Spending Review 2015 analysis: talking points for traders and SMEs

This year’s Autumn Statement and Spending Review are nearly 150 pages long, yet the newspapers and media were dominated by the chancellor’s tax credits U-turn and smaller cuts than expected.

27th December 2015

If you only read the headlines, you might have assumed that there was little in the Spending Review that affected builders’ merchants and other retailers. However, a deeper delve into the Spending Review documents reveals that there are plenty of changes that will impact traders across the UK. We’ve picked out some of the biggest talking points from the chancellor’s speech for retailers, and in particular, builders’ merchants.

Housing boost

Housebuilding and homeownership were two of the main themes of George Osborne’s speech – and that fact alone gave the construction industry some good news. Builders’ merchants may also look forward to the extra trade generated from this latest housing push – assuming that the 400,000 new homes promised by 2020 materialise. Another promising announcement is that central government land is set to be sold off for housing – enough for 160,000 homes. 

Energy efficiency schemes cut

It’s not all good news for builders’ merchants: the Department for Energy and Climate Change is facing more huge cuts, and energy efficiency schemes are the victims. The Renewable Heat Incentive is set to be reformed – it’ll receive £700 million less funding than expected over the course of the parliament. Similarly, funding for the Energy Company Obligation is set to end in 2017. It is likely to be replaced by a less generous successor. With the government having recently scrapped the Green Deal and its zero carbon homes pledge, insulation and other retrofit businesses will continue to scale back their operations.

Apprenticeship levy

The apprenticeship levy will be a 0.5% payroll tax on medium and large businesses, netting the government an estimated £11.6 billion. Smaller companies won’t be affected by the tax; there will be a £15,000 allowance which essentially excludes businesses from paying the levy if their total payroll amounts to less than £3 million. The government says only the largest 2% of businesses will have to pay. The goal of the levy is clearly to fund more apprenticeships – perhaps going some way to alleviate the skills shortages in the construction industry which undoubtedly have some impact on builders’ merchants. However, opponents of the levy suggest that the administrative costs of such a tax could amount to a quarter of funds generated – hardly an efficient use of such as a hefty tax.

Business rates

First, the bad news. The Conservatives have broken their manifesto promise to review business rates by the end of the year – now the review should be published during next year’s budget. Additionally, the high street retail discount (worth £1,500 to shops) will be scrapped. However, the doubling of business rate relief for small businesses will be extended for another year and the smallest businesses will still receive 100% business rates relief. Universal business rates are also being scrapped – councils will now be able to set rates to encourage business.

New enterprise zones

18 new enterprise zones and eight expansions were announced in the Spending Review. See a full list of the new enterprise zones. These zones offer discounted business rates, improved capital allowances, simplified local authority planning and government support to roll out superfast broadband.

Overall, this budget was probably a neutral one for most businesses. No doubt the apprenticeship levy will be a large burden for bigger business, but most SMEs will escape the new tax. Concerned the new levy will put you in the red? Evaluate how you’re using your retail management software – there could be key money saving functions that you aren’t taking full advantage of.



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