Comments on the recent Budget from all of the business organisations

Chamber of Commerce

The Northern Ireland Chamber of Commerce (NICC) have responded to the Chancellor's Budget.  Ann McGregor, Chief Executive, NICC said: "We welcome the Chancellor's additional support for small businesses here particularly in terms of further assistance to encourage investment in training and innovation. SMEs play a crucial important role in the local economy and will also benefit from several other measures introduced by the Chancellor particularly in areas such as business rate. Support for university businesses is also encouraging.
 
"But industry here will still be concerned about the staged increase in fuel taxation. This will pose further problems for importers and undermine the competitiveness of our exporters which have been endeavouring to maximise the benefits abroad of current sterling rates.
 
"We also welcome the additional funding for Northern Ireland which should help the Executive develop its spending plans to promote economic growth."

In addition, David Frost, Director General of the British Chambers of Commerce (BCC), said:

“After two years of economic downturn, the Chancellor has clearly recognised the need to place business at the heart of this Budget. Doubling the annual investment allowance, help with business rates, and allowing entrepreneurs to keep more of their gains will prove especially popular.

“The Chancellor could have done more to set out a clear plan for the reduction of the budget deficit, which continues to threaten business confidence and investment.”

Commenting on the macro-economic points in today's Budget, David Kern, Chief Economist at the BCC, said:

"The Chancellor's GDP forecasts for 2010, though slightly stronger than our own, are realistic. But, the official forecasts envisaging very rapid growth in 2011 and beyond are much too optimistic.

"Since the Chancellor's medium-term predictions for the public finances are based on growth expectations that many analysts would see as unrealistic, he may struggle to persuade the markets that his deficit-cutting plans are achievable without further measures.

"As envisaged in the BCC's recent economic forecasts, borrowing in 2009-10 and 2010-11 is very likely to be lower than the Chancellor predicted in December’s Pre-Budget Report. But the Chancellor's borrowing forecasts for subsequent years appear too optimistic and more detail will be needed to ensure that Britain's AAA credit rating is secure.

"The markets will also be disappointed that that some of the savings made from the lower than expected borrowing this financial year and next are being diverted to new spending plans, rather than actually cutting the deficit.

“The Chancellor will have to do more to persuade the markets that the health our public finances will be restored within a realistic timescale. The official deficit-cutting plans still lack sufficient credibility."

Dr Adam Marshall, Director of Policy and External Affairs at the British Chambers of Commerce (BCC), added:“The National Minimum Wage increase took some of the shine off a Budget that had small and medium-sized businesses at its heart.

“It is astounding that the Government would increase the minimum wage by 2.2% at a time when private sector wages are virtually flat, and companies across the country are still making tough choices to keep as many people in employment as possible. While the recession may be over, the jobs market will remain tough for some time to come.

“A near-doubling on last year’s increase is even more astounding. Combined with next year’s rise in employer National Insurance Contributions, a minimum wage that’s a ‘one-way bet’ could stop some businesses taking on new workers.”

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Northern Ireland’s Chartered Accountants
Chancellor Alistair Darling’s Budget was more about political statements than economic announcements, but that there was some support for small businesses which could have a positive effect for local firms.

Kevin Kingston, Chairman of Chartered Accountants Ulster Society, a district society of Chartered Accountants Ireland said: “Perhaps the best news of this year’s budget for local business is that the rate of Corporation Tax for small companies has not increased from 21%, as most local companies would fit into this category. A rate rise had been rumoured previously but we’re glad to see the rate maintained. At a very difficult time for small businesses we need to keep their costs down.

“We would also welcome the £2.5 billion package to boost skills and innovation amongst small businesses and the increase to the threshold of the Annual Investment Allowance to £100,000, meaning that business can get more immediate tax relief on investing in plant and machinery.
“Our priority must be to sustain and develop the best of what we have in our local economy. To achieve that, we must find a blend of public sector strategic thinking and decisive private sector commerciality. It is vital that our political leaders and business sector work together to build for economic recovery.”

The Chairman of the Chartered Accountants Ireland Northern Ireland Tax Committee, Mr Eamonn Donaghy, said: “The Capital Gains Tax rate has helpfully remained at 18%, and this, coupled with a doubling of relief on Capital Gains Tax for entrepreneurs so that the first £2m of gains from sales of business assets and shares will be taxed at only 10%, should help to encourage business and share disposals.

