From tackling late payment to promising to keep Britain at the forefront of technological innovation, Philip Hammond’s latest financial forecast had several news announcements. However, some SME leaders and business experts were left unimpressed
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The spring statement was always going to be influenced by the Brexit negotiations. With the UK being poised to leave the EU on Friday March 29, few things Philip Hammond said during his estimation of the British economy were ever expected to stir up as many emotions as the break-up from the country’s biggest trading partner. Still, that doesn’t mean the startup founders, business leaders and SME experts we spoke with didn’t have opinions to speak about.
For instance, while Hammond acknowledged that the government was preparing for a debate about whether or not a no-deal scenario should be on the table, he kicked off by saying: “[The] economy, itself is remarkably robust. It has grown for nine consecutive years with the longest unbroken quarterly growth run of any G7 economy and is forecast to continue growing in each of the next five years.”
That being said, the Office for Budget Responsibility estimated that the economy will only grow by 1.2% in 2019, the weakest growth rate since the recession days of 2009.
Still, that didn’t stop Hammond from attempting to put a positive spin on the government’s achievements, citing that unemployment is at record lows and “96% of new jobs were full-time” in 2018.
Trades Union Congress general secretary Frances O’Grady didn’t swallow Hammond’s sales pitch, however. "While the chancellor pats himself on the back, working people are paying the price for the prime minister’s disastrous mishandling of Brexit,” she slammed. “Jobs are being lost, plants are under threat and much-needed investment is being cancelled. The government created this mess – it must clean it up. That means taking no-deal off the table and seeking an extension of Article 50.”
The spring statement also included several news announcements for the UK’s tech businesses. For instance, Hammond announced that the government will look into updating the country’s competition rules for the digital age later this year. This was after the Furman review, an independent analysis of competition in the digital economy, highlighted how tech titans like Amazon, Google and Apple are dominating the economy.
Similarly, he reiterated the pledge to help “Britain to remain at the forefront of the technology revolution that is transforming our economy.” As a part of this he promised to keep funding the Joint European Torus programme in Oxfordshire in case Brexit would mean the capital flow from Europe would cease and announced to invest £79m in the development of a new super computer to keep pushing for scientific discoveries.
Hammond also repeated his pledge from the spring statement of 2018 that the government will tackle the issue of late payments. Even though he said more news about how this will be done will come at a later date, he said “that as a first step we will require company audit committees to review payment practices and report on them in their annual accounts.”
Nevertheless, the break-up from the EU was never far from mind with Hammond pledging to spend a £26.6bn Brexit war chest to boost the economy in case the government voted to leave the EU with a deal.
This fact was hardly missed by the experts Elite Business spoke to. “This spring statement has been overshadowed by Brexit and its economic forecasts must be considered in that context too,” argued Matthew Walters, head of consultancy at LeasePlan UK, the leasing company. “The uncertainty caused by Britain’s impending departure from the EU has already hit economic confidence and that uncertainty is unlikely to stop any time soon. Today’s anaemic growth forecasts might have to be downgraded in future.”
Indeed, the uncertainty of what the UK’s relationship with the EU and the rest of the world will be past Friday March 29 is the one thing affecting Britain’s fast-growth companies. “[The] uncertainty is proving a challenge for many startups,” said Alister Esam, CEO and co-founder of Process Bliss, the process management solutions startup. Even though he was confident that the country has the talent to make Britain a world startup leader, Esam added that the divorce negotiations will continue to make the future unpredictable.
Similarly, while Hammond repeated his pledge to keep Britain at the forefront of technology, founders worried that Brexit will prevent innovation. “I can’t overstate the impact Brexit may have on innovation,” stated Djalal Lougouev, CPO and co-founder of Ometria, a predictive e-commerce marketing platform. “Cross-border data flows are the single most important way we as a nation can continue to innovate and compete on a global stage. With 75% of our data flows coming from EU countries and services accounting for 44% of our exports, data is a vital currency for modern business, and without freedom of data movement the UK won’t be the tech hub the government wants the country to be.”
Lougouev was also left unimpressed by the proposed digital tax. “The government should focus on encouraging growth rather than punishing the most innovative businesses for offering customers convenient ways of shopping,” he argued. “In a digital world, this only serves to pander to the old standards of bricks and mortar retail that aren’t resonating with consumers like they used to.
Elsewhere, several businesses welcomed Hammond’s announcement to keep fighting late payments. “Large firms can hold smaller firms almost to ransom with the idea that you can have the work but the payment is 90 days or even 120 days, which for many small businesses means the decision between turning down large orders or taking them and potentially causing cashflow problems, which as we know often become catastrophic,” said John Armstrong, co-founder at Custom Planet, the printing and branding company. “In Europe larger companies are not allowed to operate this way, everything is strictly 30 days for payment terms and that makes it a fair playing field for everyone.”
With mere weeks left before Brexit day, we can hardly fault UK businesses for being worried about what the divorce will entail for their companies.