GSC GraysGSC Grays

Contact our offices

Fran Barrigan, Director & Head of Valuations, GSC Grays

A Budget of missed opportunities for rural enterprise

We’ve become so used to Autumn Budgets being a big event that this year’s was a bit of a let-down in more ways than one. Is no change good news? No change to the headline rate of CGT: good for those realising capital gains. No change to the IHT regime: disappointing for farmers, with the unpopular cap on reliefs remaining in place, although at least rates didn’t go up. No overall rise in income tax rates, but an additional 2% on property and savings income, alongside changes to minimum wage rates which will add further pressure to employers.

I’ve followed the headlines and analysis with interest. Is it a good Budget because it avoids spooking the markets and doesn’t target any single specific issue? Or is it a bad Budget because it might not achieve much? It’s very much going to be a case of wait and see. There’s no denying that economic growth is desperately needed, so perhaps it is more about confidence and how businesses and consumers feel than any one specific measure.

But what does all of this mean for farmers and rural businesses? The rural economy includes not just farming, but the workshop on an estate, the village pub, the farm shop, the holiday business, the contractor, the local builder and the dozens of other small businesses which keep rural communities functioning. For many of them, growth does not mean becoming the next household name. It means taking on another employee, converting a redundant building into workspace, adding accommodation or investing in new equipment.

Many farming businesses are now mixed businesses, with let residential or commercial property sitting alongside farming, tourism, food production or other enterprises. An additional 2% on property income isn’t just taxing a passive investor sitting apart from the rural economy; it’s hitting the diversified businesses farmers have constantly been told to create. For many, diversification has become essential to the long-term viability of their farms, providing income to support agricultural operations and future investment.

Then there’s the proposed Founders’ Relief. The principle of encouraging entrepreneurs to start, grow and retain businesses in the UK is a good one, but the consultation proposes a minimum turnover of £10 million and at least 15 full-time employees before a business even gets to the growth and innovation tests. How many rural businesses do you know that spend upwards of £1.5 million on growth and development?

The question is why design it that way? Is it a shiny new policy that looks good on paper, or does it suggest that Government and Whitehall don’t particularly understand how much of the economy operates outside the world of high-growth scale-ups?

Meanwhile, with no action on Business Property Relief or Agricultural Property Relief, farming families continue to face difficult questions over succession. These are often asset-rich but cash-poor businesses, built up over generations. If succession planning in life is made difficult and succession on death is subject to potentially unaffordable IHT bills, where is the incentive to grow a business capable of continuing generation after generation?

Growth does not only come from the handful of businesses capable of becoming the next household name. In rural areas it also comes, rather less dramatically, from established farming and rural businesses investing, employing people, providing vital services and passing viable enterprises from one generation to the next.

Perhaps the next Budget might find room for them too.

Article by

Fran Barrigan
MA MRICS
Director

Get to know Fran

Latest News

Secret Link