Thursday, March 20, 2014

News: The Budget 2014

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The Government is "taking decisions that will support businesses to invest, export, and create jobs – laying the foundations for sustainable economic growth." Rothbiz editor, Tom Austen looks at what this week's Budget announcements might mean for businesses in Rotherham.

With manufacturing the cornerstone of a successful Rotherham economy, one of the first soundbites from chancellor George Osbourne's speech yesterday was that the government backs manufacturers across the entire country.

Key announcements attempting to boost business include doubling the annual investment allowance to £500,000 until the end of 2015 and manufacturers will be looking closely at the proposed sharp reductions in the cost of energy and the "£7bn package to cut energy bills for British manufacturers."

Karl Koehler, CEO of Tata Steel's European operations has been leading the call for the government to create a level playing field when it comes to energy policy. Energy costs remain a significant element of the costs of the Foundation Industries such as steelmaking with evidence that they are higher than those facing competitors operating in other countries.

The government accepts the need to compensate these industries and announced plans to extend the compensation for energy intensive industries for the cost of the Carbon Price Floor (CPF) (a carbon tax) and EU emissions trading system to 2019-20. It is also set to introduce a new compensation scheme, to help energy intensive industries with higher electricity costs resulting from the renewables obligation and small-scale feed in tariffs for renewable generation, from 2016-17.

Dr Craig Berry, of the Sheffield Political Economy Research Institute (SPERI), believes that the measures don't go far enough and called for bank lending and offering incentives for institutional investors to invest in manufacturing.

For businesses hoping to grow, the Budget confirmed that the government will raise the rate of the R&D tax credit payable to loss making small and medium sized companies from 11% to 14.5% from April 2014. Over the next five years this increase is expected to support £1.3 billion of investment in innovation.

The Seed Enterprise Investment Scheme (SEIS) is being made permanent in a bid to help more start-ups raise equity finance. SEIS offers a range of tax reliefs to individual investors who purchase new shares in those companies.

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Firms are also being encouraged to grow through exporting, with the doubling of the UK's Export Finance direct lending programme to £3 billion, coupled with low interest rates.

Long-haul flights are set to carry a lower rate of air duty and Robin Hood Airport Doncaster Sheffield will be interested in the extended Regional Air Connectivity Fund to include start-up aid for new routes from regional airports, worth £20m a year.

Businesses are being encouraged to grow by taking on new apprentices. The Apprenticeship Grants for Employers (AGE) scheme, is being providing with an extra £85m in both 2014-15 and 2015-16 for over 100,000 grants to employers.

For companies looking to invest, the announcement regarding Enterprise Zones will be welcomed, as it will be by regeneration teams in the Sheffield city region. The business rate discounts and Enhanced Capital Allowances will each be extended by three years as an incentive for new and expanding businesses to locate in Enterprise Zones. Areas such as Waverley, Templeborough and Dinnington will be able to offer business rate discounts for five years, with the offer extending until March 2018 and businesses will now have until March 2020 to make a qualifying investment, and can then write off up to £100m against corporation tax.

Even after a committee of MPs deemed the current business rates system not fit for purpose, property professionals will be disappointed that there was no announcements regarding any changes to the revaluation system or the way rates are calculated.

Compared to last year, retail was hardly mentioned. Changes to planning guidelines may have an impact with consultation on what development can be permitted under a much wider "retail" use class, excluding betting shops and payday loan shops. Bingo duty will be halved to 10% as the number of premises shrinks and the duty on fixed-odds betting terminals increased to 25%.

Other key announcements include the raising of the point at which people start paying income tax to £10,500 and raising the higher rate 40p income tax band from its current level of £41,450 to £41,865 from next month and then by a further 1 per cent to £42,285 from next April.

In response to the Chancellor's speech where he said that the Government's long-term economic plan has protected the economy through a period of uncertainty, provided the foundations for the recovery with the economy growing faster than predicted, John Healey, MP for Wentworth and Dearne and a former Treasury minister said that "the chancellor's "recovery" has barely reached Rotherham or Barnsley."

HM Treasury website

Images: HM Treasury

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