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Autumn Statement: Tough times ahead but financial support for small and medium businesses and the construction and transport sectors – By John North, Corporate Department
The Chancellor made his much-leaked Autumn Statement at 12.30pm today and whilst there were a number of measures to try to help businesses and families who are still struggling with the aftermath of the recession, the austerity measures and the fallout from the Euro crisis mean that overall it doesn’t make happy reading. Here is our summary of the main developments:
Delayed and modest economic growth The economic growth forecasts for 2011 and 2012 have been downgraded again (.9% and .7% respectively) but the picture looks optimistic (but is it realistic?) in 2013, 2014 and 2015 where forecast growth is 2.1%, 2.7% and 3%.
More finance for small and medium businesses With the efforts to get the banks to lend to small businesses seen to be failing (see our newsletter article on Project Merlin) the Government has resorted to other means with a credit easing programme to underwrite £40bn in low-interest loans to small and medium-sized firms, a £1bn business finance partnership to support funding for medium-sized firms, an extra £1bn for the regional growth regeneration fund and an extension to business rates holiday relief for small firms to April 2013. There is also a £250m support package for energy-intensive firms. And for the Banks? The Bank levy will be increased in January.
Boost for construction and transport sectors There is to be £5bn of new spending over three years in infrastructure, including £1bn for the rail network and plans for 35 road and rail projects across England. Also announced is a £400m scheme to kick-start stalled construction projects in England. There are hopes to unlock another £20bn in investment from pension funds. Those in the transport and logistics sectors, as well as all the private motorists, will be relieved that the planned 3p fuel duty rise in January 2012 is cancelled and that the rise planned for August 2012 has been reduced from 5p to 3p.
Mixed family fortunes Beleaguered families may not be pleased as although benefits payments will be increased in line with inflation (5.2%) next year there will be below inflation increases in some working tax credits and the proposed above inflation rise in the child element of the child tax credit has been scrapped. But with more support for the construction sector, the Chancellor announced £1.2bn of extra spending for school buildings and to provide cash for 100 additional free schools. He also announced that childcare places for two-year-olds in England would be doubled to 260,000.
Workers benefits down but transport and housing gains Public sector workers (who are striking tomorrow about proposed pension reforms) will not be pleased to see a 1% cap on public sector pay rises for two years after the end of current freeze next year and an investigation into regional pay differences. Yet there is support for young people with a £1bn fund to subsidise six-month work placements for 410,000 and some comfort for those who commute with rises in regulated rail fares to be capped at 6% – 1% above inflation – in January. Also, on the housing front the Chancellor announced a mortgage indemnity scheme to help up to 100,000 people buy homes with just a 5% deposit and a 50% discount for social tenants wanting to buy their own homes. Not sure if that will help much when in other news today the OBR announced that it expects house prices to fall by .2% in 2012 with a modest rise of 1.9% forecast for 2013.
Pensions The talked about rise in the state pension age to 67 has been brought forward to 2026 from 2036 and the basic state pension will rise by £5.35 to £107.45.