Amid protracted European negotiations, or lack of, it seemed like a Brexit black hole. When chancellor Philip Hammond delivered his first and ‘last’ autumn statement, he said borrowing would be £122bn more than planned. Indeed, as the Office for Budgetary Responsibility has estimated Brexit will cost £58bn over the next five years, in a best-case outlook, it looks like a chilly winter indeed.
But, though these forecasts are mind-boggling, they do not necessarily reflect on the road ahead for the real economy. Small businesses operate at a level well below the strata of macro-economic policy. While the storms rage, here on planet Earth, we will be largely unaffected by the whole process.
Better than that, to sweeten the Brexit pill, one which he did not want to swallow, chancellor Hammond tabled several autumn initiatives that are all good news for entrepreneurs. With the UK arguably being one of the most entrepreneurial nations in the world, these incentives will certainly set the stage for SMEs to prosper.
By earmarking £400m for the British Business Bank, expected to be more than matched by private investment, he is aiming to unlock £1bn in investments in innovative firms planning to scale up.
This could make a real difference. “Scale-up” has become the watch word for the cluster of UK startups that launched post-crash and which are now needing to get to the next level. Hammond is investing to address a problem spotlighted before Brexit.
Two years ago, Sherry Coutu’s report on the topic for then-chancellor Osborne showed how the number of businesses employing 250 or more employees was falling. Closing the “scale-up gap” could add 238,000 extra jobs and £38bn in turnover within three years, according to an RBS analysis.
Caveats and consequences
So don’t frown about the Brexit kerfuffle. Prepare to embrace finance available to help you take the next step.
The upbeat outlook doesn’t stop there. Hammond has also committed the government to investigate levy tax credits for above-the-line R&D investments. That will make it even more attractive for small and medium businesses to commit to staying ahead of the competition - a dynamic that is essential for our economy to thrive.
Brexit has fired many concerns about businesses’ export market. While redrawing our international trading relationships will be no mean feat, the chancellor is allowing UK Export Finance, the organisation which protects traders’ overseas dealings with insurance and guarantees to their banks, to double its risk appetite to £5bn.
For businesses that seek out the opportunity, this is going to mean a stronger safety net underneath efforts to do trade in outside markets, including with Europe.
Companies grumbling about poor broadband should rejoice at a £1bn range of measures designed to finally connect more of the country up with fiber lines and future 5G mobile spectrum.
There is also £100m each promised to Innovate UK, the organisation supporting innovative companies, and to incentivise universities to transfer technology research in to business applications, plus £500,000 set aside to support specialist fin-tech companies.
I didn’t go into 2016 optimistic about Brexit. In fact, I voted to remain a member of the European Union. We should all be the first ones to admit that the UK will not get everything it wants, especially in respect to control on immigration or free trade. I think this is a caveat we all need (and are) prepared to make.
Consequences of the decision need to be faced and I believe the ultimate compromise will be a financial one. That is, a significant financial contribution -- one which will be ongoing -- will need to be made in order to still reap the benefits of the EU.
Surviving and thriving
But I have since become convinced that UK businesses really can survive and thrive in an independent UK. Let’s look at one of the worst-case scenarios, that if European states decide to implement harsh taxes on imports of their goods, we can easily look abroad - perhaps to the US.
World Bank have the UK ranked as seventeenth for one of the easiest countries to start a business, and we also have one of the lower tax brackets for corporations. We are a nation built on driving forth through innovation, whether that’s by way of silicon roundabout or overall financial aptitude when things get tough.
Through the right combination of incentives and a sturdy mindset, businesses should be able to thrive even with these challenging circumstances. As an entrepreneurial nation, like I’ve previously stated, I have no fear that we can overcome this obstacle. With the changes that Hammond has recently proposed there are many good reasons why Great British business will thrive.
In life, you don’t always get dealt the hand you want. What marks us out is how we adapt to the circumstances. In these circumstances, Philip Hammond has just set the best stage possible for businesses ahead of Article 50 being triggered.
Lee Murphy, MAAT, MD at The Accountancy Partnership
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