Month: August 2021

When Chancellor of the Exchequer Rishi Sunak delivered his Budget speech in March much of the focus – inevitably – was on the economy’s recovery from the pandemic, and the cost of all the support measures.

But Sunak also announced a host of new initiatives including freeports and a new campus for the Treasury. One of the freeports was at Teesport, the Treasury campus is to be in Darlington. Throw in developments in the private sector and the Prime Minister’s commitment to “levelling up” the UK and many people are wondering if the North East could soon rival London and the South East as one of the UK’s key economic areas.

Freeports allow goods to be imported without paying the usual tariffs: the tariffs are only payable if the goods are then moved elsewhere in the UK – but they can be shipped back overseas without any tariffs ever being payable.

The first, and biggest, freeport in the UK will be at Teesport, in a move that will “turbocharge Teesside’s recovery” and bring thousands of jobs and a reported £3.4bn boost to the local economy.

The decision to relocate as many as 1,000 Treasury officials to Darlington may not have the same economic impact on the region, but it was a significant sign that the Government appears to be committed to areas outside London. It is expected that around 300 staff will have moved within a year, and that they will be joined by staff from other departments such as Business and International Trade.

All this was swiftly followed by Nissan announcing a £1bn investment and major expansion of electric vehicle production at its car plant in Sunderland. This will create 1,650 jobs, plus thousands more in the local supply chain.

July then brought planning approval for Britishvolt’s gigafactory which will eventually produce enough lithium-ion batteries for 300,000 electric cars a year. It will be based at Blyth in Northumberland. It is expected that this will create another 3,000 jobs, plus those in the supply chain.

The title of this article is, of course, slightly tongue-in-cheek. The North East will likely not become the “new London.” What is possible, however, is that direct Government action can help to rebuild regional economies in the UK. Equally, companies are seeing that London and the South East is not the only answer if they are looking to expand.

The next step, perhaps, is to persuade the tech giants – such as Facebook and Google – that their UK headquarters do not need to be in London. After all, Amazon now has more than a dozen fulfilment centres in the UK, stretching from the south to Inverclyde in Scotland.

With many people now looking to escape to the country in search of a better work/life balance after the pandemic, it may be that the Government’s commitment to levelling-up has come at just the right time – for both the economy, and for people’s wider mental health.

“Only two things in life are certain,” as the old saying goes: “Death and taxes.”

But of late it seems that taxes could be replaced by something else: headlines about Amazon (and other tech giants) not paying enough tax. Every year it seems to be the same: the companies make millions – if not billions – in profits, but pay less tax than a reasonably successful small business. In 2020, for example, Amazon had a sales income of €44bn (£37.7bn) in Europe but declared a loss of €1.2bn (£1.03bn) and therefore paid no corporation tax.

Could all that be about to change? There has long been talk of an international tax agreement to tackle abuse by the tech companies, and – while months and possibly years of talks are still needed – it moved a significant step closer after the recent G7 summit in Cornwall.

What did the G7 agree?

There was agreement on two principal points. First, that countries can tax the companies on revenue generated in that country rather than where the firm is located for tax purposes. So the UK Government could in theory tax Amazon on its UK revenue, despite the company being based in Luxembourg.

Secondly, the G7 committed to a global minimum tax rate of 15%. This was lower than the 21% suggested by President Biden, but the inclusion of “at least” in the G7 deal means the rate could be negotiated higher.

Which companies would it apply to?

The obvious targets are the tech giants but the plans for a global corporation tax rate could capture up to 8,000 multinationals, including oil giants like BP and Shell, and banks such as HSBC, Barclays and Santander.

How much would the tax raise?

The OECD estimated last October that tax revenues of $81bn (£58bn) could be raised by the proposals, with the Institute for Public Policy Research suggesting that the UK’s share (albeit from the 21% tax rate favoured by President Biden) could be up to £14.7bn annually.

Could the tax be avoided?

The simple answer is ‘yes.’ Countries such as Ireland, Hungary and Cyprus all have corporation taxes lower than 15% – but the G7 are hoping that their combined economic might will bring such countries into line, especially if the minimum rate is agreed with the G20, which includes China, Russia and India.

In theory, therefore, the deal appears both doable and likely to raise significant revenues. But like all international agreements, there will be a lot of talking and it won’t be done quickly. It will also need to gain regulatory approval in the relevant countries, giving ample time for delay and lobbying. Most experts believe that ultimately there will be some form of agreement – but don’t expect it to happen in the next 12 months.

It may not have appeared on your radar, but the week of June 14th to 18th was Loneliness Awareness Week.

We’ve heard a lot about loneliness over the past 15 months. Mental health in general has, rightly, occupied a lot of column inches during the pandemic. Understandably, there has been a focus on the mental health of NHS staff and frontline workers, as well as those people living alone. Much has been written about people unable to visit elderly relatives – or avoiding the risks associated with visiting them.

Little, though, has been written about the mental health of entrepreneurs and business owners. We’re not talking here about people running multi-million pound businesses: rather the small shopkeeper, the pub landlord wondering if and when the doors will reopen, the startup entrepreneur wondering if they’ll be able to persuade their staff to return to the office…

These are the people the Government are hoping will rebuild the UK economy and – one day – pay the bill for Covid. Are they going to be in the right state of mind to do that?

Over the last 15 months owners and directors of SMEs have faced challenges they could never have anticipated: the first lockdown, wrestling with the complexities of furlough, losing clients and customers, wondering when it might all return to normal, unprecedented levels of borrowing, the easing of lockdown, and that was all before the second wave…

Even now, with the vaccine roll-out and the prospect of ‘Freedom Day’, there are difficult questions to answer. “Should I insist that all my staff get vaccinated? Am I legally entitled to do that? Can I insist that everyone comes back to the office?”

Much has been written about a return to normal. It seems increasingly certain that a “new normal” is far more likely. But for people running the UK’s SMEs, the definition of “new normal” seems to change on an almost daily basis.

Small and medium sized businesses are the lifeblood of the UK economy. According to the Federation of Small Business (FSB) there were 5.94m small businesses in the UK at the start of 2020. They account for 60% of the employment and half the turnover of the UK’s private sector – estimated at £2.3tn by the FSB.

If the economy is to recover to pre-Covid levels then the health – especially the mental health – of the people running these businesses is crucial. Let us hope that in the coming months the problem is more widely acknowledged in Government, and covered by the mainstream media.