Summer Budget a ‘Mixed Bag’ for South West Business

Commenting on the Summer Budget 2015, delivered on Wednesday by the Chancellor of the Exchequer George Osborne, Phil Smith, Managing Director of Business West, said:

“The first budget of a new government will be seen as a mixed bag for South West firms. In a speech that will be remembered in the history books as one of deficit reduction and a surprise compulsory Living Wage, there were both highs and lows. Before the budget we called for a focus on infrastructure, exports and the skills gap, and whilst our nation’s roads and apprentices got a cordial mention, international trade was almost utterly absent. Also missing was a mention of the West when it came to the devolution stakes, showing that we need to raise our game.

“Firstly, let’s look at the positives. Amongst a welcome focus on productivity we saw the Chancellor promise a new ‘Roads Fund’ for sustained investment to get Britain moving and tackle the poor state of our roads. Add to that a new apprenticeship levy to create an additional 3 million apprenticeships and you see a government firmly committed to improving skills levels..

“However, the lack of exporting initiatives was a major disappointment. A brief statement from the Chancellor that ‘we need to see investment at home matched by exports abroad’ wasn’t backed up by any detail of incentives to ensure we pull this off. Whilst this budget boosted business in other ways, such as the planned reduction in Corporation Tax and raising the Annual Investment Allowance, exporters will be wondering where the government support was today. With the UK battling a trade deficit and the government still falling well short of its target of £1 trillion worth of exports by 2020, it was a missed opportunity to kick start this drive.

“Far reaching devolution deals were announced for the cities of Leeds, Liverpool, Manchester and Sheffield and also for areas like Cornwall, but there was no mention of Bristol and the West of England. The Chancellor also announced that new powers could be available for counties and county towns – for Swindon, Wiltshire and Gloucestershire this will be welcome news. He also announced that county towns could set up Enterprise Zones, again opening up economic opportunities in these areas.

“The boldest measure from the Chancellor was saved till last, with his announcement that ‘Britain will be getting a pay rise’ with a new compulsory National Living Wage starting at £7.20 next year and a target for this to rise to £9 per hour by 2020, with the Low Pay Commission recommending future rises. Many businesses in the South West, including ourselves, already pay the living wage and are proud to pay their employees a good salary. They already know that retaining and recruiting talent means being fair on pay.  Nonetheless, it is important that the underlying health of the economy supports higher pay, otherwise there is a danger that it will impede future jobs creation.

“We are pleased that future pay rises will be based on an independent assessment of the state of the economy and the labour market and that initial analysis has shown that negative impact will be minimal. Safeguards are made for smaller firms, exempting them from national insurance payments if they employ four or less and pay the living wage. The move to exclude employees aged under 25 will also mean it doesn’t stop firms hiring young people, an important safeguard when youth unemployment is still high.”