Business welcomes skills and SME initiatives
Government initiatives to boost skills and the prospects of small and medium-sized enterprises (SMEs), announced in the Spring Statement to parliament, won favour among UK business leaders on Thursday.
24 March 2022Although they remained disappointed that Chancellor of the Exchequer Rishi Sunak postponed tax plans aimed at increasing growth, productivity and R&D spending until October's Budget, business groups were more enthusiastic about more detailed proposals in Wednesday afternoon's 'mini-budget'.
The Institute of Directors (IoD) and the Chartered Institute of Personnel and Development (CIPD) both welcomed the Chancellor's commitment to explore ways of using the tax system to encourage businesses to invest in workplace training.
Kitty Ussher, chief economist at the IoD, said: “We have long been arguing for stronger tax incentives for workplace training, so we are pleased with the commitment to work with business to consider this in the autumn Budget.
"There exists a market failure around upskilling and reskilling within the workforce, particularly for smaller companies, and this urgently needs correcting, so we will be urging the Chancellor in the months ahead to provide tax incentives for retraining in shortage skills areas.
“However," he added, "more needs to be done to encourage and enable employers across the economy to invest more in the technology, management capability and workforce development to boost firm-level performance and real wages, especially amongst the lowest paid.
“In particular, there’s a pressing need to improve local business support services for smaller businesses, as well as further thinking on how employers can meaningfully engage with the further education system and on other key areas of skills policy.”
SMEs themselves were particularly pleased with Mr Sunak's announcement that the Employment Allowance, which allows smaller businesses to reduce their National Insurance contributions bills, was to be increased from £4,000 to £5,000 at the beginning of next month.
“We originally put forward the Employment Allowance as a targeted measure to help small firms, and it has now been expanded three times since its creation," he said.
“Together with a cut to fuel duty, these measures will provide crucial breathing space for our embattled small employers. This Spring Statement marks a good starting point, with welcome measures on business rates, net zero and energy investment taking effect next month."
Mr McTague said the FSB was looking forward to working with ministers on the creation of a tax plan aimed at achieving Mr Sunak's vision of a "new culture of enterprise".
He added that should mean taking more SMEs out of the business rates system, protecting smaller firms' R&D investment incentives and "delivering on commitments to end an endemic late payment culture that destroys thousands of firms a year".
Jamie Mackenzie, director of employee engagement firm Sodexo Engage, also applauded government support for SMEs in the Spring Statement, saying the Chancellor's initiatives were "extremely reassuring" at a time when many businesses are struggling to stay afloat amid rising energy costs and the challenges of recruiting and retaining staff.
“Given the much-publicised skills shortage in the UK, the focus on learning and development was particularly encouraging as SMEs across the UK work to build a more sustainable workforce for the future," Mr Mackenzie said.
"By pledging to subsidise 90% of training costs...the government has increased accessibility and lifted financial constraints which might have been a barrier for SMEs in the past."
David Hedges, head of employment taxes at Azets, the UK's largest regional accountancy and business advisers to SMEs, also welcomed the planned discussions on tax reliefs in areas such as training, qualifications and R&D.
"This means there will be more pressure on SMEs from their employees to increase wages to offset the effects of increased inflation - which is predicted to rise to 8% this year - in order to retain valued staff," Mr Hedges said.
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The Institute of Directors (IoD) and the Chartered Institute of Personnel and Development (CIPD) both welcomed the Chancellor's commitment to explore ways of using the tax system to encourage businesses to invest in workplace training.
Kitty Ussher, chief economist at the IoD, said: “We have long been arguing for stronger tax incentives for workplace training, so we are pleased with the commitment to work with business to consider this in the autumn Budget.
"There exists a market failure around upskilling and reskilling within the workforce, particularly for smaller companies, and this urgently needs correcting, so we will be urging the Chancellor in the months ahead to provide tax incentives for retraining in shortage skills areas.
More needs to be done to boost firm level performance
Ben Willmott, head of public policy at the CIPD, said the announcement that the Apprenticeship Levy would be reviewed as part of a push to unlock greater business investment in skills and technology was "long overdue" but represented a real opportunity to rethink how to boost employer investment in skills.“However," he added, "more needs to be done to encourage and enable employers across the economy to invest more in the technology, management capability and workforce development to boost firm-level performance and real wages, especially amongst the lowest paid.
“In particular, there’s a pressing need to improve local business support services for smaller businesses, as well as further thinking on how employers can meaningfully engage with the further education system and on other key areas of skills policy.”
SMEs themselves were particularly pleased with Mr Sunak's announcement that the Employment Allowance, which allows smaller businesses to reduce their National Insurance contributions bills, was to be increased from £4,000 to £5,000 at the beginning of next month.
Employment Allowance sees a positive reaction from SME Businesses
Martin McTague, who chairs the Federation of Small Businesses (FSB), said he was "very pleased" the government had accepted the organisation's plea for an increase in the allowance.“We originally put forward the Employment Allowance as a targeted measure to help small firms, and it has now been expanded three times since its creation," he said.
“Together with a cut to fuel duty, these measures will provide crucial breathing space for our embattled small employers. This Spring Statement marks a good starting point, with welcome measures on business rates, net zero and energy investment taking effect next month."
Mr McTague said the FSB was looking forward to working with ministers on the creation of a tax plan aimed at achieving Mr Sunak's vision of a "new culture of enterprise".
He added that should mean taking more SMEs out of the business rates system, protecting smaller firms' R&D investment incentives and "delivering on commitments to end an endemic late payment culture that destroys thousands of firms a year".
Jamie Mackenzie, director of employee engagement firm Sodexo Engage, also applauded government support for SMEs in the Spring Statement, saying the Chancellor's initiatives were "extremely reassuring" at a time when many businesses are struggling to stay afloat amid rising energy costs and the challenges of recruiting and retaining staff.
“Given the much-publicised skills shortage in the UK, the focus on learning and development was particularly encouraging as SMEs across the UK work to build a more sustainable workforce for the future," Mr Mackenzie said.
"By pledging to subsidise 90% of training costs...the government has increased accessibility and lifted financial constraints which might have been a barrier for SMEs in the past."
David Hedges, head of employment taxes at Azets, the UK's largest regional accountancy and business advisers to SMEs, also welcomed the planned discussions on tax reliefs in areas such as training, qualifications and R&D.
However...the tax relief will not improve inflationary impact
But he said, for SMEs, these measures, plus the temporary cut in fuel duty, were unlikely to fully mitigate the inflationary impact of the Health and Social Care levy to be paid from April."This means there will be more pressure on SMEs from their employees to increase wages to offset the effects of increased inflation - which is predicted to rise to 8% this year - in order to retain valued staff," Mr Hedges said.
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