Budget makes some progress in restoring print’s confidence
Monday, November 12, 2018
In the first Budget to take place on a Monday since 1962, Philip Hammond made moves to commit the government to greater spending on health – £20.5bn more for the NHS over the next five years and at least £2bn specifically committed to mental health.
While the bulk of his policies focused on addressing the increasing ills of the electorate, some resources were kept back to treat the ailments afflicting businesses. As growth forecasts for 2019 were boosted from 1.3% to 1.6%, the Chancellor filtered in proposals for businesses that could turn the tide for an island floundering in uncertain Brexit waters.
But the print sector, which appears to welcome the actions notionally, seems to wonder whether it’s enough. Further, Hammond’s announcement that the Spring Statement could be upgraded to a Budget itself casts doubt on whether these autumnal policies will see the first bloom.
“With a lot of these policies, only time will tell if they are effective,” says Zoe Deadman, managing director at KCS Print in Launceston. “But this talk about another Budget means that all of this could be ripped up within months.”
Deadman’s worries centre around the government’s inability to provide any detail about the business environment post Brexit. An extra £500m will be funnelled into a preparatory pot now exceeding £4bn, to be used to even out any volatility after leaving, but it’s no use to businesses such as KCS that have to plough ahead with Brexit contingency plans without official guidance.
“We are speaking to suppliers about increasing our stocks,” Deadman continues. “Any extra money is too little too late because firms are already putting in their own investment. A steer in January or February would be after most of our plans have already gone ahead.”
One effect from the Brexit vote Hammond was keen to address was a drop in business investment, having fallen consistently since 2017. By temporarily boosting the annual investment allowance (AIA) from £200,000 to £1m for two years, it is hoped that firms will look to get spending again on technology to enhance their productivity.
Charles Jarrold, chief executive at the BPIF, welcomes the measure amid a Budget he generally considers “scattered” due to Brexit remaining an elephant in the room.
“We were very pleased to see concrete action on productivity in the shape of an increase in the AIA,” he says.
“Investment in the UK lags behind other leading economies, so this is a step in the right direction. For print, an industry in which costs are often well over £200,000 for a single piece of equipment, this is a welcome move which should provide a quick helping hand to investment.”
While the increase in AIA was largely welcomed, a number of print SMEs express frustration that their own investment drives are winding down and therefore they will miss out on the benefits of the extension.
“I wish it had been introduced a year ago,” says Leeds-based Northern Flags managing director Iain Clasper-Cotte. “We have probably invested £2m in the past 18 months and are now just looking at finishing equipment, which is at the lower end of costs.”
Macclesfield-based Plastic Card Services director Rob Nicholls concurs: “Obviously this is very good news because companies stopped investing in the face of Brexit. We have just missed out, though there are always new opportunities to be explored.”
Something of a grab-bag of policies, the Budget presented different opportunities and hopes to different printers, sometimes in unexpected ways.
While a £900m business rates relief for small businesses and a £650m fund, all to rejuvenate the high streets, may not directly impact printers, for Clasper-Cotte, whose operation works heavily in point-of-sale, it’s a life raft for a vital market of end users.
“Looking at the issues on the high street has been the most important thing for us,” he says. “Not a day goes by we don’t hear about another retailer announcing closures – New Look recently said they are considering shutting 100 stores.
“If even the huge brands are struggling, there will soon be no POS work left for printers like us. The market has to adapt to the emergence of internet shopping and this will certainly help revive those sorts of businesses.”
A tax on tech giants such as Facebook and Google, which is intended to accumulate £400m each year, was regarded as a step in the right direction, but a feeble one with conventional businesses “collapsing all over the place”, according to Nicholls.
Deadman says: “In reality, it is such a small drop in the ocean for those firms. I think it is a red herring that sounds good and plays well to very little effect. Hammering the big boys is all well and good, but they have ways of getting around these measures.”
One policy that was greeted openly by the sector, though, was the reduction in apprenticeship levy contributions for SMEs from 10% to 5%. With an endemic skill shortage in print, any incentives to get young people trained up and working are essential.
Nicholls says: “Apprenticeships are very much on the agenda for us as we have a meeting set up with a training provider to get a scheme sorted. We have been developing our equipment and now it’s time to focus on our workforce too.”
But Jarrold hopes policies around apprenticeships can go further, saying: “With apprenticeship starts currently so low, and travel costs a disincentive to take-up, perhaps proposals to reduce bus and train fares for apprentices might have seen this money better spent?
“Generally, we would like to see the government engage on understanding why take up of apprenticeship training remains somewhat disappointing.”
A good Budget for SMEs but Brexit needs to be settled
Mike Cherry, national chair, Federation of Small Businesses
This most recent Budget shows that the government is listening to the needs and concerns of small businesses at a time when many are feeling the pinch.
We welcome the fact that several recommendations from the FSB have been acted on. These include actions on high streets, freezing the current VAT threshold for another two years and the improved targeting of the Employment Allowance, all of which will provide some much-needed lifelines for thousands of small firms.
Small business retailers on our high streets that cannot get rate relief will be delighted with the significant discount for the next two years, which on average will help these businesses to the tune of almost £2,000 each, but potentially up to around £16,000 for small businesses facing the biggest bills.
Apprenticeship starts have plummeted over the past year, following the introduction of burdensome co-investment costs for small firms who want to bring young people into the workplace. The move to drop the proportion of apprenticeship training and assessment costs by small firms from 10% to 5% is a much-needed development.
Brexit remains the big issue on everyone’s lips, and despite the raft of positive actions in this Budget, we need to make sure that any deal signed between Britain and the EU doesn’t undermine these changes that small businesses have needed for some time.
The Chancellor said even in the case of a no-deal Brexit the measures unveiled in this Budget will remain, which is important in case of a larger Spring Statement or Brexit Budget in 2019.
Overall, this Budget was one that went some way to address many of the issues that SMEs are facing on a daily basis, but this doesn’t mean we can rest on our laurels, especially at a time when so much uncertainty clouds the future for many firms.
Which elements of the Budget will affect you the most?
Sanjay Patel, founding partner, Packaging Collective
“All I can say to the introduction of a tax on non-recycled plastics is ‘oh dear’ – it is a knee-jerk reaction when we need focus on recovery of materials instead. I am keen to see where this money will go. A tax is fine, but it needs to be invested into local authorities and infrastructure. The fundamental issue is that there are not enough bins for people to recycle into. Costs for material changes are often passed down the supply chain to manufacturers, so it is up to smaller brands to innovate so the big companies change, too.”
Simon Smith, managing director, CS Labels
“This was a fantastic Budget for us, particularly in terms of the investment allowance announcement. We have a history of continually investing in and upgrading our tech and this will allow us to move forward with confidence. We are also rolling out our plans to move into flexible packaging, so we are looking at the new plastic tax. It is good to consider the environment and we want to play our role in recycling the plastics in the marketplace, but huge investment is needed, and flexible packaging alone cannot address this.”
Alison Branch, managing director, Park Communications
“It is a positive Budget for us, but the big caveat is Brexit. Whatever policy the government wants to introduce, the best thing they can do is agree on a sensible deal quickly. There is scarce money, and no one wants to spend it, but a deal would have an immediate benefit for consumers and businesses. I am not sure what good adding to the preparatory pot can do when we have already spoken to suppliers about how to handle stocks. I am concerned about access to consumables and equipment.”