The UK economy will grow 3% this year – the fastest of any G7 nation – and not less than 2.2% for the next five years, yet it will take that long to eliminate the deficit, which – while half that inherited from Labour – has proved stubbornly hard to shift.
Unemployment has fallen to below 2m for the first time in six years, yet tax receipts are down due to the increase in the personal allowance and low wages, together with falls in corporation tax and North Sea oil and gas receipts.
Inflation has been revised down to 1.5% this year and is now being outstripped by wage growth, but with a further £50bn reduction in the deficit forecast for the next two years (from £91.3bn this year to £40.9bn in 2016/17) there is still more pain to come, particularly in the public sector.
For each positive announcement – on growth, on employment and on inflation – there was a counterbalancing point and an explicit warning that there are “problems that remain unresolved in the British economy”. At the heart of these problems lies always the deficit, and Osborne will bang the drum till polling day that handing Labour the job of eliminating it is a very risky business.
This was absolutely an Autumn Statement with next May’s general election in mind and so it was no surprise to see the chancellor seek to strengthen the Conservative’s image in topics that are likely to be hot on the campaign trail, such as safeguarding the NHS and cracking down on wealthy non-doms, property owners and multinationals to make sure they’re contributing their fair share to the cause.
But what was there for business – and print in particular – to applaud in one of the final acts of this parliament? Much of the focus was on SMEs – good news for print – with Small Business Rate Relief doubled for another year and the 2% cap on inflation-linked increases in the rates multiplier also extended for a further 12 months. The £1,000 discount for high-street shops, pubs and cafes was also boosted to £1,500, while the chancellor has announced a “full review of the structure of business rates” to report back by Budget 2016.
As with all such reviews, the devil will be in the detail, and Nationwide Print managing director Julian Hocking for one would have liked to have seen more definitive action. “There was real hope he would have given a complete overhaul of business rates but he has failed to do this once again,” said Hocking. “You need to understand the reality of running a business to really see the effect of business rates. He could transform the high street overnight with an overhaul.”
The chancellor has urged business groups to engage with the Treasury on the rates review and Webmart chief executive Simon Biltcliffe argued the chancellor could kill two birds with one stone: easing the burden of business rates while incentivising businesses to boost productivity. “You could keep the rates based on property but then rebate a proportion based on the tax paid – income, NI and corporation tax – against the building. It would drive the desired behaviour of maximising added-value per square foot whilst keeping the valuation as it is now.”
Biltcliffe added that while the coalition record on supporting business was reasonable, there remained many simple measures any government could take to make life easier for entrepreneurs. “More simple support is needed rather than expensive stuff,” he said. “For example, when you start a business, why do you have to become an expert in finance, HR, tax etc? If the government gave access to business software that anyone could use for free, with all the best practice and compliance loaded in, the state would gain, business would gain and the wider society would gain from the value created. Simple solutions which cost little and benefit all.
“Likewise on training: why couldn’t accredited courses be offset against tax; we know that people are a business’s biggest resource and we all need to consistently refresh our skills and knowledge – this would be a way of making it happen. Make it an investment rather than a cost to the bean-counters who often slash this expense when they can.”
Also of significance was the £900m of new funds for the Regional Growth Fund and Enterprise Capital Funds, as well as another 12-month extension to the Funding for Lending scheme. “All the above are focused on the SME sector and if the economy is to continue to show growth, then it’s the SME sector that’s going to play a critical role,” said Compass Business Finance director Mark Nelson. “There’s no doubt, improved production efficiencies are also vital for the UK, and any incentive to invest in modern technologies is welcomed.”
One feature of coalition government has been the attempt to rebalance the economy to boost manufacturing and exports rather than relying on services (especially financial) and to invest in growth outside of London and the South East (such as via the Enterprise Zones and through infrastructure investment). The chancellor continued this theme with the announcement of a sovereign wealth fund for the North of England that will ensure that shale gas resources are reinvested in the region. Together with billions of investment in science, technology, manufacturing, education and transport in the region, it is hoped that this will create a “northern powerhouse” that will benefit the whole of the UK. Biltcliffe described the proposal as a “great idea, long overdue”.
