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Budget 2012: some highlights for motor retailers

Industry responses to Budget 2012:

Sue Robinson, Retail Motor Industry Federation director:

Lending to small/medium businesses
"The RMI is encouraged that the Government has offered assistance to smaller and medium sized businesses by reducing borrowing costs. However, this does not go far enough to address the issues that businesses are experiencing when trying to secure a loan in the first place. The RMI would have preferred to have seen a more targeted approach to encourage banks to lend to SMEs."

Personal allowances
It is positive that the Government has taken steps to increase the amount of disposable income consumers have available by increasing the personal allowance to £9205 by April 2013. The RMI would like to see further measures introduced that would increase money available to consumers and thus boost spending.

Corporation tax
The news that corporation tax for the largest businesses will fall immediately to 24% and to 22% by 2014 will be welcomed by our larger members. However our smaller members will be disappointed that there was no further reduction in the rate for smaller businesses. A fall in small business corporation tax would have greatly improved the financial situation of these businesses and potentially generate more employment opportunities.

Company car tax
It was announced there would be a number of changes to company car tax rates to encourage the use of lower polluting vehicles. The rates for low polluters will be adjusted and the diesel supplement will be removed in 2016. However the exemption for ultra low emission vehicles will end in 2015 and a low rate of tax will be introduced at this point. We are pleased to see the Government supporting low emission vehicles, though this will need to be matched by manufacturer’s supply of this type of vehicle.

Consumer stimulus
The RMI will to continue to lobby for economic measures that will stimulate consumer demand and assist the recovery of the UK economy. We would have liked to have seen more initiatives that would have directly helped the retail sector.

Paul Everitt, Society of Motor Manufacturers and Traders' chief executive:

“The Chancellor’s actions to improve R&D tax credits and develop a catapult for transport systems and future cities will help trigger substantial extra business investment in the years ahead. The UK automotive industry is attracting major levels of investment and creating real opportunities for engineering and manufacturing businesses.

“The proposed independent review by Lord Heseltine into the role of government in delivering pro-growth policies provides a welcome next step in establishing a comprehensive UK industrial strategy. Government’s continued support for low and ultra-low carbon vehicles is also an essential part of delivering on its environmental and industrial ambitions.”

The Scottish Motor Trade Association (SMTA) chief executive Douglas Robertson
"We're unhappy that the Chancellor has ignored the opportunity to defer proposed fuel duty increases in today’s Budget.

"George Osborne promised tax reforms that would be fair; to go ahead with this deferred increase will mean a 4p per litre rise on pump prices bringing the diesel price to 1.50 ppl by Easter and petrol to the same price by the summer and these rises are anything but fair. All this means for household budgets is additional costs and these additional costs do not take into account the continuing rises in the price of crude oil.

"We find it incredible that he has chosen not to defer the increase once again as this will mean more hardship for householders and businesses alike. It will be especially hard in rural areas where a car is a necessity not a luxury. What the Chancellor has given in increased personal allowances he has more than taken away by forcing through this unwelcome duty increase.”

Ian Simpson, sales and marketing director at The Warranty Group:

“There is a chance that the lowest rate tax threshold rise and the highest rate reduction may create a slight feelgood factor at the extreme ends of the used car market – budget and luxury – but otherwise there is little in the Budget to specifically cheer the motor industry. Really, the best development over recent months is that the 2012 used car market appears to be heading towards the more optimistic end of the forecast spectrum although conditions remain very tough and maintaining profitability requires a highly proactive approach to both sales and aftersales.”

Brian Madderson, Retail Motor Industry Federation Petrol chairman:

“The Chancellor’s decision to irresponsibly press ahead with plans to levy the deferred duty increase of 3.02 pence per litre (ppl) from August 1 will see pump prices for diesel at 150ppl by Easter and petrol in the range of 150-155ppl in the summer. With VAT at 20%, this will result in a 4.00ppl rise in pump prices over and above any continuing increase due to global prices of crude oil

“This is a deeply unpopular move by government to force through a regressive fuel tax increase of this magnitude. It is unwelcome and unhelpful, not just to the cash strapped householder but to business and to the wider economy. Drivers in rural areas where cars are a necessity not a luxury will be particularly hard hit.

“Only this week the IMF has voiced fears that Brent crude could spike from the present US$124 per barrel up to unchartered levels, above US$160 per barrel should there be a major shortage of export oil from Iran. With strong demand from emerging economies, this would inevitably drive pump prices yet higher with significantly adverse consequences for the UK economy.

“We have previously written to the Chancellor and treasury officials pointing out that the Exchequer was already ‘benefiting by an estimated £4 billion extra fuel tax receipts since taking office’. This resulted from the ongoing net duty increase of 1.76ppl, the rise from 15 to 20% VAT and the windfall gains of higher VAT on ever increasing pump prices. Just a 5.00ppl price rise nets the Exchequer another £250 million per year from VAT.

“The Chancellor promised today that reforms would produce taxation that is fair. There is nothing fair about fuel duty. It spells more misery for households as they cut back yet further on driving, more misery for retailers as disposable income shrinks further, more misery for independent forecourt retailers as fuel volumes reduce, more fuel related crime and more time before economic growth prospects are realised. It is scarcely credible that the Chancellor has ignored all warnings to push ahead with a duty rise at this time.”

Neville Briggs, managing director at Pinewood:

“In motor industry terms, there is little in the Budget to substantially cheer or dismay dealers. However, what might create a slight uplift in mood is the range of forecasts that the Chancellor made – that growth for 2012 will be a little better than expected, that inflation will continue to fall and that unemployment will improve slightly. If correct, all of these could help to lighten the mood of consumers over the course of the year and this may translate into marginally better trading conditions. The fact remains, though, that we expect that the general economy will still remain very difficult indeed and that dealers will have to continue to work intelligently and diligently in order to achieve and maintain profitability.”

Dr Walter Boettcher, director – research & forecasting, Colliers International:

“This was a carefully thought through budget that seems to have achieved a political balance within the coalition and likely to have a positive impact on rating agency and investor perceptions of UK political and economic stability.

“The headline reductions of corporate taxation rate to 24p and the ‘temporary’ 50% rate should bolster the perception the Government is keen not to erode UK competitiveness in attracting and keeping businesses. This may bring greater certainty to corporates whose investment decisions have been on hold for far too long. The emphasis on promoting growth rather than cutting costs is welcome and will perhaps bring greater certainty to businesses evaluating when and where to invest in expansion.

“Despite the stamp duty announcement there are few measures targeted directly at the property industry - a bit of a break on empty rates would have been a welcome addition to the brew.”

Michelle Malone, from ASE
"Today’s long awaited Budget speech contained little comfort for the motor trade. Although the reduction in the main rate of corporation tax to 24% was a welcome announcement, other measures will raise the real tax burden for the majority of dealers.

"We have again seen an increase in the cost of providing company cars and fuel to employees with the first change taking effect from this April.

"A typical business offering higher emission cars to 10 employees would have an increased tax bill on fuel alone of approximately £700 and each employee would have an additional £200 tax to pay. It is important that all dealers quantify the impact these changes will have on the tax paid by both their business and employees and consider whether now is the time to look at alternative strategies for providing cars.

"With the increased costs of company vehicles, ASE would urge you to seek alternative strategies to assist your valued employees with the company vehicles and we would be happy to advise if required." 

 

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