With Article 50 set to be triggered imminently, on the face of it perhaps, one of the most glaring omissions of Philip Hammond’s first – and last – Spring Budget earlier this month was any mention of Brexit beyond his opening speech.
“[This Budget] was absent of any sense that the chancellor or the government grasped the enormity of the shock that Brexit will bring to core manufacturing industries,” says Unite general secretary Len McCluskey.
“Workers and employers have been left none the wiser as to how this government will prepare the economy for the seismic changes that Brexit will bring.”
But others were unsurprised by Hammond’s approach. “We haven’t started the negotiations to leave the EU yet so how can he legislate on a situation whereby nothing is happening?” says Sidney Bobb, chair of the British Association for Print & Communication (BAPC).
The Spring Statement will now replace the Spring Budget and the Budget will become a single fiscal event held in the autumn, meaning there will be another one later this year.
While this month’s final Budget prior to the Brexit process getting underway was perhaps a calm before the storm, the chancellor nevertheless outlined a number of measures that could have a range of repercussions on print.
One of Hammond’s big announcements was that self-employed people will see their Class 4 National Insurance Contributions (NICs) rise from the current level of 9% to 10% in April 2018 and 11% in April 2019.
A week later, Hammond dropped the proposal, but while the impact of this on print may, on the surface, have been minimal, Mercury Search & Selection managing director Dani Novick says the initiative could have impacted freelancers working at the creative end of the industry.
“There is always a balance and tipping point as to whether it is better, i.e. more tax efficient, to be self-employed or incorporated as a limited company. These changes might have shifted that tipping point.
“Add in projections of higher inflation and some may have started to feel the pinch.”
Terrye Teverson, managing director of Launceston-based KCS Print, points out that many small printers may also use other self-employed workers, like bookkeepers.
She says: “They tend to be self-employed and probably operating from home and don’t have any childcare, sick pay, holiday pay and the rest of it. They’re not normally on big earnings and I think this would have significantly affected them.”
There was some good news for companies hit by increasing business rates, with Hammond pledging a total of £435m to help affected firms.
Local authorities will be provided with £300m to deliver discretionary relief to businesses facing large bills and companies losing small business rate relief will benefit from a cap that prevents their bills from increasing by more than £50 a month.
“With a high concentration of the print and creative sector in London and the South East, business rates have been a hot topic so assistance in this area is welcome although it remains to be seen how this will pan out,” says Novick.
“Certainly when you add business rate increases to the headaches of auto-enrolment pensions and then stack on top the Apprenticeship Levy, recent budgets are not exactly pro-business.”
Hammond also announced a reduction in tax-free dividend allowance for shareholders and directors of small private businesses from £5,000 to £2,000.
Ian Cass, chief executive of the Forum of Private Business, believes this will deter entrepreneurialism. He says: “These are the very people who create growth and employment, and continuing to increase both regulatory and tax burdens on them while removing rewards is hardly smart.”
But Bobb says it is unlikely that many print firms will be hugely affected by the decision.
“In some respects it’s fortunate that the vast majority of print companies are small. And profit margins are [generally] on the decline, so whilst it could have an impact, it will be more of an emotional impact and it will affect more of a minority than the majority,” he says.
Also on the Budget agenda once again was productivity, with Hammond remarking that UK productivity is 18% behind the G7 average and that the gap is “not closing”.
He is hoping to tackle this with increased investment in training and infrastructure which will include new technical qualifications, T-Levels, for 16 to 19-year-olds.
These qualifications, which will be introduced from autumn 2019, could benefit print – among other industries – though Teverson believes that in-house training with specialist involvement from outside sources may prove more effective.
“Our difficulty at KCS is that if any of our staff had to travel to go to a college, it’s about an hour’s journey each way. And then often the complaint is that they don’t learn anything while they are there or it’s not meaty enough. Whereas when they’re in the workplace, they are learning on the job and it’s got a direct result to what they are learning.
“I do think there is a place for some classroom training but that would be better delivered by either clusters of printers or like-minded businesses getting together to deliver it.”
Overall, then, it was a relatively unspectacular Budget (followed by a fairly spectacular u-turn on NICs) and one that may have longer term rather than immediate implications for much of the print industry.
All eyes now turn to the Autumn Budget, which is potentially likely to see more controversial changes but also more clarity on the direction the country is heading.
Spring Budget is a modest step in the right direction
Charles Jarrold, chief executive, BPIF
In supposedly the last Spring Budget, the chancellor was in good humour and able to deliver some good news. Higher-than-forecast economic growth may have put Hammond in a strong position, but he is keenly aware of the uncertainties ahead.
From an industry perspective, the BPIF was pleased that the government appears prepared to listen to the business community, not least with a modest mitigation of some of the challenges arising from the business rates revaluation. We were also encouraged to see our recommendations for improving the R&D tax relief system seemingly taken up.
Nevertheless, significant uncertainty remains. The chancellor predicted a rollercoaster ride over the next two years, and his Budget is intended to give him financial headroom while backing investment in productivity. The economy may have defied forecasts, but this strength has been driven by robust household consumption - up 3% last year while business investment fell by 1.5% in the same period. With the economy close to full employment, sustained increases in productivity will be essential if growth is to be maintained. Creating a business environment that supports investment in both skills and equipment is therefore essential.
We were pleased to see continued recognition of the role of technical and vocational education in supporting business growth. The proposed T-levels are a further attempt to narrow the divide between academic and vocational education. We were also encouraged by the continued commitment to reduce corporation tax, enabling businesses to retain a greater share of profits for reinvestment.
A business environment that supports competitiveness and growth for our members is always at the forefront of the BPIF’s messages to government, and along with the outcomes of the government’s current Industrial Strategy consultation, this Budget is a modest step in the right direction.
What was your react ion to the Spring Budget?
Nigel Lyon, managing director, Pinstripe Print Group
“I’ve been through and looked at some of the details of the Budget and I think the trouble is that there is very little the government can play with. Clearly there are areas, training and the like, that they would want to improve but the government has spread the butter too thinly across the piece of bread in order to try and please everybody. What they ought to be doing is going out and addressing some real specific things and I don’t think there is enough that is specific to an industry.”
Alison Branch, managing director, Park Communications
“This budget was primarily about the extra money going to social care but in terms of printing the transactional relief on business rates may help some companies. The drop in corporation tax is helpful but the issue of National Insurance wouldn’t have really affected us. I would say we want to see a Budget that encourages people to feel positive; there is a lot of uncertainty around at the moment and people are holding back on spending.”
Bill McFedries, chief executive, CFH Docmail
“The Budget itself was relatively conservative but the broader challenge to the industry from our perspective remains the suppressive effect that Brexit uncertainty has on demand due to market turmoil, the potential impact on EU workers and the further disruption that may be caused via the potential of a second independence referendum in Scotland. It was however interesting to see the encouragement of robotics and AI, both elements that have the potential to see a major transformative shift in UK manufacturing.”