Fiscal Phil Backs Entrepreneurs but Dodges Overdue Reforms

Philip Salter, Founder said:

“Hammond's Budget wasn't short of pro-business rhetoric, and the Budget document itself contains a number of announcements designed to support Britain's entrepreneurs. And we didn't get the predicted scrapping of Entrepreneurs' Relief which will be a boost to Britain’s ambitious business owners."

“However, it is by no means a perfect budget for entrepreneurs. While spending on R&D, management training and the boost to the Annual Investments Allowance are welcome, the 2% digital services tax on ‘tech giants’ and business rates relief represent missed opportunities for fundamental reform.”

On the increase in the Annual Investments Allowance:

Philip Salter, Founder said:

To help stimulate business investment, the government will increase the Annual Investment Allowance (AIA) to £1m for all qualifying investment in plant and machinery made from 1 January 2019 until 31 December 2020.

This will be a welcome announcement for business owners looking to invest, but by making it temporary the Government is failing to offer businesses the stable environment they need to properly plan for the future. Over recent years the AIA has yo-yoed from £100,000 down to £25,000, up to £200,000, up to £500,000, down to £200,000, and now temporarily up to £1m. This is the epitome of business uncertainty.

On the Chancellor’s plan to impose a 2% digital services tax on ‘tech giants’

Sam Dumitriu, Research Director said:

“The Chancellor may live to regret making the tax system even more complex. Corporation Tax needs updating, but any reform should focus on fixing the general rules, rather than papering over the cracks in the status quo. Singling out ‘tech giants’ may lead to UK SMEs paying more to advertise through social media and because the tax is levied on revenue not profits could unfairly disadvantage firms who are still raising money through equity finance.”

On additional business rates relief for small high-street retailers

Sam Dumitriu, Research Director said:

“The Chancellor has missed an opportunity to fix business rates. Instead of managing decline, Philip Hammond should have prioritised removing barriers to business growth and investment. Replacing business rates with a business land tax paid by commercial landowners would dramatically cut paperwork for most business owners and create a stronger incentive for businesses to invest in improving their properties.”

On increased funding for management training

Sam Dumitriu, Research Director said:

“There’s clear evidence from The Entrepreneurs Network’s Business Stay-Up campaign that improving the quality of management skills in the UK is key to raising productivity. Creating stronger peer-to-peer networks and boosting the Knowledge Transfer Partnership to allow best practices to diffuse is rightly a priority. But the Chancellor should go further and create additional tax reliefs for employee-funded training.

On boosts to R&D spending

Philip Salter, Founder said:

A significant amount (£1.6bn) has been allocated to increasing the Industrial Strategy Challenge Fund. Among other things, the Government is taking a punt on quantum technologies, nuclear fusion, artificial intelligence and distributed ledger technologies. It will also put another £115m into the Digital Catapult, which has centres in the North East, South East and Northern Ireland, and the Medicines Discovery Catapult in Cheshire.

While there are strong arguments that at current R&D investment levels increasing Government spending could leads to positive economic spillovers, we need to ensure that we get value for money. For example, just last year the Digital Catapults were heavily criticised in a BEIS commissioned review by Ernst & Young. The devil will be in the implementation.”