Autumn Statement 2012: What’s in it for Small Businesses?
The Chancellor George Osborne has delivered his Autumn Statement for 2012 and austerity measures will remain in place until 2018.
He addressed the House of Commons sating that the UK economy is healing, that progress is being made but using forecasts from the Office of Budgetary Responsibility (OBR) he downgraded growth predictions.
Growth for the year 2012 was predicted to be a weak 0.8% in the Budget but has been revised to a show the economy will actually contract this year by 0.1%
In 2013 economic growth is expected to be 1.2%, in 2014 2%, 2015 2.3%, 2016 2.7% and in 2017 2.8%
The problem, according to the Chancellor, is not the austerity measures designed to put a lid on public spending but the figures regarding trade were over optimistic.
Fuel Duty Cut & Road Improvements
One good piece of good news in the Autumn statement was that the proposed 3p fuel duty hike in January has been cancelled.
Geoff Dunning, the Chief Executive of the Road Haulage Association (RHA), welcomed the scrapping of the fuel duty rise after his organisation campaigned hard to stop HM Treasury pushing up the cost of motoring for his members. He said of the Chancellor’s move:
“Today’s Autumn Statement has brought us good news. It is encouraging to know that the Road Haulage Association has a voice that is listened to.”
“The RHA lobbied HM Treasury hard for much improved allowances, to help stimulate growth and to protect SME’s long-term balance sheet strength. Our position was broadly shared by organisations representing SMEs in the manufacturing and plant sectors, with which we worked.”
Dunning also greeted the announcement that £1 billion extra will be invested in road improvement schemes including upgrading sections of the A1 between London and Newcastle to motorway standard, linking the A5 to the M1, improving parts of the M25 and making single carriageway parts of the A30 in Cornwall dual carriageways.
Annual Investment Allowances
Only in April the Chancellor slashed the Annual Investment Allowance (AIA) from £100,000 to £25,000. But today George Osborne reversed that decision and increased the AIA tenfold from January 2013.
For two years, AIA will be £250,000 giving SMEs more breathing room to invest in plant & machinery with 100% tax relief up to that amount.
Cutting Corporation Tax
Back in the April budget George Osborne cut Corporation Tax from 26% to 24% and had planned to reduce the corporate tax rate to 22% by April 2014. He has now cut a further percentage point from Corporation Tax and it is expected to fall to 21% by 2014. Osborne added:
“This is the lowest rate of any major western economy. It is an advert for our country that says: come here; invest here; create jobs here; Britain is open for business.”
In recent weeks big corporations like Amazon, Google and Starbucks have all been criticised for “immorally minimising their tax obligations”, so the move will see the country’s tax rate match that of more competitive regimes such as Luxembourg where big internationals base their European headquarters and use transfer pricing to minimise their UK tax bills.
The Chancellor declared that banks would not benefit from the reduced Corporation Tax rate but the bank levy rate would rise to 0.130% from next year.
Despite the move to a more competitive tax rate on business profits the Irish Republic remains much lower at 12%.
LEPs and RGFs
In other areas the Autumn Statement announced more money for Local Enterprise Partnerships (LEPs) for "capacity building" so that local infrastructure can be boosted. LEPs are also gaining greater devolved powers to make local decisions.
Regional Growth Funds (RGFs) will also see more cash with the Chancellor announcing that RGFs had been responsible for the creation of more than half a million jobs.
The Business Bank
The business bank was also mentioned in the Chancellor’s address with promises that the institution will act to bring together a "myriad of schemes" that currently exist in the UK.
George Osborne acknowledged that many of the schemes introduced by the Government to try and stimulate lending to the small business sector were still unknown to many of the UK’s SMEs and that the new business bank would address these concerns, making business finance more available.