So, the budget has come and gone…
However, the tremors from the announcements on the day seem set to continue and even increase.
There is little doubt that business was something of a loser based on the policy announcements set out.
The changes in Employers National Insurance and the resulting on-costs being suggested for businesses are very significant indeed. There is a real chance that this could affect levels of employment and pay increases going forward. A recent poll of 288 business leaders concluded that the budget changes would reduce employment and hiring intentions.
This coupled with large increases in Minimum Wage and a proposed extension of employment rights will add anxiety to employers when considering their recruitment needs.
Alternatively, these costs may be passed on to businesses and consumers, increasing inflation and possibly reducing the ability of the Monetary Policy Committee to reduce interest rates in the near term.
Latest economic data from the Purchasing Managers Index indicates a probable contraction, leading to concerns of stagnation in the economy. This against a strong push for Growth from the government.
Farmers have been in the news since the budget. The proposal to levy inheritance tax at half lifetime rates for farming assets valued over £1m is a very big change. Whilst there is a great deal of toing and froing about how many will be affected, and the merits of potentially targeting non farming landowners, there is no doubt that some will be placed into difficult decisions over the coming years. Even their own supporters are now querying the accuracy of the information and how it will affect ‘ordinary’ farmers.
This is also the same for family business, where the relief changes are identical. This has the potential to affect far more business owners and for very significant sums.
One concern is the potential for family firms to attain a certain level of value or activity but then be unwilling to take a further step and, perhaps move from being a small firm to a medium enterprise. On the continent, many family firms develop under private ownership, and become significant organisations for the economy – BMW for example is still 50% privately owned by the Quandt family.
The proposed IHT changes may well lead entrepreneurs to realise their investment during their lifetime, rather than create a ‘dynasty’.
All of these changes create uncertainty. Uncertainty is one of the biggest enemies of business as it stifles investment and innovation. These are required for an economy to grow and flourish and with the government hanging their hat on growth; this has to be a concern.
What if growth does not happen? How will the additional borrowings be funded? – fiscal rules have been changed to allow greater investment flexibility for pension funds to invest. This is a good thing; however, the returns need to be reasonably secure for trustees of these funds to make long term investments into large capital projects and infrastructure.
We must hope that they have got this right.
Why not join us and come along to one of our numerous networking events, plenty of information on our updated website; nwbc.org.uk
Jeremy Salisbury
Chairman North Wales Business Club
Published in the Daily Post
