Speaking at the 2021 ICAEW Midlands Economic Summit last week, Margot James, Executive Chair of WMG, University of Warwick and former MP and Minister for the Department for Digital, Culture, Media and Sport, said government support for freeports means they will “probably work”, provided the freeport acts as a “catalyst” for investment in the wider Midlands region.
“Undoubtedly the manufacturing sector should benefit from freeports, but it depends on the level of displacement versus the freeport acting as a catalyst for production and investment outside of the actual area of the freeport,” she told the ICAEW event panel.
ICAEW’s Business Confidence Monitor (BCM) report, published last month, found that confidence among businesses in the Midlands returned to positive territory in the first quarter of 2021, despite the damage inflicted on the region’s large manufacturing sector by supply chain disruptions and weak global demand.
Freeports a “game-changer”
Panellist Kevin Harris FCA, a managing partner at accounting firm RSM, was confident about the prospects of an economic rebound in the Midlands.
He said: “There’s been a real shift of late to people looking at rebuilding and future growth, which indicates where people’s minds are at. Everything seems to be pointing towards the fact that there is a lot of pent-up demand and a lot of businesses are very positive about what the next stage may involve.”
Harris also believed the new freeport would be a “game-changer” for the region and would benefit the whole of the Midlands.
He added: “While the sites are based in the East Midlands, it will have enormous benefits for the Midlands as a whole. My view is that it’s a very big positive, a game-changer for this region, because of what spins off from it. It’s not the freeport in isolation, but everything around it as well.”
Overall, business confidence in the UK was back in positive territory in Q1 2021, the BCM found, likely boosted by news of vaccine approvals and its subsequent rollout.
Tax will become “increasingly complex”
However, many speakers at the summit raised concerns that whilst the Budget will support businesses through the next six months, the tax system is becoming increasingly complex, and this coupled with the government’s Making Tax Digital (MTD) initiative picking up pace, will put more pressure on SMEs. Summit attendees agreed that short-term survival and growth should be driving policy decisions in the next six months, not longer-term streamlining.
Speakers welcomed the additional COVID support schemes and tax reliefs announced in the Budget but cautioned against over-complicating an already complex landscape. “We now have a more complicated tax system with two rates for corporation tax and four rates for VAT”, warned one speaker.
Some speakers attributed the reported rise in M&A activity to SMEs being tired and not wanting to re-build their businesses again amongst the complexities. This raised concerns for owner-managers whose retirement income is often tied up with the value of their business – as the value of businesses has suffered, what does this mean for people entering retirement?
Commenting on the Summit, Sophie Dale-Black, ICAEW Midlands Regional Director, said: “It is testament to the standing of ICAEW Chartered Accountants in the Midlands that we could have speakers of this calibre appear on the panel and give their thoughts on the latest findings of the BCM. We hope the region can build on the positive business sentiment from Q1 2021 and make a strong economic recovery this year.”
- ICAEW’s Budget 2021 coverage
- ICAEW Business Confidence Monitor (BCM): Regional
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