Higher Wage Bills Give SMEs Little Cheer In The Last Ever Autumn Statement
By Alex Littner, managing director of Boost Capital (http://www.boostcapital.co.uk/)
BREXIT was always set to cast a long shadow over the Autumn Statement, and the weak economic outlook made it unlikely the Chancellor would have much good news for Britain’s small business community. But with the Government admitting growth is set to be even lower than expected in 2017, modest infrastructure investment announced, and higher wage bills on the cards, few SMEs will feel there’s much reason to celebrate after Wednesday’s speech by Philip Hammond.
Silver linings
It’s not all doom and gloom, and there were some measures in evidence that could help Britain’s smaller businesses. A boost to export finance to encourage overseas sales is welcome at a time when more companies are considering trading with foreign markets. The fact that £400 million has been set aside to improve small business finance via the British Business Bank is also encouraging. And fuel duty being frozen for the seventh year running will be a relief to those that operate a large fleet of vehicles. Plus, the commitment to invest £1.8 billion in Local Enterprise Partnerships, which should provide much-needed support at a grassroots level for businesses across England, is not to be dismissed. This will bring valuable investment in local infrastructure, transport networks, and should speed up broadband in more remote areas.
Pay rate headache
But many SME owners will be worried about the confirmation that the National Living Wage is set to increase to £7.50 an hour next year. While it is good news for low-paid workers - those working full-time will get the equivalent of a £500 pay rise from April - it’s a real blow for small firms already struggling to cope with higher pay rates. Boost Capital has a lot of clients operating in sectors such as care homes, retail, and hospitality, and many are already borrowing just to cover basic wage costs. With uncertainty over the outcome of the Brexit vote and higher inflation set to squash any hopes of a resurgent economy for the time being, SMEs are set to be under increasing pressure from many quarters in the coming months. Higher wage bills only add to this mounting stress.
UK open for business?
The decision to cut corporation tax to 17 per cent by 2020 as previously planned has been welcomed in many quarters, though doesn’t go far enough for some. A corporation tax cut to 15 per cent would have sent the world a strong message that Britain is truly open for business, as the Brexiteers would have us believe. But small firms must take from the policies what they can. The Government continues its commitment to remove many small firms from the need to pay business rates, cutting that burden by £6.7 billion over the next five years. Rural rate relief is good news for small companies based in the countryside. And, once the details emerge of exactly how businesses will be further incentivised to invest in research and development, those with innovation and business growth in mind should take advantage of any tax breaks in this vein.
What SMEs really want
That this was the last ever Autumn Statement will be a change that few people will lament. At a time when instability abounds, reducing fiscal announcements to just once a year seems sensible, and at least allows businesses to adapt to one round of regulatory changes before another is introduced, as happens at present.