Yesterday, the current Chancellor of the Exchequer, George Osborne announced the Governments plans for the future with the Comprehensive Spending Review. A great majority of the announcements involved cuts to the public sector and Government departments in an effort to reduce debt and drag the UK out of the recession, but some of the changes will also have an effect on business.
The first interesting point to note was announced nearly as a side note, but perhaps is one of the most interesting in terms of the business economy. Despite the cuts of around 490,000 jobs in the public sector, the Office For Budget Responsibility has forecast a rise in employment of around 1.3 million over the next 5 years. Certainly with the loss of many public sector jobs, there will be plenty of people seeking employment in the private sector or carrying out a company formation to start their own business.
The Main Points For Business
There are a few points from the spending review which are likely to have an impact on businesses within the UK, including:
- An increase of funding for the Regional Growth Fund of around £500 million, with a view to helping small businesses set up outside of London and the South East. Promoting regional growth of business across the United Kingdom.
- The number of adult apprenticeships is set to be increased by additional funding (up to £250 million by 2014) meaning approximately 75,000 extra positions available per year. This could be excellent news for small but growing businesses looking to employ extra staff at low cost.
- Train fares are set to rise 3% above inflation which is predicted to mean an overall increase of around 30% by 2012. Clearly, those businesses employing commuting staff might want to take these increased costs of living into account with wage calculations.
- The previously proposed bank levy will now be made permanent. Recouping taxes from large and overseas banks operating within the UK. This could mean problems for SMEs seeking finance, but other measures are in place to encourage lending, including the recent announcements by Business Task Force of the £1.5 billion Business Growth Fund.
- The Department for Business, Innovation and Skills will be facing hefty cuts of around £400million. Which could serious affect the support they current offer to small business. Programmes which might have been used by SMEs such as “Train to Gain” will also be cut under the announcements.
- By 2020 the retirement age is set to rise to 66. Saving the Government money in pension funding but also meaning that companies and small businesses will be keeping their older staff for one more year. Extra staffing costs or hanging on to experienced staff? How it affects every business will be different.
- The funding from the Carbon Reduction Commitment Scheme will now go directly to the exchequer, meaning businesses will be helping to pay off the debt of the economy and supporting our Country.
These combined proposals and cuts could all have a significant impact on small business, it is not just the public sector that will be affected. For more detailed information on the Comprehensive Spending Review see the HM Treasury website.
If you don’t agree with the cuts, The Guardian has a rather nice interactive tool where you can chose where you think the cuts should have been made – Comprehensive Spending Review Cuts.
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