Better than expected budget benefits for business

Johnson Reed
2m read

The Chancellor George Osborne has lifted the spirits of British businesses in the 2013 budget, by announcing cuts in National Insurance Contributions (NICs) that will come into force next year. The Federation of Small Businesses (FSB) is pleased with the plans, which they feel goes ‘beyond what we were asking for’. FSB national chairman John Walker said,

“The chancellor has pulled out all the stops with a wide-ranging package of measures to support small business.”

That package features a proposal for UK companies to save up to £2,000 from their NICs. This is clearly aimed at small firms and is seen as a positive attempt to help to create more jobs. When the scheme, called the Employment Allowance, starts in April 2014, the chancellor has said it will benefit ‘one third of all employers’ who will not have to make NIC payments at all.

This move has been hailed as a tremendous boost in helping businesses through the double-dip recession. George Osborne explained,

“For the person who’s set up their own business, and is thinking about taking on their first employee – a huge barrier will be removed. They can hire someone on £22,000, or four people on the minimum wage, and pay no jobs tax.”

Of particular interest to the lease finance industry is the additional announcement by the chancellor that the Treasury is considering an extension to the Funding for Lending programme, whereby bank lending will be increased to firms as well as homes. This comes after recent criticisms of the existing scheme – official figures show that bank lending actually fell during the last quarter of 2012, in spite of the scheme. The way it’s supposed to work is that the Bank of England lends money cheaply to commercial banks, and they then pass cheaper loans on to businesses. But the British Bankers Association has said the decrease in lending has been caused by weak demand. Perhaps the new NIC benefits to SMEs will help to boost overall confidence, so that next year will see more businesses surviving, more jobs being created – and more demand for funds to be borrowed for capital expenditure.