A lot has happened since the last Budget in October 2018. Back then, Phillip Hammond was the Chancellor of the Exchequer and Theresa May was the Prime Minister. The UK was still a member of the European Union and there was no such thing as Covid-19.
Today’s Budget is the first of Boris Johnson’s premiership and comes amidst social and economic unrest caused by ongoing coronavirus epidemic. We also have our third Chancellor of the Exchequer since the last budget, with Rishi Sunak taking over from Savid Javid following his shock resignation in February.
Over the preceding months, this had been billed as the ‘Brexit Budget’. Commentators were talking up the prospect of a bold spending programme to cement the new government’s vision of a post-Brexit UK. However, dealing with the coronavirus outbreak has dominated government planning in recent weeks. With the crisis threatening to bring economic activity to a standstill, coverage centered on this being the ‘coronavirus Budget’ instead.
So, in a nutshell, what happened?
There was a distinct lack of jibes and quips as we often see. As expected, measures to protect the economy from the coronavirus outbreak were laid out with the Chancellor stating “we will get through this together” and the response should be “above party politics”. This followed the Bank of England cutting interest rates earlier in the day. Overall, a £30bn stimulus package was pledged to help the UK respond to the coronavirus crisis, with a number of key points for small businesses, namely:
- Statutory Sick Pay – businesses with fewer than 250 employees will have the cost of providing Statutory Sick Pay during the 14-day isolation funded by the government in full.
- Business Rates – a one-year extension to the retail discount to leisure and hospitality sectors, as well as abolishing business rates for firms with a rateable value below £51,000 for 12 months.
Aside from the coronavirus, the main takeaway was the pledge to increase spending to its highest levels in decades. £600bn will be made available to invest in key infrastructure projects – such as road, rail, and broadband – in an effort to ‘level up the UK’.
Here are some of the main points we picked out from a small business perspective.
Let’s take a look at the announcements in a bit more detail, as well as the non-announcements, and canvas the social media response from small business owners…
Business Rates
Reform to the business rates system is something lobby groups have been calling for for a long time. In previous Budgets, measures have been put in place to try and relieve the burden that this tax places on bricks and mortar businesses. However, many see the tax as no longer fit for purpose in today’s digital age. The added impact of the coronavirus has forced drastic action.
Unsurprisingly, this went down pretty well with the business community.
However, these emergency measures won’t benefit all businesses.
What we say:
“Whilst recently the focus has been on how business rates can impact large businesses such as Intu, they can also be absolutely devastating for much smaller companies, often forcing them to shut down entirely due to rising costs. Today’s announcement that the government will extend Time To Pay and reduce business rates for small businesses – any in many cases abolish them altogether – in order to limit the impact of coronavirus is therefore a welcome one.
“The government also needs to look beyond the current situation and ensure that business rates do not limit small businesses’ opportunities to remain operational, as well as continuing to grow, particularly with their ongoing focus on infrastructure and ‘levelling up’ towns and cities outside London. We welcome today’s proposed review of business rates in the longer term and would urge the Chancellor to ensure that any resulting changes are fair and simple, enabling more SMEs across the UK to continue to grow, alongside the establishment of new businesses, and empowering those with physical properties on Britain’s High Streets. In addition, we would encourage small business owners to consider contributing to any consultations or review of business rates in the future.”
Steven Drew, Informi spokesperson for Informi
£30bn coronavirus stimulus package
As the coronavirus causes increasing disruption, small businesses are seeing the impact on their supply chains as well as consumer demand. In the worst-case scenario, a fifth of the UK’s workforce might be off work in the coming months. Clearly, this will place a massive strain on the day-to-day operations and finances of small businesses. This was addressed in a stimulus package by the Chancellor which touched on all aspects of the government response.
Still, for some, fundamental issues remained with regards to Statutory Sick Pay.
What we say:
“We welcome the Chancellor’s targeted measures to support small businesses in today’s Budget, including extending Time to Pay, relief on business rates – including temporarily abolishing them altogether in some cases – refunding the cost of Statutory Sick pay for SMEs and guaranteed loans for small businesses. This will help to combat the immediate impact of the ongoing coronavirus epidemic, which may disproportionately affect small businesses.”
Steven Drew, Informi spokesperson for Informi
Late payment
The blight of late payment affects businesses of all shapes and sizes. However, small businesses are particularly exposed with as many as 50,000 failures attributed to late payment (Source: FSB). Previous measures to tackle the crisis have had a limited impact, prompting calls for stronger action.
Unfortunately, there wasn’t much in the way of action…
What we say:
“Late payment issues have an enormous impact on the health and success of small businesses, causing almost a quarter of small business insolvencies. Even for firms who are able to absorb late payments, they can lead to stunted growth, damaging productivity and innovation, and ultimately stifling their opportunity to expand.
“Whilst the government’s measures to help small businesses weather the potential crisis of coronavirus are welcome, we are disappointed that they did not include strengthening the Prompt Payment Code. Doing so would help to tackle a persistent issue for many small businesses around the UK. Instead, the Chancellor should continue to relieve the pressure late payments place on the UK’s small businesses and commit to a statutory 30-day limit on payment of all invoices and giving the Small Business Commissioner powers to impose large fines on the worst offenders.”
Steven Drew, Informi spokesperson for Informi
Entrepreneurs’ Relief
Entrepreneur’s Relief is a tax relief that sees some business owners pay just 10% Capital Gains Tax when they sell their business instead of the usual 20%. AAT and Informi have been calling on the government to scrap entrepreneurs relief and replace it with initiatives or reliefs that encourage business start-ups or scale-up activity.
Not quite what we wanted to see…
What we say:
“Although today’s announcement from the Chancellor acknowledged the many flaws of entrepreneurs’ relief, it nonetheless represents a missed opportunity. With many small business owners being unaware of entrepreneurs’ relief until the time comes to consider a sale, it’s clear that the policy was doing little to encourage people to start their own businesses and instead rewarding those who would have sold up anyway. Scrapping entrepreneurs’ relief would have seen £3bn freed up for investment in schemes that will help small businesses grow and prosper, as well as supporting towns and cities across the UK to thrive, and we urge the Chancellor to consider ending it entirely in the near future.”
Steven Drew, Informi spokesperson for Informi
Away from fiscal policy, the revised economic forecasts from the Office of Budget Responsibility (OBR) showed a slowdown in growth. These were made before the extent of the coronavirus outbreak in the UK became clear.
Perhaps most significantly, though, was the mystery surrounding this piece of TV coverage as the Chancellor left Number 11.
Nope, we can’t explain it either.
