Phillip Hammond’s inaugural Autumn Statement, to be delivered this Wednesday, will be the Chancellor’s first opportunity to set out his vision for the economy post-Brexit. Amid rumours of a snap general election early in 2017, the challenge facing the Chancellor is how to balance ongoing management of the public finances with a few targeted pre-election incentives. With anti-establishment sentiment the global political theme of 2016, he will no doubt aim to position the Conservatives as a party that understands the pressures facing the average working man and woman. To this end, four months into his post, Mr Hammond has already sought to distance himself from the austerity-centric approach adopted by his predecessor. It is therefore expected that he will relax rules on Government borrowing, allowing for Keynesian-style investment in infrastructure as an economic stimulus.
However, despite the Chancellor’s attempts to differentiate himself from George Osborne, recent figures published by the IFS suggest that the Government will overshoot its borrowing target for the current fiscal year by more than £5 bn (£60.5 bn vs. a forecast of £55.5 bn) and therefore he will likely have to continue to implement austerity measures into the next parliament. Recognising the potential short-term economic impact of Brexit, the IFS has called for temporary cuts to VAT and a relaxation of stamp duty, but notes that targeted tax rises and spending cuts will likely be required if the Government is to balance the books. Under the “five year tax lock” announced by then PM David Cameron in 2015, the Government is precluded from increasing income tax, national insurance and VAT until 2020; similarly, it is expected that Mrs May will today confirm the Government’s commitment to a low corporation tax regime. With the Chancellor’s hands pretty tightly bound, it is unlikely that there will be any major tax-related surprises in his speech.
From a Northern Irish perspective, what do we hope to see?
- An increase in the annual investment allowance would be welcome boost to many small business. From 2008, the AIA has varied between £25,000 per annum and £500,000 and currently stands at £200,000. Restoration of the previous £500,000 limit would help create an incentive for capital investment and ultimately job creation;
- While there are currently an encouraging number of cranes over the Belfast skyline, our construction sector is still recovering from the recession and we need to have clarity around the availability of funding for major infrastructure projects such as the York Street Interchange;
- A clear commitment to retaining entrepreneurs’ relief at its current level of 10% on the first £10m of lifetime gains. Each year rumours abound that ER is in the firing line and business owners wait nervously to see whether their exit plans are likely to become significantly less appealing. Most businesses in NI are of a size that this relief provides a significant enhancement to shareholder returns and acts as an incentive for people to invest in and grow their businesses.
Whatever the outcome of the Autumn Statement, we remain focused on helping local and non-local businesses implement their growth plans. Whether you are considering raising finance for a major project, are thinking about an acquisition, or want to start planning towards selling your business, we would be delighted to hear from you.