“The nation is misbalanced and if the communication infrastructure in the rest of the country was a fraction of that within the South East, then there would be a much better use of the human, intellectual and physical value of the amazing place that we are blessed to live in: the UK. East to west in particular needs faster networks everywhere in the UK so I am much more for HS3 than HS2,” he added.
For Osborne and the rest of the Conservatives, what was originally supposed to be a one-term mission to cut the deficit and fix the economy has become an almost 10-year plan – and will be no matter who is in power next June. It truly has been a lost decade and the only consolation will be if the industry – and the UK – emerges stronger and wiser at the end of it. Better business regulation is a good place to start and it can only be hoped that whoever delivers the Budget in 2016 takes the opportunity to deliver some genuine reform.
Osborne calls on business to fuel engine of commerce
Nicholas Mockett, head of packaging M&A, Moorgate Capital
The chancellor opened with a strong statement that under this government there has been “no recession, no double dip, there was only the great recession under Labour”. This paints the picture of a benevolent macro-economic environment for business, with UK growth at 3% this year, according to the OBR. The chancellor did confess that the deficit hadn’t been cut as much as planned and that there would be no giveaways. And there wasn’t a huge amount for business.
Anyone who has been in business knows that you can’t always predict cashflows. Particularly when you are growing. There is a budget deficit difference of about £20bn, which represents 1.3% of government expenditure in 2013 of £1,576bn. George Osborne pointed out that under the current government the deficit inherited from Labour has been halved, while the OBR is expecting borrowing to fall and is predicting a surplus by 2019.
The discussion about income tax take being lower despite strong growth may reflect the fact that the UK operates in a global market and in some countries people accept much lower wages – even in parts of Europe. If the economy wants to export more than it imports it has to be competitive.
Businesses are borrowing at low interest rates. This should support further growth at a time when manufacturing is already growing fast with investment up 11% in the UK. A sovereign wealth fund for the North could be good news for business in that part of the country and politically could pour oil on troubled waters in the shale gas debate.
Employment is at record high, which ultimately should drive government income. It may, however, mean wage price rises or businesses finding it hard to recruit as they grow.
Overall it struck me as more than a ‘steady as she goes’ statement and a call to arms for UK businesses to put more coal in the engine and contribute to the growing GDP and therefore the government’s coffers.
Has the Autumn Stat ement delivered for the print industry?
Tony Rafferty, chief executive, Grafenia
“I thought it was quite a bland, election-minded Autumn Statement. I would have liked to have seen more encouragement for entrepreneurs to invest in start-ups through the Enterprise Investment Scheme, rather than relying on bureaucrats spending state capital. One of the reasons we dropped out of the government’s start-up loans scheme was because it seemed geared towards doling out capital than investing in growth. How many of those loans will be repaid is questionable and I wouldn’t be surprised if the default rate was 50%.”
Jeremy Walters, chief executive, DST
“Marketing expenditure can be impacted by sentiment about the economy. So any long-term steady forecast, such as the predicted economic growth announced in the Chancellor’s Autumn Statement of 3% for 2014, followed by ongoing growth of between 2.2% and 2.4% for each of the following four years, can only help support the long-term positive outlook that we are seeing in the market.”
Simon Biltcliffe, chief executive, Webmart
“Stability and a longer term perspective is welcome although the accuracy of the predictions is awful. I’d rather the weathermen gave their £100m supercomputer to the Treasury instead! Business gets on whoever is in power and print has largely been left alone throughout this parliament. The BPIF Management Training course is the best thing to happen to print under the coalition, although it was nowt to do with them; it’s a testament to Kathy Woodward who made more difference to print than any government has.”