Chancellor needs to reconnect with small business
In our preview of the Autumn Statement, Moore and Smalley tax partner Rachel Marsdin calls on the chancellor to do something to get SMEs investing.
George Osborne’s tenure as chancellor was marked by bold policies to attract big business to invest in the UK, such as the significant reduction in the headline rate of corporation tax.
Of course, that has to be applauded and will need to continue in this period of Brexit uncertainty where the risk of major employers leaving Britain is evident.
However, the new chancellor Philip Hammond needs to do something to encourage small businesses too. Owner managed businesses were somewhat neglected during the Osborne years in my opinion.
Encouraging the grafters
We need to encourage the grafters and wealth creators in our SME community to have the confidence to make their own moves, open up new jobs, buy new plant and machinery, and invest in new premises.
It’s perhaps not going to be easy for the chancellor to inspire that confidence when so much of our economic future is still up in the air and the public finances remain stretched, but he has to do something.
If I were him, I would start with increasing the annual investment allowance for SMEs, which has shrunk back down to £200,000 after being as high as £500,000 in recent years. This will increase the tax relief available on big capital investments and give those businesses some certainty. It would be good to see investment in plant and machinery removed from business rate calculations altogether, or perhaps some enhanced capital allowances for SME investment more generally.
A cautious approach
To be fair, he’s got the almost impossible job of trying to inspire business confidence when nobody yet knows what Brexit is going to look like and when there’s uncertainty over exchange rates, interest rates and inflation.
Though we’ve said we’re leaving the EU, we’re still a member for the time being, which means Mr Hammond can’t announce measures that would contravene the rules on state-aid.
Mr Hammond is known to be a cautious politician, so I don’t expect him to be like Osborne who seemed to pull multiple rabbits out of hats during his budget and autumn statement announcements (some of which came back to haunt him), but he has to be bold.
Taking the long view
If there is a prospect of a snap election next year, like some political commentators are suggesting, then that may encourage him to offer one or two fireworks in his autumn statement as a sweetener to the electorate.
However, I believe he has to take a long-term view and not be too clever if he wants to get SMEs and owner-managed businesses back on side.
We need bigger and better ideas to get these businesses investing for the long-term. Give us security and confidence to get growing.