So, how was it for you? Reactions from local businesses to George Osborne's latest Budget.

So how was it for you?

Angela Ward, Manager, PR Services with The Marketing Eye, interviewed a number of local businesses and professional advisers to gauge their reaction to this afternoon's Budget.

Today’s Budget was, businesses in the South East, generally agreed ‘good and well intended’.

Neil Edwards, managing director of The Marketing Eye said: “George Osborne said a lot of the things that small businesses want to hear - making Britain the best place to start up, finance and grow a small business has to be the right aim. However, service businesses in the South East never seem to get a mention – and we need a helping hand too. We are looking for more incentives and tax breaks to employ people in the South East.”

It wasn’t, however, a Budget with many surprises.

“As the Chancellor was speaking, I was struck by how much we already knew - due, no doubt, to the fact that either economists and accountants are getting better in second-guessing what’s coming or perhaps the government is getting better at leaking proposals before they are made public,” commented Martin Pollins, managing director, Bizezia. “Overall, it looks like a sensible Budget that responds fairly to the concerns of many citizens in the UK.”

There were a few ‘headline grabbers’, such as the proposed merger of income tax and National Insurance.

“However, this will have political implications about raising tax rates and will need to be carefully considered to make sure it doesn’t hit the ‘wrong’ people,” added Keith Hall, director, Feist Hedgethorne.

Nick Green, branch manager of Handelsbanken in Tunbridge Wells, described it as ‘a Budget that appeared to be aimed at stimulating growth and empowering entrepreneurial Britain’. He said that this could be seen in a number of measures, particularly the cut in Corporation Tax, no new regulation for small firms for the next three years and new rules to help planners prioritise jobs and growth.

Martin Pollins pointed out that cutting the Corporation Tax rate by 2% will mean that the tax rate will be the lowest in the G7 and Richard Holme, a partner at Creaseys, agreed that the cut in Corporation Tax is good news.

“This will hopefully encourage investment,” he added. “The rate for smaller companies will fall, as planned, to 20% from next month. More individuals and businesses should now look to channel activities through limited companies to save large amounts of tax, especially if extractions of profit can be deferred.”

Another key highlight was that investments under the Enterprise Investment Scheme (EIS) will attract tax relief of 30% (from 20%) form April 6, something described as a ‘step in the right direction to getting people to invest in small and growing businesses’ by Richard Holme.

Kieron Robertson, estate planner and independent financial adviser, Valiant Financial Consultants, added: “Increase in entrepreneurs’ relief will also be well received from those in business – a doubling of the lifetime limit of gains from £5 million to £10 million.”

It was also announced that there will be an increase in research and development tax relief to 200% (and 225% next year), which was described by Keith Hall as ‘an opportunity that smaller companies in the digital community should not overlook’.

Neil Edwards said that there wasn’t much in the Budget to take the risk out of employing staff and to get people back to work and spending again.

He added: “We want to grow the business, take on new staff and reward the ones we’ve got. Finding the cash for pay rises is difficult in the current climate and it’s made harder if anything you do offer is negated by inflation and increased NI. I am, however, pleased that increase in the personal allowance will offset the rise in NI for individuals and that steps are being taken to limit the rise in fuel prices. This means any pay rises we can offer will make people better off each month.”

There was some relief for first time buyers, which Nick Green said was ‘good’ and Kieron Robertson agreed. He explained: “The £250 million commitment to first time buyers provides some solace to those struggling to raise deposits – although it is a shame it is restricted to those buying new homes. Will this mean that more school fields are sold off?”

The one thing which everyone – including said Nick Green ‘the beleaguered motorist and haulage firms’ - was united in welcoming was the measures to freeze the planned inflation rise in fuel duty and reduce it by 1p.

The announcement of a 10% Inheritance Tax discount for those leaving 10% of more of their estate to charity was welcomed.

“The charity sector is suffering at the moment – so anything that can be done to give it a boost is good news,” said Richard Holme. “It is also positive for people who wish to leave part of their estate to charity. Donors will need to look carefully at their wills and also plan whether to give to charity in lifetime through gift aid, or on death to save Inheritance Tax.”

Kieron Robertson concluded that it was ‘always going to be a hard Budget – with so much anguish caused over the last few years (if not longer?) and the borrowing to fund the deficit forecast of £146 billion.”

