On Tuesday, Chancellor Philip Hammond struck an optimistic tone in the first Spring Statement to the House of Commons, saying that the government will champion individuals and businesses who create jobs and wealth, not demonise them.
Since the Autumn 2017 budget, the Chancellor says “substantial progress” has been made.
Over £1.5 billion has been allocated to departments and devolved administrations to prepare for Brexit in 2018-19. This is part of the £3 billion to be spent over two years, as announced at Autumn Budget 2017.
The Chancellor did however deliver some measures which will impact SMEs.
Growth and borrowing
The Chancellor announced that the economy continues to grow, continues to create jobs and continues to beat expectations. The economy has grown for five consecutive years, and exceeded expectations in 2017.
The Office for Budget Responsibility (OBR) has increased their forecast for growth in 2018 from 1.4 per cent to 1.5 per cent.
In what he termed “a turning point in the nation’s recovery,” the Chancellor announced that borrowing has fallen by three-quarters since 2010. In 2009-10 the UK borrowed £1 in every £4 that was spent. The OBR expect that we will borrow £1 in every £18 this year.
Confirming that the government recognises the challenges the new system presents to some small business looking to employ an apprentice, the Chancellor announced up to £80 million of funding will be made available to support small businesses in engaging apprentices.
Mr Hammond said: “We are committed as a Government to delivering three million apprenticeship starts by 2020 with the support of business through the apprenticeship levy.”
He also said that there would be £500m for T-levels, , the new qualifications designed in part by industry leaders, and £50m to help employers provide placements for T-level students.
Mr Hammond said there would be consultations on measures to tackle late payments, with Forum of Private Business (FPB) director Ian Cass saying: “Late payments are a major concern to many small and micro businesses. We have previously heard musings from government about dealing with the issue of late payments so we now await real action from the Chancellor.”
At the Autumn Budget 2017 it was announced that business rates revaluations will take place every three years, rather than every five years, following the next revaluation. This makes bills more accurately reflect the current rental value of properties. In a key note for SMEs with premises, the Chancellor announced in the Spring Budget 2018 that the next revaluation, currently due in 2022, will now be brought forward to 2021. This will mean businesses can benefit from the change to three-year revaluations earlier, with the first taking place in 2024.
In April 2018 the National Living Wage will rise to £7.83, worth £600 extra a year for a full-time worker. National Minimum Wage rates for under 25s and apprentices will also rise – the largest increase in youth rates in 10 years. Over 2 million people are expected to benefit from April’s increases, but this will impact business’ bottom line.
The tax-free personal allowance – the amount you earn before you start paying income tax – will rise to £11,850 from April 2018. This means that in 2018-19, a typical taxpayer will pay £1,075 less income tax than in 2010-11.
As announced in the Autumn Budget, fuel duty has been frozen for an eighth year in a row, saving a typical driver £160 annually.
Access to full-fibre broadband across the UK will be rolled out providing the fastest, most reliable broadband to more homes and businesses, Mr Hammond announced. In the first wave of funding, over £95 million has been allocated for full-fibre broadband for 13 areas across the UK.
Cash in the new economy
Digital technology has changed the way people shop, sell, and save. While cash will continue to be an important method of payment, more people are moving towards digital payments every year.
The government therefore used the Spring Statement to announce that it will undertaking a consultation on what more it can do to support people and businesses who use digital payments, ensure that those who need to are able to pay with cash, and prevent the use of cash to evade tax and launder money.
Whilst there were few concrete announcements for spending in the Spring Statement, Mr Hammond told the House of Commons, that a full spending review would be conducted in 2019. He also confirmed that the Autumn Budget 2018 will set an overall path for public spending for 2020 and beyond.
Beavis Morgan – Advisers to UK SMEs
In this current economic climate, it is more important than ever that business owners look at ways of improving profitability, working capital and cashflow, enabling their businesses to be more agile and flexible to respond positively to the changing economic landscape.
Our experts at Beavis Morgan are committed to helping ensure that your financial plans remain effective, even as your personal and business circumstances change, and we will work alongside you to help you achieve a rewarding and financially secure future for you and your family.
Contact your usual Beavis Morgan Partner for further information