2019 Spring Statement – the business reaction

Business groups have responded to Chancellor Philip Hammond’s Spring Statement speech.

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The Federation of Small Businesses (FSB) welcomed the Chancellor’s commitment to tackling the late payments issue. Mike Cherry, National Chairman of the FSB, said that the government must ‘tackle this scourge once and for all’.

He said: ‘The commitment from the Chancellor that the Business Secretary will see this through is welcome, and we are especially pleased that the first measure has been announced – to make a Non-Executive Director responsible for the supply chain through the Audit Committee of every large business, and to report back through the Annual Report on their progress.

‘The end of late payments could finally be in sight. It can’t come soon enough, to bolster small businesses at a time when they are in great need of support and a lift in confidence.’

The response from the British Chambers of Commerce (BCC), however, was decidedly lukewarm. Commenting on the speech, Suren Thiru, Head of Economics at the BCC, said: ‘The Office for Budget Responsibility’s forecasts for the Spring Statement indicate a more downbeat outlook for the UK economy, with GDP growth now projected to be lower in 2019 compared to their previous forecast.’

Meanwhile, the Confederation of British Industry (CBI) praised the Chancellor for making ‘an admirable attempt to set out a long-term vision for the UK economy’ while remaining ‘shackled’ by Brexit. However, it remains cautious about the UK’s plans to implement its so-called Digital Services Tax, especially as the EU has seemingly withdrawn its support of the Organisation for Economic Co-operation Development’s efforts.

Rain Newton-Smith, Chief Economist at the CBI, said: ‘Going it alone on a Digital Services Tax is high-risk, especially at a time when the UK already looks increasingly isolated.

‘The government needs to be doing all it can to encourage investment in the UK and adoption of new technologies, not putting up barriers.’

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Treasury Committee launches business rates inquiry

The Treasury Committee has launched an inquiry into the UK’s business rates system, in order to assess the impact of business rates on firms.

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The Committee intends to examine how changes in government policy have altered the business rates system. It will also analyse ‘how the current business rates system is operating’.

Additionally, the inquiry will assess the ‘economic justification’ for a property-based business tax, taking into account the impact of business rates on rental prices and property prices. The Treasury Committee also stated that it will consider alternatives to property-based business taxes, such as the proposed Digital Services Tax.

The Federation of Small Businesses (FSB) welcomed the inquiry. Mike Cherry, its National Chairman, said: ‘The FSB has worked with the government to secure a set of reforms to business rates since 2016 – doubling small business rate relief, linking annual rises to CPI, transitional relief, and now a high streets discount.

‘The tax, however, remains regressive, and not linked to ability to pay.

‘We welcome the inquiry as the next step in building on the recent work to help, and sort out a modern tax system that balances the need to fund public services with protecting our vibrant 5.6 million-strong small business community.’

UK small firms spending ‘significant amount’ on tax and employment obligations

According to new research, UK small businesses are spending 15% more on tax and employment obligations when compared to 2011.

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The Impact of Government Policy Index (IGPI), which was compiled jointly by the Federation of Small Businesses (FSB) and the Centre for Economics and Business Research (CEBR), found that the average UK small business spends £480,788 on complying with government policies, including business rates, auto-enrolment and Insurance Premium Tax (IPT).

The IGPI also revealed that small firms lose an average of £5,000 per year to tax administration and paperwork.

‘Come the beginning of April, small firms will not only have Brexit Day to worry about, but also Making Tax Digital (MTD), a higher living wage, rising employer auto-enrolment contributions and further business rate hikes,’ said Mike Cherry, National Chairman of the FSB.

‘The competition to attract entrepreneurs to the UK is more intense than ever. With Brexit on the horizon, it’s critical that the government at all levels does its utmost to help, rather than hinder, the UK small business owners who are being tempted to other shores.’

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Small business confidence ‘falls to lowest level since 2011’

A survey carried out by the Federation of Small Businesses (FSB) has revealed that confidence amongst small firms has ‘fallen to its lowest level since 2011’.

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The FSB’s Small Business Index (SBI) revealed that confidence has fallen to -9.9 – its lowest level since the wake of the financial crash in 2011.

According to the SBI, 58% of small firms believe that the domestic economy is ‘restricting their ability to grow’. Lack of consumer demand, limited access to skilled staff and rising labour costs were also cited as being barriers to growth.

Commenting on the findings, Mike Cherry, National Chairman of the FSB, said: ‘Two and a half years on from the Brexit vote and small businesses are looking ahead to Brexit day with no idea of what environment they’ll be faced with in less than ten weeks’ time.

‘Come the beginning of April, small firms will not only have Brexit day to worry about but also Making Tax Digital (MTD), a higher living wage, rising auto-enrolment contributions and further business rate hikes.’

FSB urges Chancellor to use Budget to ‘reduce cost burdens for small businesses’

The Federation of Small Businesses (FSB) has urged Chancellor Philip Hammond to use the upcoming Budget to ‘reduce cost burdens for small businesses’.

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Within its Budget wishlist, the FSB has proposed the creation of a £1,000 ‘business rates discount’ for small shops, cafes and pubs, in order to help them to continue trading. It has also called for additional support for the self-employed, and has recommended the implementation of a statutory Adoption Allowance.

In addition, the FSB warned against changes to the Dividend Allowance, VAT and Insurance Premium Tax (IPT) amid ‘spiralling’ compliance and employment costs for small firms.

Concerns have also been raised by the business group in regard to the potential extension of IR35 public sector rule changes to the private sector, with the FSB warning that it is ‘impossible to accurately predict the impact’ of this move.

Commenting on the wishlist, Mike Cherry, National Chairman of the FSB, said: ‘Warm words from the government are welcome, but they need to translate into action.

‘With our small retailers trying to keep their heads above water – and the self-employed community left demoralised by the failure to end Class 2 national insurance contributions (NICs) – this is the Chancellor’s opportunity to show he really does back business.’

Local councils urged to take ‘swift action’ following business rates increase

Councils across England are being urged to distribute quickly the funds allocated for firms hit by the recent hike in business rates.

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The call came from the Federation of Small Businesses (FSB) and follows the controversial revaluation of business rates, which took effect on 1 April.

Last month the Chancellor Philip Hammond announced a range of measures intended to help those worst hit by the rates increase, which included providing English local authorities with funding to support £300m of discretionary relief.

However, critics have warned of potential chaos and uncertainty as many businesses do not yet know whether they will benefit from the relief fund.

Commenting, FSB National Chairman, Mike Cherry, said: ‘The promise of a £300m relief fund for local authorities to help those hardest hit is welcome. But we urge councils to make small firms aware of their allocation and finalise the mechanism for distributing it as soon as possible.

‘What we have to remember is that bills have already landed. That being the case, any firm that pays their full business rates without realising they qualify for relief should have their overpayment returned automatically, and swiftly.’

It is thought that around 510,000 businesses have seen a rise in their rates bills, with some firms expected to incur an increase of up to 50%.

Responding to the concerns, the government said it was working with local authorities to ensure the extra support ‘gets to businesses as soon as possible’.