Touted as a budget for “makers, doers and savers”, it did not disappoint as probably the most business friendly budget since 2010.
One of the key changes for businesses in terms of encouraging growth is the decision to double the annual investment allowance to £500,000 until the end of 2015, enabling the vast majority of firms to receive full relief on expenditure in plant and machinery.
Given that Wales is the most manufacturing intensive region in the UK, this should encourage higher levels of investment by businesses to promote greater productivity over the longer term which can only be good for the Welsh economy. In fact, if the Welsh Government wants to give the manufacturing sector a long overdue shot in the arm, then it could look to boost SMEs by providing a specific fund which would match any investment from Welsh firms and therefore maximising the benefit from this measure during the next 12 months.
But it is not only smaller firms that will benefit from this budget. There is also specific support for larger manufacturers in Wales through measures to tackle the high costs faced by the most energy intensive industries. This is finally an appreciation by the UK Government that the high cost of energy is having a damaging effect on the ability of major investors, such as Tata Steel, to be competitive within their Welsh plants and, more importantly, to continue employment and investment in this country.
On the other end of the energy spectrum, it is also worth noting the promise of £60m to support carbon capture and storage technologies and the Welsh Government should be looking to see whether it could attract part of this funding here to Wales as part of its ambitious plans for a low carbon, energy and environment science network that will be based at Bangor and Aberystwyth universities.
As my recent review for the Welsh Government showed, there is a major requirement to support access to finance for business and increased competition in the banking sector. In responding to this challenge, one of the proposals from the Chancellor is the decision to make the 50 per cent capital gains tax reinvestment relief for Seed Enterprise Investment Scheme permanent. This can only be good news for stimulating greater individual investment in Welsh start-ups, given that Scotland currently attracts ten times the amount of business angel funding that we do. The decision to extend tax relief to encourage new investors to put money into social enterprises will also be welcomed given the focus of the Welsh Government and other bodies in championing this sector.
Whilst such measures will help, the most important announcement on funding was hidden on page 36 of the actual Budget document namely the promise to encourage a more diverse banking sector through the implementation of an innovative wholesale guarantees programme through the British Business Bank. This will certainly be of interest to the Welsh Government and its proposal for a new Development Bank for Wales that may require such funding to establish itself in the marketplace.
In terms of exports, the UK Government has been keen to ensure that businesses take full advantage of the opportunities available within fast growing economies globally. Whilst Wales has increased the value of its exports in recent years, this has mainly been through the efforts of larger companies. Indeed, Wales has the lowest number of active exporters of any region of the UK.
This reluctance to participate in international trade is no doubt down to the financial risk that entry into such markets entail and the reluctance of many businesses to participate in such risks. That is why the decision to double UK Export Finance’s (UKEF) direct lending programme to exporters to £3 billion must be welcomed although as I suggested in my access to finance review, this valuable source of funding for Welsh exporters is sorely under-utilised and must become an integral part of the public sector financial support for businesses here in Wales if we are to increase exporting by SMEs.
There is also an interesting precedent set by the UK Government over the cost of lending by a public sector body with the announcement that the interest rates offered through UKEF should to be cut to “the lowest permitted levels to provide competitive financing that helps UK firms win contracts and expand overseas”. One can only hope that those running public funding bodies in Wales will eventually understand the same logic when it comes to supporting our businesses.
In terms of other measures that are of direct relevance to Welsh business, those working in the creative industries will again welcome the various decisions over film, video games and high-end television tax relief, especially given the recent success in attracting Pinewood studios to Wales.
In addition, the decision to invest millions of pounds in a cell therapy manufacturing centre as part of the UK’s Catapult network should be of interest to Sir Chris Evans and his life sciences fund.
Certainly, any development that will result in the large-scale manufacturing of cell therapies for late-stage clinical trials will help the sector immeasurably. And given that Wales has yet to get any funding from the Technology Strategy Board’s £200m Catapult programme, the Welsh Government should begin to make its case immediately as to why this centre should be located in the new life sciences hub down in Cardiff Bay.
Therefore, there is much to be commended in this budget in supporting the business community in Wales, especially in its focus on manufacturing, finance and exporting. Given this, one can only hope that the Welsh Government and Welsh firms will now take full advantage of these opportunities over the next twelve months to build a more productive, outward looking and resilient business community that will continue to create jobs in the economy.