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Nov 2008 - What does the Pre-Budget Statement mean for Recruiters?

news-downturn-imageVoyager's Sales Director, Paul Thompson, comments on the pre-budget statement from the perspective of UK recruitment businesses.

There was a great deal of expectation surrounding the Government’s pre-budget statement on 24th November, and with the Chancellor promising “wide ranging measures” and a “comprehensive plan to support business and the economy”, many were hoping that he would provide the drastic measures needed to safeguard SME businesses in these uncertain times.

With a background at the sharp end of the recruitment industry, Paul Thompson is ideally placed to sort through the Chancellor’s plans to stimulate the economy and discuss how they will affect Recruiters and the companies they service.

“We all know that cash flow is the lifeblood of an SME recruitment business and this was the main thrust of the Chancellor’s new measures.

“First the good news.  From now on, recruiters can spread their tax obligations (including corporation tax, VAT, National Insurance and Income tax) across monthly instalments, rather than in one cash flow stripping whack.

“Further to this, the government will now allow recruiters to offset losses against profits from the last three years, rather than only the previous year.  So if 2009 turns out to be the challenge that is widely predicted, many recruitment firms will be able to claim a tax rebate going back as far as 2006/7.

“The Chancellor will also make it easier to get credit through a small business finance scheme, pledging £1 billion for small businesses to be made available in loans from £1,000 to £1 million.

“They have also promised that state owned banks will pledge not to increase interest rates for SME overdrafts for at least 1 year – although with interest rates predicted to drop to 0.5% by the end of 2010 this may not be quite as generous as some may think.

“The Chancellor’s much trumpeted reduction in the rate of VAT to 15% for the next 13 months will have very little impact on the wider economy – with shops reducing prices by 20% to make a sale, I can’t see how much use a further 2.5% will be, except for recruiters supplying financial institutions.  Otherwise it’s good news for printing companies, maybe, but it will be more of a hindrance than a help to the recruitment industry at large.

“However, with the increase in small companies’ rate of corporation tax, deferred to an as yet unspecified date, many will still breathe a sigh of relief.

“All this expenditure has to be recouped from somewhere, and with National Insurance contributions set to rise in April 2011 by ½ of one percent for both employees and employers, the smart operators are bound to replace administrative staff with software packages, such as our Mid-Office product, that will effectively slash employers’ wage bills by an average of £20k per year, per employee.

“So it’s not all doom and gloom.  The Chancellor was at pains to point out that that there are still 500,000 job vacancies in UK, and with the Prime Minister declaring his intention to build his way out of the oncoming recession with a variety of road widening schemes, the outlook might be significantly brighter for those Recruiters operating a Construction division.”

For more details of how our software packages can help take the bite out of the credit crunch, please contact our sales team on 0800 008 6262 (option 1).