“The big headline is the scrapping of stamp duty land tax for homes below £250,000 for first time buyers. It’s a step which may encourage many first time buyers to get onto the property ladder and should have a positive impact on activity in the Northern Ireland housing market.

“While there is some good news for Northern Ireland here, we would like to see more being done to stimulate the business sector. In order to encourage multinational inward investment we recommend the introduction of a new Technology Zone in Northern Ireland which would confer tax benefits such as a 12.5% rate of corporation tax and a special regime of capital allowances for companies operating within that zone.

“In addition, to encourage more R&D in Northern Ireland a Northern Ireland specific R&D tax relief should be implemented. We propose an increase in the tax credit available to 200% of expenditure on R&D, coupled with a relaxation on the rules governing what constitutes R&D expenditure.”

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Institute of Directors
Joanne Stuart, Chairman of the Institute of Directors in Northern Ireland, said: “We welcome the specific measures to support small and medium-sized businesses such as the doubling of the annual investment allowance, efforts to improve access to finance for SMEs and the continuation of the Business Payment Support Scheme allowing businesses more time to pay their tax. Efforts to encourage investment in new technologies and in innovation will have a longer term positive effect in an area which is critical to the development of a stronger private sector in Northern Ireland.

“The phasing in of additional fuel duty is of only small comfort to a region heavily dependent on road transport both for individuals and businesses.

“The rapid decline of the housing market in Northern Ireland has impacted heavily on the construction sector. This will not recover quickly but the two-year stamp duty relief for first time buyers of houses worth up to £250,000 should help bring more buyers in this category into the market and stimulate more activity.

“An additional £33m to the Northern Ireland Executive is not large in relation to its overall budget but decisions on how it is spent should be based on encouraging economic growth.

“IoD believes the Chancellor’s GDP forecasts are too optimistic and we are concerned that there is still no sign of a credible plan to reduce the public deficit.”

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CBI
Richard Lambert, CBI Director-General, said: "With the election just weeks away, this was a clever, political budget. However, anxiety remains on how the deficit is going to be paid down, and the growth forecasts for 2011 and beyond are still on the optimistic side.

"There was more support for business than might have been expected, with a series of modest but helpful changes. The doubling of entrepreneurs' CGT relief will help investment in small businesses and the extra money for science places at university will be welcomed by industry.

"However, it is the fiscal decisions over the next 12 months that will really determine the UK's economic future."

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Federation of Small Businesses

Federation of Small Businesses (FSB) welcomed help for small businesses but is disappointed that the Chancellor is proceeding with the proposed hike in National Insurance Contributions (NICs).

The FSB was pleased with the announcement to take 345,000 small businesses in England out of the business rates system. Business rates are the third highest outlay for small businesses and this proposal will come as a huge relief to small businesses on the high street. This measure comes after a concerted FSB campaign to help businesses and local communities.

The FSB has been critical of the banks and their lending criteria and looks forward to the introduction of the new credit adjudicator giving small businesses the opportunity to appeal against a decision by the bank to reject a loan application. More competition for the high street clearers has been a long time coming.

Many small businesses were very concerned about proposals to increase fuel duty in one fell swoop by three pence per litre. The proposal to phase in the increase will be of some help but the FSB remains concerned at the one penny per litre increase due next month.

The FSB worked very closely with the Glover Review on public procurement and the Chancellors announcement to direct more public sector contracts towards SMEs will be a boost that must be directed at the smallest of businesses, namely those micro-businesses employing less than 10 people.

Giving small businesses time to pay their tax bills has always been a wise move. The extra time businesses get on this aspect of their enterprise allows them to survive and grow. The extension to the scheme for the whole of the next Parliament is good news.

In 2008, the FSB called for and was successful in getting the Entrepreneurs Relief. This means that entrepreneurs making gains of up to £1 million will only face a Capital Gains Tax of 10 per cent as opposed to the general 18 per cent rate. Proposals to increase the threshold to £2 million should see serial entrepreneurship rise.

The FSB continued to express concern at the proposed increase in NICs. FSB research clearly shows that this comes at a cost of 57,000 jobs to the economy.

John Walker, National Chairman of the Federation of Small Businesses said,"This Budget has provided welcome news on helping to improve small businesses cash-flow but the increase in the NICs will be bad for job creation.

