A budget for the mid-market?

We have been softened up for weeks that this 'emergency budget' would be the most austere cost cutting budget in living memory and all in all George Osborne certainly seems to have delivered on that promise.

It is never easy to cut cost out of any operation let alone on the scale that is required of our government and there is no doubt that many of their decisions will be very unpopular especially for the innocent people affected.   Of course cuts in the public sector will have a considerable knock on for the private sector contractors and suppliers. I have to say, that while there are many aspects of the budget that are unattractive to us all it is heartening and confidence inspiring that our new leaders are prepared to risk their new found status and potential popularity by taking the bull by its horns and doing what they believe needs to be done. 

For many the focus will be on the predictions of economists who calculate that by the end of the five years the cost to each household in the land will be an average of £5,000 per annum. Let's set this against the huge savings many households have achieved from vast reductions in their mortgages. "We" the people may not be to blame for the financial crisis and as such "we" feel we should not be penalised for the mistakes or greed of others but "we are where we are" and we have an opportunity now as a nation to pull together and get our house in order.   

I believe this is a good budget for the mid-market, for both us and our clients. It relies on the private sector stepping in to fill a big hole as the government reduces its spending. Potentially, employment costs and costs of manufacturing will remain low and goods and services will be competitively priced despite the upcoming VAT increases.  The mid-market has survived the recession remarkably well and many of those still standing are in better financial shape than ever before following their own cost cutting measures necessitated by the downturn in business of the last 2 years. As a company, we are seeing increased activity and investment from clients who are well placed to take up any skilled workforce made available by public sector job cuts.  

Everyone derided the benefit of the 2.5% VAT cut last year, 'why will I spend any more for a 2.5% discount?'  Now this works the other way; 'will I spend any less because of a 2.5% price hike?'  Probably not and let's face it the more ambitious retailers will hold their prices to retain our custom and probably do more business as a result.  

Corporation Tax will fall every year by 1% making the UK an attractive market for foreign investment, our stated commitment to stay out of the Euro offers stability not found in the Euro zone. Capital Gains tax is once again favourable to the vast majority of small/medium businesses; encouraging entrepreneurs to bet their house and their livelihood on innovative ventures that create local employment while reining in the fat cat profits of banks and financial institutions that reward a very few for taking inappropriate risks with the funds of others. 

So, Mr Osborne may have taken the biggest political gamble ever but for those mid-market businesses with a clear vision I think we have already survived the worst and perhaps the best is yet to come.

Alistair O'Reilly
Group managing director