Capitalising on the budget

Capitalising on the budget

Nick Ray, CEO of Woodcote Software, the parent company of recruitment software leaders Voyager and expressHR, analyses the March budget.

Once a year, I buy a copy of the FT (for me, most of the time, anything that isn’t published by Ladybird, is viewed as heavy going) but I make an exception on the day after Budget Day. 

While TV headlines will tell me there’s 50p on a packet of cigs and 15p on a bottle wine – essential information, since these sins comprise a major part of the Ray family budget – it’s the impact of the budget on my business that I really need to understand.  And that detail is best found in the FT.

So, we got a “budget for growth”, which seems pretty important given that GDP growth went negative last quarter, the public spending cuts have yet to bite and the OBR have just down-graded their growth forecast for 2011.  (Our own experience is a bit at odds, since Voyager had record months in November and February and expressHR has done better than ever in the last 8 months, but nobody asked us.)  The question is: where will that growth appear and how will it affect our companies?

Across Voyager and expressHR, we provide software to recruiters that service pretty much the entire UK economy.  From head-hunters placing captains of industry to high street blue collar temp agencies and everything in-between, somewhere in our product range is a product for their needs.  So it’s important to know which sectors will grow and which are threatened by government policy and to fine-tune our sales and marketing accordingly.  There is nothing more dispiriting for your sales teams than to focus them on, say, banking, when Lehman Brothers has just collapsed.

So, the great news is that there is a raft of tax changes and initiatives designed to help start-ups and promote growth in early-stage businesses.  Chief among these is an increase in the income tax relief to 30% for “angels” who invest through the Enterprise Investment Scheme in qualifying companies, or who put their money into Venture Capital Trusts.  With zero capital gains tax, too, I’m seriously wondering why I keep money in a savings account where the interest rate is less than inflation and I’m taxed on that meagre amount too.  Ah, I remember, it’s to pay for the ciggies and wine.

Next up, is the increase in R&D tax credits from 175% to 200% and then up to 225% in the 2012/13 tax year and the re-launch of Enterprise Zones with tax breaks and zero business rates; there will be one of these in most of the major cities.

Finally, there are some incentives for the construction industry and house-builders in particular.  The government is now prepared to invest in your house if you’re a first-time buyer and don’t have a big enough deposit.  Wow!  They never did that for me.  They’re also delivering faster, easier planning approvals and changes in stamp duty costs for investors with portfolios of property which will encourage big private landlords and may also encourage pension schemes to invest in domestic property.  So, if you have a lovely house on the edge of the greenbelt with view s over open countryside, expect to see a Tesco’s you didn’t want and an estate of affordable housing owned by the Pru to spring up in your backyard.

So, with my detailed analysis in hand, I shall be going to our next board meeting with a clear and detailed plan to refocus our well-oiled sales and marketing machine.  (Possibly a bit less well oiled, given the rises in duty on strong liquor.) 

“Gentlemen, after a great deal of analysis and with laser precision, we shall target our efforts on recruiters that serve start-up house builders, based in the North East, who conduct qualifying R&D, need angel investment and plan to sell their developments to first-time buyers with no money, or to wealthy property speculators.  George Osborne has delivered the perfect package of measures to guarantee these businesses see spectacular growth.”

Health warning: Nick Ray is not qualified to give investment advice, has no training or experience as a financial analyst and enjoys his wine too much to be sure he read the FT properly – after all, it’s a bit heavy going compared to Ladybird books.