Steve Hoon is a tax partner at BDO in Southampton. He discusses the latest Rethinking the Economy survey findings and what this means for Central South businesses.
Whether it’s extended support measures, tax initiatives to reinvigorate investment, or incentives to trigger growth, there was plenty for the region to digest and respond to in the chancellor’s spring budget.
BDO’s latest Rethinking the Economy survey of mid-market businesses within the region, shows the effect the announcements have already had on driving key strategic decisions. An overwhelming 98% of respondents from the Central South’s mid-market said they plan to recruit in the next six months, with 73% planning to hire more permanent staff. More than half (66%) are considering a temporary workforce in order to provide the flexibility to balance both resource and market demand.
The Government’s £3,000 incentive to hire apprentices has also sparked a response from business leaders looking across the talent spectrum to meet workforce needs.
The region’s appetite to invest has remained consistent throughout the pandemic, but it appears that investment intentions amongst Central South businesses have risen in recent months in direct response to the capital allowance announcement.
The headline-grabbing 130% ‘super deduction’ – a capital allowance on
qualifying plant and machinery investment, which will allow companies to cut their tax bill by up to 25p for every £1 they invest – has clearly done what the chancellor intended it to do. It serves as an incentive to businesses to invest and with it drive growth in the economy.
It’s not the only government announcement that will provide a greater sense of optimism for the region’s businesses. News that one of eight newly-created Freeports will be located on the Solent will undoubtedly buoy businesses and add weight to the ‘levelling up’ debate. And rightly so. More than £2 billion will be invested in the region, which will mean lower taxes and less red tape for businesses in designated areas, together with reports that the Freeport could create more than 25,000 jobs across Hampshire.
The topic of levelling up has intensified during the course of the pandemic, with political leaders across the country using Covid-19 as a reason to fight their corner. Politics aside, businesses in the Central South believe the chancellor has promised enough to support the regional ‘levelling up’ agenda in his spring budget, with 63% stating that the region will be given enough financial support over the next 12 months as a direct result of the pandemic. The creation of a Freeport within the region will only serve to cement that viewpoint.
While the majority of businesses believe that revenues will return to pre-pandemiclevels within a year of the strictest restrictions being lifted – spurred on by government support and the UK’s progress in fighting the coronavirus pandemic – we have learned over the course of the past 12 months to proceed with caution.
Workforces will need to be restructured to avoid redundancies, pricing of products and services will need to increase to compensate for fluctuating revenues, and a continued focus on managing the impacts of Covid-19 restrictions on businesses remains a key priority amongst Central South businesses.
Progress has been made; confidence is renewed; but the road ahead remains a challenging one.
If you would like to discuss how your business can capitalise on the Government’s financial measures and tax incentives, contact Steve Hoon: