The deferral of the increase in the small companies’ rate of corporation tax (the BCC called for a reversal in the Small Companies’ Rate);
The temporary increase in the threshold at which an empty property becomes liable for business rates (the BCC called for the reintroduction of empty properties relief);
A temporary reduction in the VAT rate to 15 per cent with effect from 1 December to 31 December 2009;The employee, employer and self-employed rates of National Insurance Contributions will increase by 0.5 per cent from April 2011; andThe postponement of the two pence per litre fuel duty increase will go ahead on 1 December 2008. The government announced the following measures which will directly affect UK business:
A new HMRC Business Payment Support Service has been set up to allow businesses in temporary financial difficulty to pay their HMRC tax bills on a timetable.A bigger tax relief for businesses now making losses has been temporarily put in place, allowing additional carry-back of up to £50,000 of losses to be set against taxable profits from the last three years.
In early 2009, the government, with Regional Development Agencies’ (RDAs) support, will launch the Small Business Finance Scheme, a new temporary guarantee scheme to enable up to £1 billion of new Government supported lending by banks (the BCC had called for a temporary extension to the Small Firms Loan Guarantee scheme).
In early November 2008, Advantage West Midlands launched a transition loan fund for viable, SMEs facing financial difficulties. Other RDAs will launch similar loan funds, now totaling £25 million, to help businesses over the next six months.
The Government will make available a capital fund of £50 million providing equity or quasi-equity to SMEs who are overleveraged.
Following negotiations between UK banks and the EIB, £1 billion of EIB funds will be available to SMEs in the UK by the end of 2008.
The Export Credits Guarantee Department, in conjunction with the banks, will introduce a temporary guarantee scheme to support a £1 billion facility providing smaller exporters with better access to short-term working capital. Beneficiaries will include several occupiers of ports who have been affected by recent rating reviews.
The Government will legislate to give businesses more time to pay certain backdated business rates bills issued before 31 March 2010. Businesses facing such bills will be able to pay their liability for previous years in equal interest-free instalments over 8 years, rather than immediately.
Measures to enhance SMEs’ access to government contracts, including a new online portal for all Government contracts over £20,000.The government is bringing forward public sector capital spending which they will say will benefit businesses (the BCC had called for public spending projects to be brought forward).
The UK’s Economic Position
-1.75 to -0.75
1.5 to 2
|Debt (% of GDP)|
The BCC’s Position Commenting, David Frost, Director-General of the BCC said:
“If I were marking the Chancellor’s report card, I’d say ‘could do better’. There are a few good announcements in there like deferment of the Small Business Rate of corporation tax, allowing
“The proposal to increase National Insurance Contributions is wrong. At the very time when the economy should be coming out of the recession, businesses will face an extra tax on employing people.
“This is not the way to reduce unemployment. “Businesses will wonder why he didn’t just restore empty property rate relief in full, instead of only raising the threshold for a year. Restoring relief in full would have provided the vital stimulus to the hard-hit construction industry.
“Fuel duty increases should have been scrapped. What the Chancellor has announced today means that we could see two increases in fuel duty in a year.
“In the end this was billed as a fiscal stimulus to inject confidence into the economy. Time will tell if this has been achieved, but I can’t help feeling that the Government has missed an opportunity.”
Commenting on the the main macro-economic points in today's PBR speech, David Kern, Chief Economist at the BCC, said:
"The Chancellor's PBR goes a long way towards acknowledging that we are facing a serious recession. But, we believe his forecasts are still too optimistic. Growth next year is likely to be worse than predicted and it is doubtful that positive quarterly GDP growth would start as early as mid-2009.
"If the Chancellor's growth forecasts prove to be too optimistic, there is a real risk that even the huge deficit figures announced today are still not sufficiently high.
“Mr Darling has outlined detailed plans for restoring the public finances to a sustainable state, but it is not yet clear he has done enough to reassure the markets.
"Given the dire state of the economy, the £20bn stimulus is welcome. Many individual measures in the PBR are helpful but business will be disappointed that a VAT cut is the main feature of the package. The direct benefits of a VAT cut are very uncertain. There could be significant leakages into savings and imports.
"Any boost to personal consumption resulting from lower VAT will be helpful. However, a VAT cut only provides a remote boost to business cashflow and profits. It does not provide sufficient encouragement for business to limit unemployment increases and to continue investing.
"In this recession, rising unemployment and plunging investment are serious threats. The decision to defer the increase in small companies corporation tax is useful, but it is a pity the increase was not cancelled altogether. It is also highly regrettable that the Chancellor has not lowered the NIC rate, and we are concerned over the decision that from April 2011 all NIC rates are to be increased for both employers and employees."