Chancellor earmarks funds for business expansion
Speaking in his last Autumn Statement before the General Election next year, Chancellor George Osborne announced a number of changes that will benefit small and medium-sized enterprises (SMEs) and businesses in general throughout the UK.
The 2014 Autumn Statement focused on maintaining economic recovery, reducing the deficit, looking to build a “Northern powerhouse” and showing support for the country’s future infrastructure and for SMEs.
The Government is pinning a lot of its hopes for sound financial recovery on the SME sector and, as widely expected, the Chancellor announced a one-year extension to the Bank of England’s Funding for Lending Scheme (FLS) which supports asset and other finance provided by qualifying banks.
Focus on SMEs
The extension will focus the scheme further on SMEs as, following the earlier removal of household lending, this will taper the scheme still further to remove lending to large corporations.
Asset finance providers will be able to earn further borrowing allowances by net lending to SMEs in 2015, with SME-lending strongly incentivised by the maintenance of the current ratio that allows participants to draw £5 in the scheme for every £1 of net lending to SMEs.
The Chancellor also announced an additional £400M for the British Business Bank’s (BBB) venture capital programme, and £500M of new lending guarantees for its Enterprise Finance Guarantee scheme.
This initiative was well received by the Finance and Leasing Association (FLA) which has been working closely with the BBB since it was established. One result of this co-operation is the recent launch of the ENABLE programme which aims to inject further finance into the SME market.
Strong economic outlook
The Government will be hoping for strong growth from SMEs because, as was widely reported before the Autumn Statement, lower than expected wage and productivity growth has led to a fall in tax receipts.
This contributed to a higher level of net public sector debt over the forecast period, now expected to peak at 81.1% of GDP in 2015/16 before falling in subsequent years.
However, the Autumn Statement revealed that other economic indicators were pointing in the right direction. For example, the GDP growth forecast for 2015 has now been revised up from 2.3% to 2.4% while growth in household consumption has been revised up from 1.8% to 2.8%.
At the same time, the rate of unemployment for 2015 has been revised down from 6.5% to 5.4%, and inflation, as measured by the Consumer Price Index, is expected to fall from 2.0% to 1.2% next year.
Tax changes to boost growth
The Chancellor reiterated several announcements he made in his Budget Statement in March, including a cut of 1% in the main rate of Corporation Tax to 20% from April 2015.
He also announced that the Annual Investment Allowance had been doubled to £500,000 until 31 December 2015 for all qualifying investments in plant and machinery, including asset finance agreements.
The Chancellor also confirmed that the freeze in fuel duty will remain in place – as expected by many – despite falling oil prices.
This follows his confirmation in the 2013 Autumn Statement that fuel duty would be frozen for the rest of this Parliament. However, Mr Osborne stopped short of offering a further cut.
The Government added that action on fuel duty since 2011 will save a typical motorist £675 by the end of 2015-16.
The Department for Transport announced that it will begin work early next year on trialling a new fuel comparison sign at five service stations on the M5 between Bristol and Exeter to help promote competition and lower fuel prices.
Road investment strategy
The Autumn Statement confirmed that the Government is committing £15bn between 2015-16 and 2020-21 to continue the transformation of the Strategic Road Network.
Announced by Transport Secretary Patrick McLoughlin and Chief Secretary to the Treasury Danny Alexander, the Government is investing in more than 100 new road schemes over this Parliament and next, including 84 newly announced schemes.
Ultra low emission vehicles
An additional £10M will be made available between 2017-18 and 2019-20 to increase the number of ultra-low emission vehicles – including electric, plug-in hybrid and hydrogen fuel cells – operating in London, ahead of plans to introduce an Ultra-Low Emission Zone by 2025.
Three new funding pots, totalling £85M, will support the roll-out of ultra-low emission taxis and buses, while up to £50m will be invested to support innovation in manufacturing ultra-low emission vehicles in the UK.
At the same time, £15M has been set aside to install rapid charging points at 20-mile intervals along the UK’s major routes between 2015-16 and 2020-21, and the majority conversion of the Traffic Officer Fleet to Ultra-Low Emission Vehicles.
In addition, the Government will provide up to £4m to extend the Clean Vehicle Technology fund in 2014-15, which funds road vehicle modification by local authorities in order to reduce air pollution.
An additional £9 million is being provided by the government to increase the prize fund for driverless car testing, with trials planned in Bristol, London, Milton Keynes and Coventry from next year.