxed potentially making some owners and managers worse off.
In regards to the living wage, from next April, workers aged 25 and above will receive the National Living Wage of £7.20. The government estimates that this will reach £9 by 2020.
While this move will affect a limited number of people in the creative industries (as it is not, on the whole, a low-paid profession), there is estimated to be a knock on effect further up the wage distribution scale, which could see low earners receive increased wages to compensate. However, as identified in the budget, Britain currently has a higher rate of low pay than other advanced economies. So though there may be challenges for business, the cautious rates suggested (and gentle increases) mean this should be a move to be largely welcomed.
There was also a commitment in the budget to fund three million new apprenticeships, in the main via a levy on larger employers. This may raise some objections among these bigger companies – despite the government’s claim that those committed to training and investment will get back more than they put in.
However, as part of a wider plan to increase employability, skills and productivity in the UK, this is a largely beneficial move. Businesses of all sizes in the region considering taking on apprentices should explore what support might be available to them as part of this scheme.
There were also a number of tax promises in the budget. The headline announcement was an increase of employer national insurance contributions by £1000 – but there were also promised consultations on changing National Insurance contributions for freelancers, and on reforming tax for individuals and small businesses more broadly. We await the results of these with interest.
But more interestingly, and particularly pertinent for Bristol Media members was a commitment to support lending to SMEs.
Banks will soon be required to offer support to SMEs they reject for lending and refer them to a finance platform to find alternative lending. This is good and timely news – just 12 per cent of Bristol Media members accessed bank lending to support their business last year according to 2015 annual barometer. The increased availability of options here can only be a positive thing.
The picture for the South West
The budget featured a lot of discussion about increasing power for the UKs regions – though much of this focused on the ‘Northern Powerhouse’ – with fewer specifics for the Bristol and South West area.
However, there was some good news, much of which addressed issues identified in our recent barometer. The government reaffirmed its commitment to a £7.2bn investment in transport infrastructure in the South West over this Parliament – something to gladden the hearts of the almost half of members (46 per cent) who, in our the barometer felt that local transport did not meet their needs.
Add to this the allocation of £10m to a broadband fund for the South West, available as soon as April next year, and we also have a hopeful picture for the 40 per cent of our members who felt broadband speeds were too slow to support their business.
Our sister city, Bath, stands to benefit from the formation of a Next Generation Digital Economy Centre in the city. This will be one of six such centres around the UK, which will ‘exploit opportunities across sectors of the digital economy including the creative industries, financial, healthcare and education’. Though this sounds promising, it will be interesting to see how it will work in practice. This will become clearer over the coming months as more details are announced.
One final point to add in for the region was a commitment to support small cider producers. Discussions are underway with the EU about reform of duty – surely something for us all to raise a glass to after a hard day’s graft!
All in all, there was a lot to be positive about in this budget. Times have been tough for SMEs, but we are hopeful that the moves put in place to support them, alongside a more stable economy, will pay off.