Five Autumn Statement predictions for British businesses
6 min read
21 November 2016
On the eve of chancellor Phillip Hammond’s first budget address to members of parliament, Real Business provides some Autumn Statement predictions.
Alongside the official Budget speech, traditionally made in March, the government’s Autumn Statement is one of the key times in the year when entrepreneurs and business owners can get an update on past policy performance and future legislation plans. As such, it’s fair to say Autumn Statement predictions are pretty big business right now.
The Autumn Statement started life as the Spending Round in 1982, before being branded the Pre-Budget Report by Labour. It’s transformation was complete when former chancellor George Osborne gave it its current name in 2010.
As with any change in personnel, there comes a certain amount of predicting and forecasting as to what will be on offer. It’ll be the first time Hammond and Theresa May’s government make such an economic statement and much of the Business world will be paying close attention.
In the aftermath of the Brexit vote to leave the European Union and Donald Trump’s surprising run to the White House and US presidency, it’s hoped the Autumn Statement will provide a modicum of stability.
Real Business has done its best to provide five Autumn Statement predictions relation to where we think changes will happen.
One of the hallmarks of the Osborne chancellorship was a steady reduction in the headline rate of corporation tax. When the Conservatives came into power in 2010, corporation tax stood at 28 per cent. Over the next six years Osborne chipped away at it so that it currently sits at 20 per cent, with planned reductions to 19 per cent in April 2017 and 17 per cent for April 2010.
However, it’s widely predicted that Hammond will not honour a pledge made by Osborne to cut it even further – to 15 per cent. Instead, the new chancellor will affirm plans for it to be 17 per cent by 2020.
It will still leave the UK with one of the most attractive business tax systems in the world, but comes at a time when president-elect Trump unveiled plans to cut the US rate from 36 per cent to 15 per cent.
In an effort to attract and retain the best staff, businesses in both Britain and the rest of the world have turned to perks and incentives such as subsidised gym memberships and company mobile phones.
However, realising that these kind of schemes mean less for the Treasury in the form of income tax and National Insurance, our Autumn Statement predictions suggest the government might be about to pull the plug on such benefits.
Autumn Statement predictions are of the belief that rather than getting them through salary sacrifice means, it could soon be a case that staff are required to pay a fee for a phone contract or health check. However, benefits such as pension contributions and childcare benefits are expected to be exempt from any possible changes.
In one of her first statements after taking over the reigns as prime minister from David Cameron, May revealed she wanted to make sure there was better representation from workers on the boards of Britain’s biggest companies.
Alongside attacking inflated FTSE 100 boardroom pay, the new prime minister indicated CEOs, chairman and CFOs would soon have to listen to the grievances of staff and consumers – and then do something about it.
However, it now appears May’s plans are unworkable and likely to put her in the firing line of big businesses which are deciding on whether the future lies in the UK or EU. In a speech made at a Confederation of British Industry (CBI) conference, the prime minister said companies would not be forced to directly appoint staff or trade union representatives to boards.
Like many former government’s, May’s is one that is committed to maintaining Britain’s position as one of the front runners when it comes to science and innovation.
In an Autumn Statement prediction you can firmly nail to the mast, the government will commit to “substantial real terms increases in government investment in R&D”.
It will pump an extra £2bn a year by the end of this parliament, with a new Industrial Strategy Challenge Fund directing some to scientific research and development and particular technological development.
Any business owners hoping for a return to VAT of 17.5 per cent to boost sales will likely have to wait a little while longer.
Instead, he’s more likely to announce plans to increase the tax-free personal allowance to £12,500, from £11,000, and raise the higher-rate threshold to £50,000, from £43,000.
Autumn Statement predictions indicate the Budget in 2017 will feature a trimming to VAT, as a way of dealing with a weakening pound and growing inflation.