"Small firms are key to furthering economic recovery as the UK's largest employer and we are concerned that through continuing plans to increase employer National Insurance Contributions (NICs) and not introducing a NICs holiday to firms employing less than 50 staff who take on more employees, it will increase pressure on struggling firms meaning they will not be able to take on additional staff. FSB and CEBR research shows that the one per cent increase would cost 57,000 jobs in the UK. It is a tax on jobs which will do nothing to aid economic growth.

"Proposals to increase the Small Business Rate Relief threshold will be welcome news for those small firms in England whose cash-flow in hindered by big tax bills. A third of FSB members have said that business rates are the biggest taxation obstacle to growth and today's announcement will go far to help firms, especially local shops and businesses.

"The FSB welcomes the Government's commitment to get the bank's lending to small businesses but feels the targets will have little impact if the banks do not begin to offer more affordable finance. An FSB-ICM survey of 10,000 members showed that a third (32%) had seen the cost of finance increase over the previous 12 months despite the Bank of England Base rate being at an all time low. The Government must now put pressure on the banks to lend affordable finance to small businesses so they can get on with the job in hand. The role of the new credit adjudicator will be key in this regard and the FSB looks forward to working with this new institution."

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Northern Ireland Independent Retail Trade Association
‘Not bad-but could do better’ was the reaction of the Northern Ireland Independent Retail Trade Association to the Chancellors budget plans which were unveiled today in the House of Commons.

NIIRTA also called for clarification as to how many of the proposals will apply to Northern Ireland.
NIIRTA Chief Executive Glyn Roberts said: “On balance given the dire economic circumstances this Budget did contain some positive measures for small businesses and a more detailed plan to reduce borrowing and the deficit over the next five years”

“It was sensible for the Chancellor to give small businesses more time to pay tax given the pressures many of our members currently have with their cash-flow and indeed the proposals to double investment allowance to £100,000 and increased relief on capital gains tax for entrepreneurs are to be welcomed”

“Taken on face value the proposals for the new bank credit adjudicator have clear potential, however we need to see the detail of this and how it will apply in Northern Ireland. We also need clarification on how more public sector contracts will be awarded to local small businesses in Northern Ireland”

“The biggest disappointment in this Budget was that the Chancellor is still proceeding with the proposed hike in National Insurance Contributions. This NICs hike is nothing less than a jobs tax and will hinder small business owners from taking on additional staff and therefore not address Northern Ireland’s unemployment problem”

“Along with other business organisations NIIRTA had urged the Chancellor to include NIC holiday for small businesses and retailers who employ less than 50 staff. This is a major mistake by the Chancellor and will limit moves toward a sustainable recovery”

“While the staging of the fuel duty will give some relief to small businesses in the short term, it will nevertheless still be a considerable burden to our members who are struggling with sky high fuel costs”

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British Banking Association
As the Chancellor knows, the UK’s banking sector still generates a sizeable proportion of what he has available to spend, and the banks are committed to continuing to do so. They are also committed to repaying the taxpayer support in full and have already paid more than £8bn.

“Revenue from banks will support many of the Chancellor's initiatives - this shows clearly the value of the financial services industry to the UK.

"The banks welcome moves to sustain the economic recovery and restore confidence, particularly as they focus their efforts on supporting mortgage borrowers and small businesses.”

On specific Budget measures:
Banking tax:
"The financial services industry already pays £24 billion annually in tax (direct corporation tax by firms plus income tax by their employees). Unlike in America, the taxpayer intervention in the UK will be paid back and more so. Ahead are many changes which will add to the operational costs of all banks and so to the cost of borrowing. We know only too well that taxing the banks will bring short term popularity but the question that the Treasury is failing to answer is what all their additional rules and now this tax will mean for the price that people and businesses will pay for their loans and their mortgages."

Stamp duty holiday:
“The high street banks currently provide more than two-thirds of all home loans. They stand ready to support all housebuyers, including first-time buyers who might benefit from the stamp duty exemption for lower-cost homes.”

Basic bank accounts:
"It is already the case that everybody can have a bank account if they want one, unless (and this is rare) the law says they can't. Every month 40,000 more people open basic accounts. It is unclear whether a legal obligation to provide such accounts would make any difference to this steady trend.”

Small business support:
“When the recession began we saw small businesses reducing their borrowing and paying off their overheads. The banks stand ready to lend to small businesses with a sound business plan which might benefit from the package of support announced today.”