Businesses across the country are struggling financially, and tuned into Wednesday’s Autumn budget announcement with hopes for a more positive economic outlook in 2018.
Chancellor Philip Hammond acknowledged that UK business owners are currently under a great deal of pressure, and announced measures that could affect the economy over the coming year.
VAT threshold freeze
When potential plans to lower the VAT threshold were revealed recently, small business owners across the country were not impressed. Noting these concerns, Mr Hammond announced a freeze on the current VAT threshold of £85,000 for the next two years in the Autumn Budget.
This announcement was undoubtedly met with sighs of relief from independent business owners across the country, as many were at risk of being faced with added administrative and financial burdens.
Business rate changes
Following on from a lobbying campaign, business rate changes will be brought forward early. Business rates will soon be based on the consumer price index (CPI), rather than the retail price index, which is currently higher.
In addition, in the Autumn Budget Mr Hammond announced that the business rate revaluation period will now take place every three years, rather than the current five-year gap. This is intended to ease the pressure on independent businesses, with the shorter timescale reducing the increase in valuation costs.
However, in line with the CPI, business rates will rise by about 3 per cent, even though small businesses across the country had called for these rates to be frozen to help cash-strapped companies.
The Autumn Budget announcements also look set to help technology businesses by supporting innovation. The government promised to invest over £500 million in 5G mobile networks, fibre broadband and artificial intelligence.
Research and development companies will also receive investments of up to £2.3 billion, with an increase in their tax credits.
Costs are set to increase for businesses with employees, as an increase to the National Living Wage will take effect in April 2018. Wages will rise to £7.83 per hour, a 4.4 per cent rise for British workers.
Whilst a positive move for employees, this could leave businesses faced with the choice of cutting hours and jobs, or reducing costs in other areas. In the past, businesses have been forced to put growth plans on hold to be able to afford staffing costs.
What does this mean for independent businesses?
Industry leaders across the country have different opinions on whether these changes will be positive or negative for independent businesses.
Mike Cherry, National Chairman of the Federation of Small Businesses believes that the Autumn budget is business-friendly. He applauded the freeze to the VAT threshold, and thinks that the rates system will become fairer with three-yearly revaluations.
However, he believes that these announcements must be put into action with care, to avoid placing extra burdens on small companies.
Others have called this year’s Autumn Budget ‘boring’, with a decrease in the forecast for growth in the UK in 2018. It is feared that this will have a knock-on effect on small business confidence over the next twelve months.