What does the Autumn Statement mean to you?
So there we have it another year, another (though apparently final) Autumn Statement. The UK economy’s not in prize shape and the outlook strongly affected by the uncertainties created by the Brexit referendum. For SMEs that plan certainly has some encouraging aspects, in the long term at least.
Before the Autumn Statement, we highlighted three areas that Mr. Hammond needed to address to make a real difference for the UK’s SMEs: business rates, late payments, infrastructure and connectivity. The Chancellor gets three out four by our count, plus a bonus point for doing that little extra on connectivity and exports.
The big show in this November’s statement of digital infrastructure. Mr. Hammond pledged investment in fibre broadband to the tune of £1bn. The investment is intended to boost the availability of super-fast broadband around the country, a goal that SMEs outside of our largest urban centres should cheer, what remains to be seen is if it works.
The reality of the UK’s connectivity is that we already have one of the widest reaches for broadband connectivity in the world. The problem is that our broadband is prohibitively expensive – 13th in the OECD per megabit of advertised speed, behind Italy, Mexico and the USA amongst others.
Add to that the fact that the ‘last yard’ of connectivity still happens over outdated infrastructure that throttles the speeds to well below those advertised. This is a poor operating environment for businesses that rely on the internet, and that description increasingly applies to most British SMEs. Hopefully, as Mr. Hammond intends, the government’s fibre investment will be used to replace outdated connections most commonly found beyond big cities and bring true fibre connectivity to the least served areas.
In order to achieve that, Mr. Hammond added a sweetener to his broadband announcement: a 100% cut to business rates for companies laying fibre. Hopefully that will mean less populous areas (where there’s a smaller maximum number of customers) become significantly more enticing to broadband providers, and businesses in Leeming will enjoy connectivity as rapid and cheap as London (even though still non consumer fibre in Soho in central London!).
Mr. Hammond, however, must ensure that his fund doesn’t simply go to projects creating even faster connectivity in already well connected, big business areas.
On business rates, our third need, rural areas saw rate relief pass 100% and become a tax break. For the rest of us, there’s a £6.7 bn business rate reduction package, much of which will go into a lowering of the transitional relief cap, which, Mr. Hammond explained, is complicated but good news.
Put as simply as we can, if your business’s property is moved into a higher business rate, you’ll be provided with more funding to help cover the extra payments.
If you aren’t operating in a rural area, there was no guarantee that you’ll be seeing any actual rate reductions, however. Much of the ability to set rates has been devolved to local authorities, so who knows, some could get lucky. We’d give Mr. Hammond half a point for this one.
Transport infrastructure is another area on our list where Mr. Hammond went large. English transport will receive £1.1bn, we’ll see major road schemes in the north – particularly between Leeds and Manchester, and East West Rail will receive £110m for a new Oxford – Cambridge expressway.
At the same time, it is a boost to productivity, an area where the UK lags behind many other continental European economies. Add to this package of investments this month’s announcement of HS2’s extension and last month’s confirmation of Heathrow’s third runway and the UK’s infrastructure is apparently set for a boom that we’ll all profit from.
The other goodies
On top of the more predictable pile of goodies, Mr. Hammond also added a £400m venture capital fund for startups and a doubling of UK Export Finance capacity, meaning greater appetite for risk and support for businesses in more markets, of both we certainly approve.
Our final request, help businesses get paid on time, sadly didn’t make Mr. Hammond’s to do list today, but we can’t have everything.
And what didn’t work
And everything certainly didn’t go the SME’s way. A heightened living wage will hit SMEs disproportionately, if for a good cause. Salary sacrifice schemes enabling employees and employers to take benefits in kind and pay a lower cash salary (and therefore less tax) will be eliminated – no more lowered tax for employees or employers through pre-tax benefits.
This could be offset by lowered corporation tax, but that particularly give away is more suited to the UK’s largest businesses.
What it all means
So, what does today’s budget mean for the SME? If funding is applied in the spirit it has been announced, it means a better long term trading environment through connectivity – both logistical and communications. In the short term, there are few instant boosts. If you’re a rural business predicated on exports, you’ve done well, otherwise you’re likely to feel a slight pinch.
Image by: bortescristian via Visual hunt / CC BY