What does the 2017 Autumn budget mean for business owners?
Well, what do we make of that? Chancellor Philip Hammond, known for his nickname ‘Spreadsheet Phil’, has delivered a budget with few thrills, and a lot of caution. The newspaper headlines are the reduction in stamp duty, estimated to benefit 95% of all first-time home buyers, and a rise in the higher-rate income tax threshold, to £46,350. But what are the potential impacts on business owners, and how might that affect the market for business sales?
The big news for everyone in business is the Office of Budget Responsibility’s rather gloomy predictions for UK growth rates. Forecasts for growth have been downgraded from 2% to 1.5% for 2017, and every year until 2021. The BBC’s Nick Robinson calls this “the budget graph of doom”. Still, there’s some small comfort to be taken from the fact that rises in business rates will now be pegged to the Consumer Price Index (CPI) measure of inflation, not the higher Retail Price Index (RPI), which means a cut of £2.3bn.
Hidden behind this larger, macroeconomic picture are some initiatives and incentives that might have a direct impact on your business model – and we know changes in policy and market innovation often has an impact on M&A activity.
The government has pledged £500m support for 5G mobile networks, full fibre broadband and artificial intelligence, and £540m for electric cars – interesting news if you are in the automotive, manufacturing or electrical sectors. As an M&A advisor, we’ve long seen interest in specialist businesses in this area attract attention from UK and overseas acquirers – such as the investment in robotics specialist Astech Projects by German acquirer Schauenburg International.
Looking wider, a further £2.3bn has been allocated for investment in research and development. The acquisition of RT Motion by VITEC in September 2017 demonstrated how highly investors and acquirers prize leading-edge innovation – our client specialised in wireless lens control systems for cinematography. Another good example of industries that directly benefit from investment in R&D is Machine 2 Machine technology and IoT (Internet of Things). In the past few months, we’ve seen Lyceum Capital’s buy-and-build investment in our client Wireless Innovation.
Should we prepare for a gloomy few years? We know from our regular survey and polls at Masterclass and business events across the country that while business owners might fear for the wider economy, their confidence in their own business growth remains high. This is because it is something within their control. And at the risk of sounding too optimistic, growing businesses, delivering specialist products and services, will always be attractive to investors and acquirers, whatever the sector.
So let’s park the gloom for the moment: as it has always been, a business acquisition is all about the potential for growth – and this is why some commentators are predicting 2018 might be a boom year for business sales.
Founding Director of BCMS, Dave Rebbettes presents the BCMS Masterclass at venues across the country.