Mixed reactions to Chancellor’s Autumn Statement
Chancellor Philip Hammond’s Autumn Statement has received mixed reactions from business chiefs and commentators.
Mr Hammond (main picture) announced an extra £2 billion a year for research and development funding, with £23bn to be spent on innovation and infrastructure over the next five years. He also alluded to plans to double UK export funding capacity.
Businesses had another boost with a reduction in corporation tax from 20 per cent to 17 per cent – the lowest in any of the G20 countries. SMEs will also see improved financing options available, as Government plans to unlock £1bn in finance for growing firms.
However, there was bad news with Insurance Premium Tax increasing to 12 per cent, which, many pundits pointed out, would affect the cost of doing business.
Speaking exclusively to ERT, Retra chief executive Howard Saycell, said: “Having listened to the Autumn Statement and subsequent interviews with both the Chancellor and others, it is very clear that nobody really knows where we as UK plc are headed just now.
“The staggering size of the national debt means that whoever is in power has very little ‘wriggle room’. Add to that the uncertainty around the whole Brexit negotiation and we have great difficulty in predicting the future trends for our economy. The OBR have made their best “guestimate” and are already receiving criticism about their forecasts. The economy is expected to grow 1.4 per cent in 2017 and 1.7 per cent in 2018 , household consumption is expected to grow at just 1.2 per cent next year and 1.1 per cent the following year. That is a significant shift downwards from 2.2 per cent this year.
“With many price increases already in place and others in the pipeline, it looks like electrical retailing will remain challenging as our industry vies with all the others for the hard pressed consumers disposable income. Add to that the increase to the National Living Wage/National Minimum Wage , changes to NI and costs will inevitably rise.
“There were some positives like for example the freezing of fuel duty, cutting of corporation tax to 17 per cent by 2020 and reducing the burden of business rates by £6.7bn over the next five years. The Chancellor didn’t pull any rabbits out of the hat, as has been the habit of recent Chancellors. Perhaps there are no rabbits left?
“Lets hope the OBR are in fact wrong in their forecasts and the economy weathers the next few months stronger than they anticipate. We live in hope!”
Bira chief executive Alan Hawkins also gave ERT his views. He said: “We were not expecting much from the Autumn Statement and that is exactly what transpired, which is not surprising given the state of public finances. Helping the economy through Brexit, I suppose, has to be a welcome sign that the government is realising that support is needed.
“Some of the specific detail will undoubtedly add cost to retailers, for example:
- The increase in the National Living Wage to £7.50 in April. Whilst this is at the lower end of expectation, it is still a significant increase.
- Insurance thresholds have been standardised upwards, which could lead to up to £7.18 a year per employee for the employer.
- Insurance premium tax is, of course, increasing from 10 per cent to 12 per cent, which is another cost on business premiums that employers will have to fund.
“Overall, therefore, there is not enough money around to create any expectation that next year will be any easier than this year. With price increases predicted by most commentators as a result of Brexit, consumer spending will continue to be the art of retail.”
In the Autumn Statement, the Chancellor also announced that the National Living Wage will also increase from £7.20 to £7.50 per hour from April, and this could leave retailers “feeling the pinch” unless more is done to support the industry, according to accountancy firm Wilkins Kennedy LLP.
“The Government has been under pressure for quite some time to reform the outdated rates system and until they do, many retailers could find themselves worse off,” said Phil Mullis, partner and head of retail and wholesale at Wilkins Kennedy.
“What’s more, the depreciated value of currency has burdened retailers, because they are under obligation to absorb shortfalls and keep their prices low. Now, increased wage rises will leave retailers no choice but to increase prices.
“Unless the Government steps up with a more solid support structure for retailers, these latest wage increases could mean an uncertain future for retailers. It will be interesting to see the long-term effects from the changes and how smaller businesses will benefit.”
On the plus side, the Government also pledged £2.3bn to help provide 100,00 new homes in ‘high-demand’ areas, as well as £1.4bn to deliver 40,000 extra affordable homes.
Commenting on the Autumn Statement, Federation of Small Businesses (FSB) national chairman Mike Cherry (pictured) welcomed government plans to remove £6.7bn from the business rates system, as well as a Rural Rate Relief scheme, which will give small businesses “a tax break worth up to £2,900,” according to the Chancellor.
Plans to set aside more than £1bn in the Budget for digital infrastructure was also praised by the FSB. Mr Cherry said: “We welcome Government responding to our calls to increase investment in local roads and digital connectivity to help rebalance the UK economy.
“We also back the £2bn per year boost for research, development and innovation, plans to improve management skills, the £400m to improve small business finance through the British Business Bank, and the doubling of export finance. The latter is vital as we need to reach new markets in the wake of the Brexit decision.
“But there will need to be stronger fiscal interventions to boost the economy next year, with the prospect of weaker longer-term growth looming,” he added. “Small firms want to grow, export, innovate, recruit and be more productive – and they need to know as soon as possible the framework they will operate in. Today’s moves to tighten conditions for the self-employed must also be followed up with help to give them parity in benefits so that the UK’s army of genuine self-employed people will continue to grow.”
The British Retail Consortium (BRC) has also supported the measures announced in the Autumn Statement, saying they could give added support to the retail industry.
BRC chief executive, Helen Dickinson (pictured), said: “Today’s modest, but targeted, measures by the Chancellor to boost productivity are to be applauded. The new National Productivity Investment Fund has the potential to make a real difference. So, too, do the plans to improve the UK’s connectivity, with funding for digital infrastructure benefiting the entire UK.
“Retailers and other businesses on the high street will benefit from further investment to improve local transport networks. Taken together, these measures should support the retail industry as it seeks to improve its own productivity.”
However, with the Autumn Statement pointing out that public spending was expected to dip from 45 per cent in 2010 to 40 per cent, Ms Dickinson argued that this could mean challenging times ahead for retailers.