Commentary on Pre Budget Annoucement 2008

From our perspective, this is a reasonable pre-Budget Report which promises some improvements for our industry and the economy as a whole.

Firstly, the Report reflects the Government’s desire to help the SME sector. It appears to recognise the role that important businesses such as Sellick Partnership have on the local and national economy. Secondly, I was glad to see a focus on advice-led schemes to help these businesses weather the current difficult economic times.

With regards to the recruitment sector, we welcome the Chancellor’s decision to leave the tax rules for ‘umbrella companies’ unchanged. We are also pleased to see his ongoing commitment to enforce the current legislation in this area - compliance is very important in our industry and if recruitment and contracting companies implement it effectively, no further legislation will be needed in the future and in turn will reduce our cost in this area.

Measures to allow businesses such as Sellick Partnership to have increased access to Government contracts, specifically in temporary recruitment locally, promises to be a strong economic driver for our industry in the coming months and is very welcome news. This was previously a difficult area to reach and often required very extensive time and resource investment for small businesses in the recruitment sector.

More broadly, additional investment in capital expenditure schemes will hopefully bring some stability in the construction and associated infrastructural sectors in Northern Ireland in the months ahead. This promises improvements for all people and companies involved in these sectors – both directly or indirectly.

The Chancellor also took the decision to postpone the 1% increase in corporation tax as well as confirming that income shifting legislation will be deferred. In our view, both of these important measures are beneficial to small businesses. The biggest challenges in our industry, like any, is cash flow and liquidity - ‘cash is king’ and this decision will help in this regard.

Delaying the rise in corporation tax for small businesses (from 21p to 22p) and allowing business like Sellick Partnership to spread tax bills was welcome, especially given current economic pressures. This provides a very welcome breather from the taxman and allows small businesses to concentrate on sustainability, staff support and growth, all of which can only benefit the economy in the long term. I felt that these moves showed that the Government is listening to some of the concerns we face and has shown some understanding and flexibility.

The Government has also announced plans to ensure that those facing redundancy and seeking employment are helped back into work as quickly as possible. Should these initiatives be reflected locally in Northern Ireland, additional training and support given to people facing redundancy will, I am sure, be gratefully received.

Perhaps a more negative aspect of the Pre-budget Report from both an SME and recruitment industry perspective, is the increase in National Insurance contributions by 0.5% for employers and employees from 2011. I believe this is bad news for the industry as a whole. It will make employers think twice when recruiting and has the potential to ‘fan the fire’ on the slow down in the labour market. The likely outcome is that employers may be less likely to recruit on a permanent basis.

Also while the decrease in VAT has meant that consumers get more for their hard-earned cash, the Government seems to have little regard for the amount of work required for companies to change their internal systems to reflect the amendments within the tight time frame.

Finally, outside of the Pre-budget Report, with borrowing becoming increasingly more difficult and expensive in recent months, I believe the Government now needs to put more pressure on banks to ensure that the recent reduction in the base rate is passed on and passed on quickly.