SPRING STATEMENT

Hammond hails economic ‘turning point’

Philip Hammond has used his Spring Statement to set out a series of consultations on future policies, including a consultation on extending current training tax relief to self-employed people and employees. The chancellor also said that the apprenticeship levy – which has been criticised over the amount of red tape it entails – will get an extra £80m, which will be funnelled to small businesses taking on apprentices. The next revaluation for business rates is being brought forward to 2021, after which the government will move to revaluations every three years. And Mr Hammond signalled that the government will take action on the culture of late payment, along with broad measures to increase small business productivity. The Treasury will also consider forcing online platforms such as Airbnb to provide details of users’ income directly to HMRC, while large cash payments to tradesmen could be banned in a crackdown on the black eco nomy. Other announcements included a rise in the National Living Wage, to £7.83 an hour in April. The chancellor told MPs growth was forecast to be 1.5% this year, up from 1.4% forecast by the OBR in November, and that the government plans to borrow £45.2bn in the 2017-18 fiscal year. He said the figures showed the UK economy had reached a turning point and there was “light at the end of the tunnel”.

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Business offers lukewarm response

Business groups gave a mixed response to the Spring Statement, welcoming the lack of tax ‘tinkering’ but arguing more information on Brexit was needed. Manufacturers’ organisation EEF commented that it is now: “Critically important the government achieves a positive ‘Brexit’ transition deal at the European Council meeting next week to provide business with the certainty and confidence to invest”. Rain Newton-Smith, chief economist of the CBI, meanwhile noted that: “This underlines just how vital it is to secure a Brexit that delivers for jobs and an industrial strategy that helps transform UK productivity in all corners of the country”. Elsewhere, property experts argued that the chancellor’s promise to bring the revaluation of business rates forward to 2021 is “like putting a plaster on a gunshot wound” and will do little to help Britain’s struggling retailers. David Parker, hea d of rating at Savills, said that while moving the rate forward is essentially positive news “the sentiment is somewhat lost as the fundamental issues with the system have not been addressed”. However, Philip Hammond’s promise to tackle late payments was praised, with the FSB suggesting it could add £2.5bn to the economy annually and help close the productivity gap.

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FINANCE

SMEs shun bank debt

The latest SME Finance Monitor conducted by BDRC shows Britain’s small businesses are turning their backs on bank debt, deepening concerns over productivity and economic growth. The survey revealed that almost half of businesses now describe themselves as “permanent non-borrowers”, up from one in three in 2012. In 2017 only one in 20 companies reported having made an application for a new loan or overdraft in the previous 12 months, BDRC found. This has more than halved since 2012. The survey also highlights a marked decline in the use of external finance over the past six years. Last year just one in six companies that are not using external finance said they would be willing to do so, down from a quarter in 2015. Suren Thiru, head of economics and business finance at the British Chambers of Commerce, said: “Companies need finance to support growth plans. Ultimately it means not getting that new factory, not going on th at export drive.”

The Times

Brexit can boost banking competition, says Secure Trust chief

Paul Lynam, the boss of challenger bank SecureTrust Bank, has said leaving the EU provides Britain with an opportunity to cut regulation hampering the development of small banks and help break the dominance of the big five – Barclays, Lloyds, RBS, HSBC and Santander. Mr Lynam said the UK should follow the example set by the US and deregulate to boost challenger banks. Small lenders should not have to adhere to “Basel” rules on capital buffers – a requirement of the European Banking Authority – says Lynam. It’s a costly and inappropriate approach: small banks should be allowed to fail, he adds.

The Daily Telegraph

OUTLOOK

Insurers pay out as supply chain strains increase

Trade credit insurers paid out £4.3m a week last year, up 7% on 2016 and the highest level since 2009, according to figures from the Association of British Insurers (ABI). Adrian Hyde, president of R3, said: “UK businesses have been having a markedly tougher time over the past year, so it’s not a surprise to see increased supply chain pressure. This is particularly noticeable on the high street, where retailers are grappling with long-term changes in shopping habits, weakening demand and increased competition and discounting.” The Times cites research by supply chain finance company Previse, which found that SMEs have been forced to take out £31.5bn in funding to cover gaps left by slow and late payment by clients.

The Times

R&D hampered by Brexit and austerity

The majority of the research and development being done in the UK is by firms in industries most likely to be negatively affected by Brexit, says the Observer’s Phillip Inman. Pharmaceuticals, aerospace and the motor industry spent £9.4bn between them on R&D in 2016, almost half of the £22.2bn spent by business in total. Meanwhile, the CBI is seeking to prevent the loss of as much as €1bn (£880m) in annual funding for scientific research and technological development after Brexit. The Guardian reveals that the CBI is calling for the government to state its intention to renew its membership of the EU framework programme for research and development after Brexit.

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SME confidence dips sharply

The latest SME Health Check Index from CYBG, in partnership with the CEBR, dropped to a score of 42.01, down by 48% since 2014, the fifth consecutive quarterly fall and its worst reading for four years. CYBG’s CEO David Duffy commented: “Businesses are scaling back their investment and borrowing due to the wider economic uncertainty, contributing to the decline in the index. SMEs would welcome more incentives to address skills shortages, or further tax reductions to manage costs and restore confidence.”

The Press and Journal

REGULATION

Insolvency reforms to target reckless directors

The Government has launched a consultation on new laws that would make it easier to bring criminal proceedings against the most “reckless” employers and directors of businesses in or approaching insolvency. Greg Clark, the business secretary, said the reforms would allow regulators to “come down hard on abuse and to make irresponsible directors bear the consequences of their actions”. The business department proposes making it easier to return money to creditors by “reversing inappropriate asset stripping” and making it harder for directors to use the insolvency process to avoid their debts. The Government is also proposing to strengthen the powers of the Pensions Regulator to intervene when takeover activity could threaten the solvency of a company’s pension scheme.

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Brexit will force SMEs to boost productivity

Brexit will be a wakeup call for small businesses says consultancy firm Oliver Wyman, as thousands trading with the EU will have to negotiate new customs red tape. The solution to absorbing the cost burden will be to improve productivity. Those who don’t may find they no longer qualify for Government funding support, adds the Times ’ Philip Aldrick.

The Times

TECHNOLOGY

UK tech start-ups thrill with appeal

Peter Evans considers the pros and cons of foreign interest in the UK’s upcoming tech SMEs in the Sunday Times , as US funds lead the way in a consistent flow of cash targeting UK firms. Evans notes a report by GP Bullhound which found North American investment in British tech businesses rose to $22.8bn (£16.3bn) from $6.2bn last year. Far from being affronted by UK companies “selling out” to multinationals, Britain should accept it must be doing something right, Evans says. GP Bullhound’s managing partner Hugh Campbell, comments: “There is a gathering sense that European, but particularly UK, technology companies have broken through the glass ceiling and significant value is now being created consistently.”

The Sunday Times

EMPLOYMENT

Businesses paid out £3.8bn in redundancy payments last year

British firms paid out an estimated £3.8bn to more than 250,000 employees who were made redundant during the 2016-17 financial year, according to law firm Hugh James – down from £4bn in 2014-15 and 2015-16. The value of redundancy pay-outs over the past year averaged £15,000 per worker – slightly more than the maximum statutory pay for redundancy per employee, which is currently £14,670.

The Daily Telegraph

INVESTMENT

Investment falling in female-led firms

Figures from a Barclays study show that investment in female-led businesses has fallen for the first time. Statistics show that although a record level of investment went into new businesses in 2017, firms with at least one female founder saw the total put into their companies decrease by £1m. Between 2016 and 2017, the amount of funding raised by male-led companies increased by 55%, compared with a fall of 0.1% for those with a female founder.

The Daily Telegraph

EXPORTS

Exports boom to fade, says OBR

The OBR says exports’ growth will slow from 2020 onwards, as the benefits of a weaker pound and global demand for UK goods start to fade. Exports grew by 5.0% in 2017, significantly greater than the 2.3% growth seen in the previous year. In both 2019 and 2020, the OBR has upgraded its expectations for exports by one percentage point. However, the following two years have seen downward revisions.

The Daily Telegraph

ECONOMY

BCC upgrades growth forecasts

The British Chambers of Commerce has warned that Britain’s economic growth will remain at the bottom of the G7 group of advanced countries until at least 2020. The BCC was speaking as it upgraded its GDP forecast for this year from 1.1% to 1.4% and raised its outlook for 2019 from 1.3% to 1.5%. The group added, however, that “the UK will remain among the worst-performing economies in the G7 until 2020 at the earliest”.

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UK growth to be slowest in G20 this year

The OECD has said the UK economy will grow at a slower pace than any other advanced or emerging nation this year. The think-tank raised its UK growth forecast to 1.3% in 2018 amid a strengthening global recovery. This is up from an earlier projection of 1.2%, but is the weakest in the G20. The OECD said the world economy was on course to expand at an annual pace of 3.9% over the next two years. This is up from a forecast last November of 3.7% in 2018 and 3.6% in 2019. In the UK, the OECD said higher inflation would continue to squeeze household incomes, while weak business investment would continue to weigh on growth for the next two years.

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