James Mason from accountants Fifth Element talks straight about business

The 2011 PBR

A Fifth Element ‘Making-Sense-of it’ special…

A very happy New Year; it seems only appropriate to start with what were the closing headlines of 2011. The Autumn Statement, aka The Pre-Budget Report (PBR), is an interesting thing. Like Fry’s Turkish Delight, full of promise, but unless you’re a big fan, does it really deliver? More importantly, did last year’s PBR? Here are some of the highlights and my views on what took place and how things might affect you and your business.

Finance
Credit easing underwrites £40bn in low-interest loans and a £1bn business finance partnership is announced. The £40bn credit easing may help reduce borrowing rates but the real problem for small businesses isn’t the rate, it’s the overall affordability and the attrition the process demands. I’m not saying that lower rates won’t help, but for smaller businesses it won’t make much difference. The £1bn business finance partnership isn’t likely to help either although if trading with medium sized businesses you might get more work. Let me make it clear, this is not a political column and I am not an economist (although I do like to dabble). That said, the Chancellor missed his moment; the ‘corner-shop-keepers’ of this country’s business community need access to cash. A lack of it suffocates growth. So what can we do about it? My advice is to ‘trade-out’. If you need £20k of cash flow to meet that new order, make the extra profit first. It’s a tough time and this really is the only way forward – but it’s a good one.

Employment
The rise in state pension age to 67 is brought forward to 2026 from 2034 and Ossy (George Osborne, not his American name-sake counterpart) announces a £1bn “youth contract” to subsidise work placements for 410,000 young people. Bad news first, public-sector-worker issues aside, we’re living longer so it makes sense
that we will have to work longer.

The good news however, is that the government looks like it might finally be doing something to give younger people the chance of getting into work. I owe my start in life in part to an employment initiative back in the ‘80s. I now work for myself, employ other people, generate business tax revenues and pay personal taxes. I will be covering the Youth Contract proposal in more detail later in the year when the dust has settled. In the meantime, think about how to give a young person the chance of a break in your business.

Business
The chancellor announces more tax relief for people who invest in start-up businesses, business rate holiday relief for small firms is extended to April 2013 and new time limits for planning applications. All good news in particular for retail and construction, but is it enough? Admittedly, the new house building initiatives should help some construction sectors but there is a real shortage in the money supply in both areas. If you work or trade in either, think strategically and don’t wait for the iceberg. Post sentries you can rely on, don’t sail too fast, over-engineer your bulk-heads, listen to the iceberg warnings and don’t let Leonardo DiCaprio near your girlfriend… or the big blue diamond.

And finally…
Fond of a summing up, I will keep this one short. The government does what it does or rather what it can; the rest is down to us. Business is about the quality of advice we seek and the quality of decisions we make. Do both well, and the year is your oyster.

Fifth Element is a local Brighton-based accountancy practice offering expertise in all aspects of Accounts Preparation, VAT, Taxation, CIS, PAYE, Tax Planning, HMRC Issues and Business Development.