Neil Edwards added that ‘there is still a lot of uncertainty out there’. He explained: “Rising inflation rates and threats of increases in interest rates don’t help. In the absence of confidence, we need our costs held down and the ability to leave as much profit in the business as we can to re-invest - not paying it all out in tax.”

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Local entrepreneurs speak out on Budget wishes

With the Budget just around the corner (Wednesday 23 March), we canvassed some of our clients – a mixture of business owners and professionals – for their Budget wishes.

Understandably in this climate, our clients have a number of concerns – covering not only business issues, but also worries about the NHS, for instance, and our ageing population.

Martin Pollins, managing director of Bizezia in Haywards Heath says: “We need tax relief on private medical insurance premiums, which will help the overburdened NHS.”

Richard Bamford, key account director with Citrus Healthcare Consulting in Hildenborough agrees that the government needs to introduce measures to reduce the financial pressures placed on the NHS.

“Individuals who take out private medical insurance should be encouraged and rewarded for taking responsibility for their health and wellbeing, therefore reducing the cost burden placed on the NHS,” he says. “The constant advancements in medical treatment come at a price, with more money needing to be pumped into the NHS for it to cope with these costs. People should be given a tax break to help pay for their private medical insurance, especially pensioners. If the government wants the NHS to be sustainable in the future, bold decisions need to be made.”

If people are lucky enough to remain fit and well and outside of medical system as they head towards retirement – old age itself brings with it more than enough to worry about. Michele Pearson, wealth adviser with iMAP Your Finances in Cuckfield, would like to see a simplification of the pension laws.

“People want to know what they can expect at retirement, regardless of their savings,” she says. “If you want people to invest now to make their future in retirement better, then you need to give them certainly for them to build on.”

Martin adds: “Abandon the minor allowances for the elderly, such as winter–fuel payments, and combine them into an increased basic pension – it will save money on administration costs and put the level of UK pensions closer to those in other countries. Also for the retired population, I would like to see better interest rates on savings, or no tax on savings, lower taxes or no taxes on state and other privately-funded annuities.”

When it comes to saving, Michele says that personal investors want better returns from their savings. She adds: “The government can help by providing more tax-free havens – we haven’t seen a TESSA account for years – and why not extend the ISA limits further?”

Kieron Robertson, an estate planner and independent financial adviser with Valiant Financial Consultants in Tunbridge Wells, says that it would be good to see more done to encourage people to save both in the short-term and beyond.

“It would be good to see a reduction in Capital Gains Tax for those with assets held over periods of say, more than five years and more to encourage savings towards retirement,” he explains.

Richard Holme, a partner with Creaseys in Tunbridge Wells, wants George Osborne to ‘leave Capital Gains Tax alone or perhaps look to reduce the main 28% rate slightly. He adds: “Above all, retain the 10% rate for sales of businesses (entrepreneur relief) in order to encourage entrepreneurs to invest to assist in the continuing recovery of the UK economy.”

We – and our clients - are united in wanting to see more done to stimulate business investment and offer companies support.

“George Osborne must fulfil his promise to centre the Budget on entrepreneurialism and business growth,” says Neil Edwards from The Marketing Eye. “Getting people back to work and safeguarding the liquidity of small businesses is the priority. Offering rewards and incentives to businesses to employ people by offering relief from employers’ NI or rebates on previous years’ corporation tax will take the risk out of new hires for small businesses and get consumers spending again.”

Chris Winning from The Winning Partnership in Tunbridge Wells says that there need to be tax incentives for Research & Development.

“We need to ‘kick start’ the economy again and, more importantly, help businesses to recover from years of depression,” he says. “They need assistance with R&D to give them a chance to be innovative, create new income streams and boost the bottom line profit.”

He’d also like the 50% tax rate to be abolished, as he feels it is discouraging entrepreneurship.

“Much wasted time was spent preparing for this incredible leap upwards,” says Chris. “For the costs involved and fees paid to advisors, I would have thought more cost effective methods of collecting taxes from a larger proportion of the population would have been better employed.”

Adds Nick Green, branch manager from Handelsbanken in Tunbridge Wells: “There are many ways that businesses can be supported, such as reducing red tape, incentivising local government to speed up the planning process, simplifying the corporate tax regime and looking to reduce the 50p income tax rate to encourage entrepreneurship and spending.”

Finally, a major worry to everyone is the price of fuel.

