Birmingham businesses highlight 'glaring omission' from budget

Business leaders in Greater Birmingham have highlighted “one glaring omission” in a business-positive budget speech from the Chancellor.

Great Birmingham Chambers of Commerce said that while there were plenty of positive announcements for businesses in today’s Budget, there was no mention of Greater Birmingham or the West Midlands.

Henrietta Brealey, policy and strategic relations director at Greater Birmingham Chambers of Commerce, said: “While devolved nations, the Northern Powerhouse and beyond received a number of nods, the news for the West Midlands was buried in the Budget Red Book.

“It is clear from the announcements that there is still work to be done on promoting further devolution to English regions which still lag behind devolved nations and London on funding.”

On the positive side, Ms Brealey said: “Many businesses will welcome the news on the increase to the Annual Investment Allowance (something the British Chambers of Commerce has been lobbying for some time), postponing implementation of IR35 Reform to 2020 and confirmation that VAT thresholds will not be changed for the next two years.

“The news on additional funding to support Brexit preparations is also a sensible move given where we are in negotiations. However, it is crucial that part of that funding is targeted at front line support for businesses preparing for the impact of Brexit.

“There was no mention of the UK Shared Prosperity Fund (the Government’s preferred model for replacing ESIF Funding post-Brexit). As Brexit looms, it is crucial that the Government provides clarity on how this fund will operate. Many employer growth and skills related programmes are currently funded by ESIF.

“We welcome the news that small firms’ contribution to apprenticeships will halve. Apprenticeships represent a real opportunity for firms looking to train and upskill employees and for those looking for vocational routes into work.

“There’s no denying that apprenticeship starts are down significantly since implementation of the apprenticeship levy and the last major round of apprenticeship reforms.

“Today’s announcement will reduce one barrier preventing small firms from accessing apprenticeships. However, the system remains complicated to navigate and further reforms will be needed in order to ensure businesses can understand and access it effectively.

“The Budget included a significant package of support for the armed forces and veterans. As signatories of the Armed Forces Covenant we welcome the support shown for our armed forces and veterans.”

It was a delicate balancing act for the chancellor, who had to try to live up to Theresa May’s pledge that the age of austerity is almost over, while at the same time keeping one eye on the spectre of Brexit.

David Hillan, practice leader and head of corporate tax at Grant Thornton UK LLP in Birmingham, said: “As the Chancellor delivered the first Monday Budget since 1962, those who listened have been left reflecting on whether Philip Hammond’s speech said more about the prospects of an early election than anything else.

“Positive announcements aimed at swing voters were everywhere. On spending, the announcement of more money to make sure Universal Credit works as intended buys the Chancellor time. The same is true of adult social care, where the additional £700m is a welcome boost. But, both of these measures do not address the root cause of the problems in these areas – instead they are sticking plasters, not cure and certainly not prevention.

“On tax, a similar picture of buying off the Conservatives’ core constituents emerged. Tax reliefs enhanced for smaller businesses, especially those on the high street or those incurring expense on plant and machinery. And, where tax is being raised the measures were aimed at larger companies – whether in respect to off payroll workers (the IR35 rules that will apply more vigorously to the private sector from 2020) or even the new Digital Services Tax – 2% in respect of tech business with global revenues of more than £500m per annum in respect of UK generated sales, again from 2020.  

“The big announcement related to the bringing forward of the increase in the personal tax allowance – to £12,500 – in April 2019 – a year earlier than expected.  This, together with other measures, will see the average family being around £1,000 a year better off, a measure that will be welcomed by many following sluggish wage growth. Furthermore, if there is a downturn after Brexit, it might keep the tills ringing and prop up consumer confidence.

“From a local West Midlands perspective the Chancellor announced additional funding to support local transport projects and future mobility. Changes were also flagged which potentially could impact all medium and large organisations who engage with contractors, freelancers or consultants through a limited company or agency arrangement.

“The Chancellor’s giveaways can be justified by stronger public finances. The proportion of debt is set to fall and current spending is not covered by current receipts even after providing further contingency funding for Brexit. 

“This Budget leaves all options open – including the prospect of an election before the end of March 2019. It deals with current challenges and leaves the door open to the main event – the fundamental spending review – next April.”

Commenting in response to the Chancellor’s announcement that the VAT threshold would remain as-is for the next two years and that the Business Investment Allowance would be increased five-fold over the same period, James Sage, a Partner in FBC Manby Bowdler’s Corporate team, said: "The UK’s employment levels are at record highs and we’re experiencing sustained demand for our exports but there remains a certain level of uncertainty which is preventing our businesses from further expanding and growing.

"The announcement that the threshold for VAT would remain at its current level for the next two years should, therefore, be applauded.  Likewise, the increase of the Business Investment Allowance from £200k to £1m, also for two year, will not only help instil greater business positivity, but also provide the financial landscape that will encourage businesses here in the West Midlands to continue growing and investing.  This will prove vital as they seek to continue competing on the global stage.”

There was delight in many quarters to see a Budget so focused on business, with money for a further 10,000 start up loans, assistance for apprentice funding, preservation of entrepreneurs tax relief and one third discounted from business rates for small businesses with a rateable value below £51,000 . . . all countered by the UK digital services tax which will come into force in April 2020 and raise over £400m.