The world of business gives its views on the Living Wage, Annual Investment Allowance and more
There was a lot to take onboard in George Osborne’s Summer Budget. Early spoilers about Sunday opening hours now seem absurdly trivial as Living Wage and corporate tax stole the show.
But what did the leading lights of business make of it all? Reaction was largely positive, as exemplified by Howard Sears, MD of VC firm Astuta. He enthused that this was a “frankly barnstorming budget”.
“Confidence among UK businesses is already strong but these latest reductions in corporation tax will supercharge it,” he added.
“As well as sending out an important message to UK business owners, the reduction in corporation tax will give them a strong competitive edge and the all-important breathing space to grow.”
We’ve done the legwork and rounded up all of the reactions in one place so you don’t have to.
Undoubtedly the biggest announcement Osborne made was the introduction of a national Living Wage that will climb to £9p/h by 2020. It will apply for all staff aged 25 and over.
While great news for the lowest paid members of the workforce, there were immediately concerns that it would put pressure on the smallest businesses who may struggle to pay all staff the higher salary from day one.
One person who has these concerns in spades is Philip Salter, director of The Entrepreneurs Network. He called the new Living Wage “a bad policy for entrepreneurs and the UK”.
“Academic studies have found that minimum wages reduce employment and slow jobs growth, and the Low Pay Commission was set up with these problems in mind,” he warned.
“The government should leave the decision of what level to set any wage floors in the hands of the experts at the Low Pay Commission, so that business owners aren’t forced to sack employees if payroll costs go up too much.”
Salter suggested a better policy would have been to cut NI contributions.
“If the chancellor wanted to help the low paid, he should have slashed Employers’ National Insurance, 70% of which is paid for by the employees,” he said.
>See also: Living Wage will hit profits and jobs
But others were more enthusiastic. Perhaps understandably Mike Kelly, head of Living Wage at KPMG, welcomed the news.
“The new compulsory National Living Wage is very welcome news for the more than two million of the working poor who will get a significant pay rise. Enshrining the Living Wage in regulation is a brave move and by 2020 the National Living Wage will reach 60 per cent of median earnings,” he said.
“For employers who are concerned at whether the increased payroll costs will be fully offset by reduced corporation tax and national insurance contributions, our experience has seen lower absence, increased productivity and a more engaged workforce.”
Annual Investment Allowance
One area that small businesses were most anxious to hear about was the future of the Annual Investment Allowance.
It has been made permanent but at £200,000; lower than some wanted. But Federation of Small Business (FSB) national chairman John Allan believes SMEs will be happy with the solution as it stands.
“The Annual Investment Allowance (AIA) has been an important incentive for people investing in the future growth and productivity of our small businesses,” he said.
“We have long called for the Allowance to be set permanently and at a reasonable level. Small firms will therefore welcome the move by the Chancellor to do just that by setting the Allowance permanently at £200,000.”
Others were decidedly less pleased with the announcement, but overall the fact there is a permanent AIA will be a welcome boost for growing businesses.
Reduced corporation tax
The announcement that corporation tax will be reduced further, first to 19% in 2017 and to 18% in 2020, was predictably met with universal acclaim among business owners.
CBI Director-general John Cridland called the announcement “a welcome surprise” for business.
>Related: Summer Budget 2015 – full transcript
“The chancellor has provided clarity on the future direction of corporation tax rates for the remainder of this parliament,” he said.
“Combined with a welcome commitment to publish a business tax roadmap in April 2016, which was called for by the CBI, this must provide businesses of all sizes with the certainty they need to invest.”
Devolution and the Northern Powerhouse
Osborne, as he often does, paid a fair amount of lip service to the Northern Powerhouse and the government’s commitment to it.
Lawrence Jones MBE, founder and CEO of Manchester tech firm UKFast, declared himself disappointed that the Budget focused on devolution over investment.
“I think handing some central government powers to regional Mayors is a good thing in theory,” he said.
“Manchester certainly knows how best to spend money locally. But would devolution work in other cities? I don’t know.
“We have enterprising people like Sir Richard Leese and Sir Howard Bernstein running our city but commercially-savvy politicians like them are one in a million. This certainly wasn’t a Budget about investment.”
Craig Donnelly, director at Boxes2Move, was equally sceptical. He singled out lack of housing as the main blocker to a successful Northern Powerhouse.
>See also: Summer Budget 2015 – as it happened
“Much publicity is being given to the moves taken in devolving power to Northern cities, however there was no mention of how the government plans to provide for those who may consider moving there,” he said.
“The aim to build up other parts of Britain to balance with London can really only be addressed with the provision of new homes.”
Technology (where was it?)
One word that was conspicuous through its absence in Osborne’s speech was technology. In March there was talk of unicorns and the internet of things, but all that seems to have fallen by the wayside in the new parliament.
Laundrapp founder Ed Relf was particularly disappointed by this omission, criticising the Budget for containing “tumbleweed for technology start-ups”.
If the UK is to take further strides towards shaping the ‘sharing economy’ in Europe, entrepreneurs must receive further support from the government,” he said.
“Projects to support innovation across Britain, not just in London, are essential. There also should have been a pledge on the continuing rollout of mobile 4G connectivity, which still only covers approximately 55% of the UK.
“British entrepreneurs have “big ambitions”, it remains to be seen whether this ‘big Budget” will pave the way for further innovation.”