The StartUp Awards reached out to a number of start-up founders to hear their thoughts on the 2022 Autumn Statement and to understand how it could affect them.

Last week (17th November), the Chancellor of the Exchequer, Jeremy Hunt, gave his 2022 Autumn Statement to explain the UK Government’s plans for the coming months as the country faces a looming recession as a result of a number of significant economic challenges. 

The war in Ukraine has contributed to a huge surge in energy prices, driving up inflation across the world. Banks are raising interest rates to get inflation under control which, in turn, has increased the cost of borrowing for households and businesses. Economic growth is also slowing and the International Monetary Fund (IMF) expects a third of the global economy to fall into recession over the next 12 months. The UK is also recovering from the costs associated in dealing with the Covid-19 pandemic with UK debt interest spending expected to reach a record £120.4 billion this year.

In response to this, the UK Government promised to prioritise stability, growth and public services and the latest Autumn Statement outlines the plans being put in place to achieve this. “The Autumn Statement sets out further steps on taxation and spending, ensuring that each contributes in a broadly balanced way to repairing the public finances while protecting the most vulnerable. The government’s approach to delivering fiscal sustainability is underpinned by fairness, with those on the highest incomes and making the highest profits paying a larger share.”

Some of the measures outlined include: 

  • Reducing the income tax additional rate threshold from £150,000 to £125,140, and increasing taxes for those on high incomes.

  • Maintaining income tax, national insurance and inheritance tax thresholds at their current levels until April 2028

  • Instigating reforms to ensure businesses in the energy sector that are making extraordinary profits contribute more - the Energy Profits Levy will be increased to 35% and extended to the end of March 2028, and a new, temporary 45% Electricity Generator Levy will be applied to the extraordinary returns being made by electricity generators.

  • Introducing a package of targeted support to help with business rates costs worth £13.6 billion over the next 5 years with business rates multipliers frozen in 2023-24, and upward transitional relief caps will provide support 2 Autumn Statement 2022 to ratepayers facing large bill increases following the revaluation. 

Read the full 2022 Autumn Statement here for more information.  

So what does this all mean for those new businesses which create jobs and prosperity in every sector and locality in the UK?

The Startup Awards reached out to a number of start-up founders to hear their thoughts on the latest statement and to understand how it could affect them.

Ben Davies, Co-founder of Hexa Finance Limited, says that there will be challenges for their small business customers over the next few years: 

“The way in which these announcements will affect our customers is going to vary. However, there’s a general realisation from the business communities that we support that they’re going to have to work harder and smarter for what they can earn.

“So let’s take smaller trade businesses, for example, and businesses that have operated under the VAT threshold until now. With inflation rising and the VAT threshold frozen until 2026, those businesses that are earning more due to rising costs will now have to pay increased taxes. 

“The autumn statement is clearly looking to stabilise the economy by reducing public debt and controlling inflation, along with protecting the most vulnerable. But with the cost of living pressures in our private lives and now increased cost in our business lives, it certainly doesn’t make it easier for SMEs and their owners. Small business owners will naturally look to take on additional borrowing over the coming months and years, but we’ll also have to pay more for that borrowing due to interest rate increases.”

James Gayle, founder of Shogun Social explained how the pandemic has set their business up for adapting to change: 

“We scaled to a team of ten in the pandemic which was a really great, interesting time. So we’re always in this stage of fluctuation and with the statements getting announced and changing things, part of me is just grateful that we have enough notice to change things quickly which we’re quite used to. 

“However, now being more settled and coming out of our startup phase, I’d rather not have these changes coming up and impacting our growth and how we financially plan because we’ve only just started to wrap our head around the proper financial planning and started to work with more in-depth professionals to get all of this stuff right.” 

 

Marcel Fowler, founder of New Motion Labs welcomed the measures to support greater innovation in the business sector: 

“Rishi Sunak wants to make the UK a science and technology powerhouse! These R&D tax credits are key to that. If you are a company, you may have six or seven years where you’re not profit-making, and having 33% that you can claim back, it’s very key to actually making that product, and actually becoming a successful company and giving back to the taxpayer.”

Gregor Shaw, founder of WRC Holding - Devils Bridge Spiced Rum said whilst the Autumn Statement was disappointing, he will keep building his business regardless:

“The autumn statement isn’t exactly great for small businesses - that might be an understatement! 

“I think it’s important to note that these things tend not to have an effect immediately in a huge way, it’s more like a gradual erosion over. Most notably, the national insurance freeze means that we obviously have to pay more for our employees than before. The rise in corporation tax alongside the reduction, of the dividend allowance, is particularly harsh on our company directors and that’s before you even consider the fact that small company directors were largely left to their own devices during the pandemic.

“We just have to keep building.”

Daniel Brown, co-founder of Think Wow CX said that small businesses will need to make themselves indispensable to customers that may be cutting costs: 

“Small businesses will pay slightly more tax on dividends and we’ll have to pay slightly more tax on our company electric vehicle. But looking beyond that to the wider economic and customer impact, I guess a lot of businesses out there are going to be looking to their bottom line. Trying to figure out which of their spends are genuinely essential and which of them they might be able to cut. So I think the key element for small and medium businesses to survive the coming storm is to focus on customer retention.

“Keeping hold of your customers and making sure your name isn’t on the list of services or suppliers that they think they can get rid of to save money is going to be critically important. We are definitely going above and beyond at this point to make sure that we are completely indispensable to our customers by helping them be indispensable to theirs.”

Louchavan Lemard, Company Director of PH247 said that his business will need to adapt to the changing economic environment: 

“Demand for our services is going to drop and competition is going to increase. So what we’ve done is we’ve looked at how sustainable our business is. We’ve been looking at ways that we can provide our service at a cheaper rate and how we can minimize the amount of waste we produce. 

“We believe that dropping our hourly rates and trying to make our services as affordable as possible to the consumer, helps out through this tough time. We as an organization believe that giving back is very important. So what we’ve been doing is we’ve been in talks with social enterprises, communities, and what we are looking to do is we’re currently trying to provide our services free of charge so that we’re supporting the most vulnerable within our community.”

Faye Tomson, founder of District Eating said that the increase in green energy policies could help her business in the future:  

“One thing that caught my eye was the double investment in the energy efficiency of homes and industry by £6 billion from 2025! My business District Eating works to develop greenhouses that use waste heat and Co2 which usually arises from industry - so if there’s any government help to get those industries to sell their resources, that could be good news for us!”

Ashleigh Donald, Co-founder of Halo Business Consulting said business rate support will help the hospitality sector: 

“As the UK is now in recession, the autumn statement was already set against a gloomy backdrop. Some positives included the chancellor confirming energy support past April. For those most vulnerable sectors, including hospitality, we also saw that the government will provide a £13.6. billion package of business rate support to help businesses over the next five years, which will hopefully help thousands of small businesses and those in the hospitality sector.”