It's safe to say that entrepreneurs were bracing themselves for George Osborne's austerity Budget. However, now that the suspense is over, 'it could have been much worse' seems to be the general consensus among the business community.
In fact, many business owners have commended the chancellor, whose acknowledgement of the key role that entrepreneurs will play in driving the economic recovery has gone down particularly well. Meanwhile, the rise on capital gains tax for higher rate taxpayers to 28% was nowhere near as bad as expected, and the extension of Entrepreneurs’ Relief, to give entrepreneurs a rate of 10% on their first £5m of gains over a lifetime, certainly sugared the pill for business owners.
The chancellor called his first Budget "unavoidable" and "tough but fair", while the CBI said Osborne had managed to achieve his twin objectives of "setting out a credible plan for the public finances and producing a convincing growth strategy for the longer term".
We asked some of the UK’s finest entrepreneurs to tell us what they thought of the announcements, and how the measures will affect their businesses.
Overall impressions:James Caan, dragon and founder of Hamilton Bradshaw:“This is the most aggressive Budget I have witnessed in my lifetime. At £155billion, or 11% of GDP the UK faces the highest budget deficit of the G20 leading economies. It is essential that the deficit is tackled as quickly as possible, and that the government’s plan in the Budget reflects a clear need to rebalance the economy towards sustainable private sector growth.”
Matt McNeill, CEO, Sign-up.to:“I thought the Budget was good overall. It was shockingly sensible. Finally we have a government that realises small businesses are a good way out of the mess.”
Simon Lawrence, CEO, Information Arts:“The emergency Budget is well balanced and contains a lot of good news for small businesses. I am pleased to see corporation tax decreasing progressively and the National Insurance increases Labour introduced being reversed. Perhaps most crucially for nurturing enterprise and entrepreneurs in the UK the government is extending the capital gains tax exemptions. Overall there is lots of positive news, especially considering the state of the public purse and the need for difficult decisions to be made.”
Julie Meyer, CEO, Ariadne Capital:“Overall I think it was interesting. The central core of the belief behind the Budget seems to be that the private sector is going to drive the recovery – that an inflated state hinders growth.
“It strikes me that there’s a real desire to reign in and live within our means. You have to have some faith in the chancellor that he’s looked at the whole problem and done what has to be done. He’s trying to avoid a debt crisis where people are unwilling to lend to the UK and restore confidence in UK currency – that’s exactly what we should be doing right now – wean people off the state. It’s a good step in the right direction.”
Charlie Mullins, managing director, Pimlico Plumbers:“The next five or six years are going to be hard graft for all of us, make no mistake about it. However, this is a budget that pulls everyone together to face the battle ahead. More than just revealing tax rises and spending cuts I got a feeling that the aim is to pull as many people back into the economy and make sure that everyone has to play their part. From the Queen to the bankers and the civil servants to the benefit scroungers, everyone will have to deal with a hit to their pocket and purses. Hopefully the cuts to benefits will encourage some people back into work rather than staying on benefit because it gives them a better wage packet at the end of the week.”
Mitesh Soma, CEO, Chemist Direct:“I think it’s key that the government has identified that businesses are the lifeline of our country. The government has played a balancing act; they haven’t just gone after one set of people. We were all expecting the worst but it hasn’t been as bad as perhaps expected.”
Jos White, co-founder, Message Labs and Notion Capital:“Overall, the budget is not as bad as I had feared and it does provide some nice protections and incentives for entrepreneurs. The reduction in corporation tax will certainly go down well with businesses, and some of the tax measures will incentivise budding entrepreneurs to take that first step. But it is a great shame the government has missed the opportunity to make the UK a hotbed for investment. The government should have looked at the complete picture in order to build the ecosystem required to support smaller and growing businesses. In taking a piecemeal approach which penalises early stage seed and venture capital investors, the government has sucked some of the life out of entrepreneurial growth and success.”
On increasing VAT to 20%:James Caan:“VAT is historically a low hanging fruit, and it's no surprise to see it increased to 20%.However, at 17.5% it is already at the top-end of UK acceptability. From a business perspective, it hits SMEs much harder, as they do not have the reserves to absorb the practical and admin costs of implementing pricing and accounting changes. Changes last year are believed on average to have cost £1500 per business to implement. The government needs to think hard about the impact this is going to have on SMEs.”
Matt McNeill:“VAT won’t affect us too much and I don’t think the effect on the economy will be devastating.”
Charlie Mullins:"I've said it before and I haven't changed my mind VAT was a 'no brainer' of a rise - it had to happen. I'm like everyone else I'm sure given the straight choice of keeping more of the proceeds of my, and my company's work I'm always going go for keeping more. But this time round it just isn't that simple - the decision is about staying in business or going out of business and that's why I'm 100% behind the rise in VAT, to be honest I thought it would have gone up tonight!"
David Hathiramani, director, ASuitThatFits.com“With the VAT rise, I’m happy we have got a bit of time to consider it, and make sure it all gets arranged properly (until January 2011). It will affect all companies equally which is good, but it will probably have some affect on consumer spending, so we will have to work harder to meet our targets.”
“I thought the Budget was good overall. It was shockingly sensible. Finally we have a government that realises small businesses are a good way out of the mess.”
Mitesh Soma:“The VAT is a fair tax; we had to do something and this tax will affect people in a fair way, rather than just penalising one set of people.
Nicko Williamson, managing director, Climatecars:“I think raising VAT is a good measure because we need to reduce the deficit and get back on track. The Budget could have been a lot worse.
“The VAT rise shouldn’t affect us too much, although we’re reliant on other businesses so it depends how it affects them. Generally companies don’t cut out using taxis so we should be relatively unaffected. Overall it’s a tightening but I think it’s a positive step. Reducing the deficit will be good for trade.”