From pledging to tackle late payments to investments in the UK’s digital infrastructure, Philip Hammond delivers an optimistic spring statement for Blighty’s startups
The chancellor of the exchequer described himself as “positively Tigger-like” when delivering today’s spring statement. And given his speech included stellar news for the economy and a few goodies for small businesses, it’s easy to see why there was almost something giddy about his presentation. Nevertheless, some in the startup community would’ve liked to see Philip Hammond deliver more initiatives to help them grow.
Following a quick introduction where he jokingly stated he wouldn’t “be producing a red book” but couldn’t say the same about John McDonnell, the shadow chancellor, Hammond continued that the economic forecast was looking up. Indeed, he upgraded the autumn budget growth forecast for 2018from 1.4% to 1.5%. Although, the predicted growth for 2019 remained at 1.3%.
The chancellor kept serving up the good news by estimating that borrowing as a percentage of GDP was forecasted to be 2.2% in this financial year and would then steadily decrease until it reached 0.9% in between 2022 and 2023. That would mean debt as a percentage of GDP would fall from 85.6% to 77.9% over the same period. “The first sustained fall in debt in 17 years,” said Hammond. “A turning point in the nation’s recovery from the financial crisis of a decade ago. Light at the end of the tunnel.”
Having announced in the autumn budget that the government would invest £500m to support 5G mobile networks, full-fibre broadband and AI, the chancellor today announced the first £190m allocations of this investment.
Recognising that the economy has transformed over the last decade, the government today revealed a publication exploring how digital companies can be taxed properly. Hammond added “a call for evidence on how big online platforms can help their users to pay the right amount of tax” and to “ensure that the VAT consumers pay actually reaches the treasury.”
It’s hardly a secret that SMEs struggle with late payments. In fact, seven out of ten small businesses have faced legal disputes due to late payments. Fortunately the chancellor pledged to “eliminate the continuing scourge of late payments”. However, he didn’t offer any details into exactly how he’d go about achieving this goal.
In a bid to raise the UK’s productivity, the government will also launch a review to better understand how it can help the UK’s least productive businesses to learn from and catch-up with the most productive.
Last year many businesses were shocked to see business rates suddenly increase, leading 44% to estimate that their annual expenses would rise by more than £1,000. Having recognised these issues in last year’s spring budget, he today announced that the planned revaluation for business rates will be brought forward from 2022 to 2021. From there on, revaluations will be carried out every three years rather than every five years, which would reduce the risk of similar hikes in the future.
Commenting on the spring statement, Jenny Tooth, CEO of the UK Business Angels Association, said: “Following the chancellor’s spring statement the UK Business Angels Association is pleased to see rising confidence in the UK’s overall economic climate. This sentiment is reflected through the actions of the UK angel community, with 41% of angel investors investing more last year than in 2016.”
Thinking about the late payments, Simon Rothenberg, manager at Blick Rothenberg, the accountancy firm, said: “Privately owned companies feel the pain of late payments, significantly reducing working capital available for investment. The review of such payments announced by the chancellor today is to be welcomed.”
Mike Cherry, national chairman of the Federation of Small Businesses, also welcomed the initiative to evaluate how online companies dodge paying VAT. “No business, in any part of the world, should be gaining an unfair advantage by dodging tax,” he said. “We need to level the playing field for small UK firms trading online that meet their tax obligations. Any new tax on multi-national digital corporations can’t be allowed to impact on small firms who are already trying to compete in a sector dominated by big players.”
However, not everyone was as cheerful about the spring statement. “It is beyond hyperbole to state the chancellor has completely ignored the plight of the high street businesses and the crippling levels of business rates which have extinguished household names on a weekly basis,” said Keith Cooney, head of business rates at Knight Frank, the estate agents. “His answer on how to address the uncompetitive position in tax between ‘click’ and ‘brick’ was to ignore it.”
So while the consensus might be a slightly mixed bag, it does seem as if the small-business community was at least cautiously optimistic after the spring statement.