Jenny Tooth OBE, Chief Executive of UKBAA provides her overview of the chancellor’s Autumn Budget

In his budget, the last before Brexit, Chancellor Philip Hammond said that we are reaching adefining moment on our journey, and that this budget is “setting our course forwhere our country goes next”. He announced that theera of austerity is finally coming to an end,in the wake of thePM’searliercomments, followingeightstraight years of economic growth.

With the economicforecast showingcontinuinggrowth andpredicting a steady rise to1.6% by2023,withborrowing continuing tofall and employment growth set to be maintained, Chancellor was able to announce important new spending in advance of Brexit, including on key public services such as for the NHS and mental health services.

It was good to hear that the Chancellor remains committed to tacklingproductivity and increasing skills to exploit theopportunitiesoftechnologicalinnovation These measures included £1.6bn of new investment to support the further implementation of theIndustrial strategy, as well as £350mforfellowships to attract scientific talent; together with anincreased £38bn to the National productivity Fund. However there remains much to be done to address the productivity and skills challenge.

Notably, the Chancellor emphasized that enterprise was at the heart of his post Brexit strategy and announced a range of measures to stimulate business investment.

The retention of Entrepreneurs Relief was very welcome, whilst the minimum qualifying period will be extended to 2 years from 12 months. This will enable entrepreneurs to continue to reinvest in creating further small businesses to grow our economy.

R&D Tax relief will continue with no real change, but some tightening up of loopholes. This will include a cap on payable credit, limiting it to 3x payroll tax normally paid by the business.

The VAT threshold, which was also at risk of being lowered, affecting many small businesses and start-ups, will remain unchanged.

The new UK digital services tax on the big tech giants will not affect tech start-ups, or small companies operating online or e commerce sites, but will be targeted on specific platform models and aimed at established tech giants generating global revenues of at least £500m pa.

We were also pleased to learn of other measures to support small businesses such as:

  • IncreasedAnnual investment allowance for businessesfrom 200k to £1mfor thenext 2 years
  • Business rates to be cut by 30% fornext 2 years for all smallretailers with rateable value of 51k or less
  • Supporting apprenticeships, but reducing contribution of small companies to apprenticeship levy from 10% to 5%
  • Employment allowance will continue for small businesses with an employer NI bill under £100k a year from April 2020.
  • UK Export Fund will have increased lending facilities up to £2bn to support exports

In relation to measures supporting investors, it was good to hear that there are no further changes to the main EIS and SEIS tax reliefs

However, we are pleased that EIS funds for Knowledge Intensive Businesses are due to be launched from 2020, following the HMT consultation this year, enabling investors to increase their level of investment under EIS tax reliefs into innovating, knowledge rich businesses here in the UK. The Government has confirmed today that investors in these funds will access similar benefits to EIS. Fund managers must commit at least 80% of the Funds to KIP and commit 50% of the Fund into KIB in year one and the rest by the end of year 2. Investors can carry back their investment to the previous tax year before the fund closed. The KIB Funds will be set up as Approved funds through HMRC. The legislation will be agreed under the next Finance Bill 2019 and first fund launched in 2020.

The further £200m funding for the British Business Bank to back the development of VC funds is a vital measure to replace the loss of funding previously available under the European Investment Funds and which have supported up to 40% of VC funds across the UK- however only time will tell what the full impact of the loss of EIF funds will have on the growth of new VC funds.

The further £115m going to extend the number ofdigital catapults around the UK is a valuable addition to stimulate innovation, enabling new centres in North East, Northern Ireland and South east and to support a new medicines Discovery Catapult at AlderlyEdge in the North West.

We are supportive of the continuing commitment from the Government through this budget to supporting capacity building of the regions and including such measures as

  • New funding for10 new University Enterprise Zones
  • New funding for City deals for Tay Cities, Belfast and North Wales
  • £20m to further develop the railconnection between Oxford to Cambridgeand further build this triangle of innovation
  • Also, with strong commitment to wider infrastructure measures around the regions
  • Additional funding to support the devolved governments of Scotland, Wales and N. Ireland.

Finally, the Chancellor’s commitment to fulfill their manifesto pledge to raise the personal allowance from April 2019 to £12k and raise the higher rate threshold to£50k sends an encouraging message for further spending and investment

Overall, whilstretaining the potential for the Chancellor to deliver a new budget next Spring in the light of the Brexit deal or no deal, this was a generally positive and encouraging set of measures to support business and investment. However, there remains much to be done to ensure that we have the economy we need to enable us to successfully address the momentous changes as well as the opportunities that will emerge, as we move into a post-Brexit era.

Future Forward – Our Winter Investment Forum will be focusing on how investors can Brexit-proof their investment strategy to take advantage of newopportunitiesin theyear ahead. Visit our website to find out more information and purchase tickets to attend. www.futureforwardukbaa.org

By UKBAA30 Oct 2018