Hit and miss Budget for Northern Ireland’s businesses
Cash boost welcomed, but ni misses out on some initiatives
BUSINESS leaders here have welcomed Chancellor Philip Hammond’s Autumn Budget, but expressed disappointment that Northern Ireland will miss out on some of the key initiatives.
Among the business-friendly measures NI is likely to lose out on is the move to cut rates bills by one-third for retail properties with a rateable value below £51,000 as rates is a devolved matter.
Glyn Roberts of Retail NI yesterday called for the small retailer scheme to be extended here.
Also expressing his disappointment, Aodhan Connolly of the Northern Ireland Retail Consortium added: “Due to no Assembly, no Executive and no ministers, we in Northern Ireland are stuck with an antiquated system where retailers are 12% of the economy but pay 24% of business rates. “This is simply not tenable.” Business representatives did welcome most of the headline figures in yesterday’s Budget, including a £350m City Deal for Belfast and eastern councils, as well as a £2m relief fund for Belfast city centre to help it cope with the impact of the Primark fire.
In total, the Chancellor said his measures would add £320m to the Northern Ireland block grant through to 2020-21.
Key announcements for business included an increase in the national living wage from £7.83 an hour to £8.21, confirmation that corporation tax, already cut to 19%, will fall to 17% in 2020 and a £240m allocation, to halve the co-investment rate for apprenticeship training to 5%.
Fuel duty will also remain frozen for the ninth successive year.
Tina Mckenzie, who chairs the Federation of Small Businesses in NI said: “There were a number of very welcome pro-business initiatives, such as on the Additional Investment Allowance, which will stimulate capital spending in equipment as businesses respond to the tightening labour market post-brexit.”
She added the Chancellor ( inset) was correct to resist any moves to lower the threshold at which point businesses begin to pay VAT, something she said would have extended a significant administrative burden on small companies in Northern Ireland.
“Overall, the announced investments, coupled with changes to personal allowances and higher rate tax thresholds will help relieve pressures on employees and put more money in their pockets, which will be very much welcomed by our hard-pressed retailers.” However, there was no movement in the Budget to cut VAT on tourism here or an immediate end to short-haul air passenger duty (APD). Instead the Chancellor pledged to set up an APD working group. Tax commentator at PWC NI Janette Jones said while the increase in National Living Wage represents a £690 annual pay rise for a full-time worker, she said it could pose challenges for some small employers. “Given the size of Northern Ireland’s hospitality sector, meeting the goal of a 38p per hour increase will be a struggle for many local employers,” she said. Ann Mcgregor, chief executive of the NI Chamber, also welcomed the increase in the Annual Investment Allowance, stating that it could provide a strong incentive for firms to invest during the Brexit process. She also said the additional £215m for the Uk-wide digital catapult, as well as the new e-passport measures, will be welcomed by businesses here.
The new measure will allow business and leisure travellers from the US, Canada, New Zealand, Australia and Japan to use the e-passport gates at UK ports.
Meanwhile, there was some scepticism on the scope of the new Digital Services Tax, which will introduce a new 2% tax on the revenues of some tech companies from April 2020.
The Chancellor stressed it would only target the so-called tech giants and not small startups.
He said it would apply to search engines, social media platforms and online marketplaces and only apply to groups that generate global revenues of more than £500m per year.
Janette Jones from PWC said: “This was widely trailed as a step towards levelling the playing field between online retailers and the high street.
“But the Chancellor has opted for a narrow 2% rate, an implementation date of 2020 and aimed it at the tech giants and not the online retailers.
“It will do little to address the woes of bricks and mortar retailers and could even be perceived as an anti-american measure and that could come back to bite us as the UK looks to move to trade talks after the Brexit deadline,” she said. Yesterday’s Budget also revealed that the Office for Budget Responsibility (OBR) has raised its economic growth forecast for 2019 to 1.6%, an increase of 0.3% from the forecast he made in the spring statement.
But Stephen Kelly of Manufacturing NI claimed that the figure was still a real concern.
“This is sluggish and at a time where there is major disruption to the UK’S economic model,” he said.
He said the £1.6bn announced for the UK’S new Industrial Strategy is important, but added: “It’s yet to be seen how this can reach the regions including Northern Ireland.”
Ulster Bank’s chief economist Richard Ramsey surmised that: “In many ways today’s budget could be summarised as spend now, tax later.”
He added: “The UK economy is still expected to experience sluggish economic growth over the next few years.
“Indeed, 2019 has been revised up from 1.3% back in March to 1.6% and the forecasts up until 2023 fail to accelerate above this level.
“From a historical perspective this represents a pedestrian rate of growth and Northern Ireland is likely to struggle to see growth above 1% over this same period.
“This economic context is also predicated on a deal with the EU, requiring new emergency tax and spending measures in the eventuality of a no-deal Brexit.”
Reflecting on the Chancellor’s refrain yesterday that “austerity is coming to an end”, Peter Legge from business advisory firm Grant Thornton said: “With the caveat that an emergency budget could follow in the spring, many are asking if it is only ending for five months.
“That will be dependent on securing a Brexit withdrawal agreement but with an additional £500m announced to fund planning, the Chancellor has given himself plenty of scope.”