Focus has to be on business productivity as chancellor admits economy faltering
Much of the headlines following George Osborne’s latest budget has centred on the tax on sugary drinks, but the big issue affecting business has to be on the country’s falling productivity.
As accountants, we at AIT are always looking at productivity, and how clients can prosper and just as managing the financial affairs of a business many of the same issues affect running the country.
Productivity measures how much output is produced by every worker, and is seen as a key indicator to an economy’s health.
To illustrate this, Robert Chote, Chairman of the Office for Budget Responsibility, has described the productivity downgrade as the most significant part of his report, which was the basis for Mr Osborne’s announcements last week.
So the upshot is that we as businesses have to find a way of being more productive. It’s also worth highlighting too that as on average we produce 30% less per hour than the German, French and Americans.
It is finding this winning edge, mainly by embracing cutting edge technology and better management skills that will help the UK to thrive.
This is desperately needed as the chancellor said, “financial markets are turbulent”, and “the outlook for the global economy is weak.”
However, despite this less than joyful message, the economy is expected to grow by 2.2pc this year, down from a previous forecast of 2.4pc and the important point is that we are still growing.
Of course, the basis of this prediction is all on the UK staying within the EU, which is another subject altogether.
Elsewhere in the budget, there are some key points worth highlighting for business:
• Corporation tax will be cut to 17pc by 2020, from 20pc now.
• Capital gains tax cut from 28pc to 20pc for top rate taxpayers and from 18pc to 10pc for basic rate taxpayers.
• New threshold for small business rate relief will increase from £6,000 to £15,000, and higher rate will be increased also.
• Business rates will also be linked to CPI, the official measure of inflation, which has historically been lower than the RPI rate rates are currently linked to.
So, in the big scheme, the chancellor has spoken. It wasn’t all together pleasant listening, but the main thing is that Britain still continues to thrive.
It is up to us as businesses to do our best to ensure we continue to move forward.