Friday, May 11, 2012

CWO Report: Forum 'Business Budget 2012'

24-Apr-2012: The CWO forum panel on the ‘Business Budget 2012’ took place in a committee room of the House of Commons on Tuesday 24th April.
The speakers for the evening were:
Andrew Tyrie    MP for Chichester and Chairman of the Treasury Select Committee.
Susan Hayes      Head of Business Banking, Barclays
Gillian Cardy      Managing Director of the Independent Financial Adviser (IFA) centre.

CWO Chairman, Katy Bourne welcomed our guests on behalf of CWO and outlined that the purpose of the ‘Business Budget 2012’ was to allow exploration of the impact of the recent budget announcements on small businesses.  Katy encouraged discussions around the role of women in business and in what ways the budget will have an impact on economic growth for all demographics.  

CWO Forum: Sophie Stratton, Gillian Hardy and Susan Hayes
Sue Hayes led the discussion by explaining her role as Head of Business Banking at Barclays and went on to discuss how and why banks are making a concerted effort, through their growth agenda to help small businesses.
Currently 50 % of start-up businesses fail within their first three years; Sue discussed the challenging conditions that a start-up company is likely to face based on her assessment of the core issues she sees arising daily within her client’s environment.  The three main reasons she identified for the failure of new businesses are: the economic climate and reduced demand, the competitive landscape and cash flow issues.
 Sue observed that there is a general feeling of uncertainty around the regulations in respect of setting up a new business which serve to deter people from venturing into this territory due to a lack of confidence and understanding of the basic logistics involved in setting up a new business.

Homing in on the budget, Sue thought that there had been modest changes but nothing which would make a substantial difference to promote entrepreneurial growth.  However, the reduction in the higher rate of personal income tax and the increase in personal allowance would mean that greater disposable income could potentially have the effect of stimulating consumer spending, albeit not aiding initial investment.
Sue went on to explain how banks can help to stimulate confidence via a number of fiscal initiatives and support services such as;

-The National Loan Guarantee Scheme  which creates lower interest rates for lending and gives a percentage of cash back to the applicant.
-Business support units and seminars proactively advising business on any issues they are experiencing and discussing ways to increase revenues for a new business.  E-commerce for example, if conducted internationally, gives a business a fourfold chance of being successful in the critical 36-month window.
-Networking forums to link customers and business together.

CWO Forum: Susan Hayes, Theodora Clarke, Margaret Bird, Pauline Lucas, Gillian  Cardy and Katy Bourne
The overall message was that banks do want to loan to businesses to aid the UK’s economic recovery.  Last year alone £4.7bn was invested by Barclays into small businesses and Barclays hit their Merlin targets.  Given the current economic situation today around 42% of people will have to rethink their retirement plans and 25% of people will have to work over the age of 65.  Barclays wants to encourage a stimulus for growth to give people greater flexibility over their retirement options.

Gillian Cardy spoke about her role as Managing Director of the IFA centre and how she perceived the budget would have an effect on the financial planning strategies of individuals and businesses alike.
Gillian sees the budget in its current form as having only nominal changes which directly affect the role of an IFA in giving client advice.  In her view, present regulations need simplification to stimulate economic growth as the increased complexity of rules around taxation are making it challenging for both employers and employees to understand their responsibilities and, as a consequence, more costs are being incurred by businesses.
Prohibitive costs make it more challenging for new business to flourish.  An example of these increasing costs for employers is the new National Employee Savings scheme which all business must start to contribute to.
 An example of change suggested by Gillian was in regards to rules around National Insurance; she suggested a revision of the current 13.8% which has to be paid even into retirement.
To summarise, Gillian brought the discussion to an employee level and discussed the current missed opportunities for road-mapping a real savings plan and taking advantage of tax free opportunities such as ISA’s and personal allowances.

Finally Andrew Tyrie discussed how he saw the budget from his perspectives as an Economist, an MP and as the Chairman of the Treasury Select Committee.
CWO Forum: Andrew Tyrie MP
 Andrew supported the defining strategy of the budget which is a deficit reduction programme to deal with the current economic conditions.  He believes in turn this will promote confidence from the markets.  The budget has been set by the Chancellor with little scope for manoeuvre as there are real fiscal targets to be met and the government is in the early stages of implementing a long term strategy to restore economic growth rates to 2.4%. Andrew is confident that this coalition budget will prevent a UK replication of crises seen in Greece and other Eurozone countries.
In line with his co-speakers, Andrew agreed that an overhaul of regulation in certain areas affecting business is overdue and that a simplification of employers’ legislation and a focus on making it easier for sole traders to create the jobs, are needed to boost the economy.
CWO Forum: Theodora Clarke
In agreement with Gillian Cardy, Andrew went on to say that the British taxation system is one of the most complicated taxation systems in the world.  There are issues around tax avoidance which could be addressed by less ambiguity on the subject and clearer tax models.  Tax cuts at the top end of the market are designed to retain wealth within the UK and avoid overseas relocation in line with Laffa principles.  In addition to this, improvements via the Loan Guarantee scheme will serve as a much needed catalyst for bank and consumer lending and UK entrepreneurialism.

Questions and comments from the floor examined issues such as: why has the tax code not been simplified since the 1980’s; why income tax has not returned to the previous 40% level and will there be more efforts put in place to incentivise start up businesses and support their growth?  Each of the speakers summarised their final points and the Chairman thanked them for participating in an informative panel discussion on the budget.

With thanks to: Sophie Stratton, CWO Director of Forums and Charlotte Argyle.

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