“The price of fuel is reaching crisis proportions and is rapidly becoming an inhibitor to business growth. Steps need to be taken to bring fuel prices down or at least cap them at where they are,” says Neil Edwards.

Adds Nick Green: “Individuals’ spending power is being eroded through inflationary pressures, due to increasing food, commodity and oil prices. With the rising price of oil, the government is already benefiting from additional ‘tax take’ and while the additional fuel duty levy was built into their calculations for reducing the UK debt burden, the impact on individuals and business is becoming increasingly apparent and, therefore, I would like to see this potential further imminent rise in fuel duty deferred or scrapped.”

Finally, Richard Holme is hoping for a quiet Budget.

“Please no tinkering with the tax system unless absolutely necessary – we already have over 12,000 pages of tax law,” he says. “It would be good to have a Budget one year which makes no tax changes at all!”

Looking ahead, at The Marketing Eye, we are remaining upbeat. Neil says: “We are countering uncertainties around growth, inflation and interest rates by maintaining our marketing to build our brand and keep in touch with the evolving needs of our clients. Businesses that have the courage to continue marketing will survive and prosper when growth returns to the economy in the latter part of the year.”

What are your pre-Budget wishes? Do you agree with our commentators? Let us know.

Osborne navigates the South East economy across thin ice

Chancellor George Osborne was optimistic in his update to MPs on the health of the UK economy during his autumn statement today, but life is likely to remain unpredictable for businesses for some time to come.

George Osborne is only offering the lightest hand to businesses as he gingerly navigates the economy across thin ice. He is gambling that net export income and new investment will percolate its way through the system before domestic demand drops due to the cuts in public spending and the impending increases in VAT and employees’ National Insurance.

While his statistics might look encouraging at a macro level, I wonder if he truly appreciates how finely balanced it is on the front line.

The uncertainty, even among those of us that are doing relatively well, makes it very difficult for any business owner to commit to significant new investment or employment. Most businesses don’t have the option of suddenly opening up markets in China and India if demand falls at home.

The availability of finance will remain another significant inhibitor to growth. Osborne shouldn't believe the bank's spin when they say they are supporting small businesses. I have it on good authority that despite what the leaders and PR people might be saying, the people who work in the dark offices behind the scenes are scared rigid of making a mistake: credit is extremely tight as a result. If we need finance to grow in 2011, we will need to look elsewhere for the investment we need.

One of the best things George Osborne could do in the next Budget is to make it even easier and more attractive for private individuals to invest in small businesses. If the banks won’t do it, somebody else has to fill the gap.

While he is at it, Mr Osborne should also look at increasing incentives to employ people by extending the National Insurance concession for new businesses that was announced in the last Budget to the whole of the UK (the South East, London and the East where notably excluded). He should also stop limiting the allowance to start-ups, as it is the established businesses that will offer the most secure employment opportunities - particularly for young people.

Finally, it is time to update the concession on VAT for marketing materials. At the present time, printed promotional materials are zero rated for VAT. This needs bringing into the 21st century by extending it to websites, email marketing and pay-per-click advertising. Any disincentive to businesses marketing themselves effectively needs to be urgently removed.

It’s OK to cut the budget

The adage that the businesses which maintain their marketing expenditure during a down-turn will be the ones that prosper in the end is backed by evidence.

As a statement, however, it was coined at a time when the marketing options were fewer than they are today. Short term adjustments to expenditure are not damaging and may indeed be exactly the right thing to do.

The extent to which a business is reliant on tactical marketing to drive sales volumes will influence the amount that needs to be spent during a down-turn. A business that relies on internet sales, for example, may have to increase its expenditure to generate a greater number of visits to the website and compensate for a drop in the conversion rate. To cut the marketing budget now would be to accept an immediate reduction in sales.

For many other businesses, a switch out of cash-hungry promotional activity and into a greater focus on looking after existing customers and using on-line and off-line networking and PR to attract new ones, could be a good idea and may even lead to a re-appraisal of the type of activity the company does over the longer term.

Marketing, through its own failings, will of course always be associated with promotional activity. The full marketing mix is much broader than this and a reduction in promotional activity could be more than compensated for by taking the time to identify a new product, a new niche or an improvement in the customer experience.

The mantra ‘don’t cut the marketing budget’ needs to be re-written as ‘don’t cut the marketing activity’: it’s not what you spend, but how you spend it that matters.