What’s the difference between the cost of creating a job in a small company compared with the cost of creating a job in a large multinational? Looking at the sums of tax-payers’ money that have been given away to secure inward investment in the UK sometimes at distinct disadvantage to locally-based rival manufacturers the cost in terms of pounds per job seems high.
The Chancellor’s Budget this week seems to mark a distinct shift in policy, with his package of measures aimed at small and medium sized businesses, and at fledgeling start-up companies. He seems to be signalling that a policy of growing small, locally-based, but at the same time flexible and innovative, companies is a safer bet than luring relatively mobile multi-nationals into Britain using big ticket incentives. The choice seems obvious. For £150m, an inward investor may be enticed in, securing a few hundred jobs in the UK. But for the same sum, spent on R&D tax credits, the Chancellor will underwrite almost one third of R&D costs for UK small business in the coming year.
The benefits of such measures for our smaller engineering companies are all too evident. What’s more, if a home-grown engineering company takes root in the Midlands it is unlikely to view relocation to Hungary as an option.
Of course, the bulk of our wealth creators are not start-up firms. And what is less clear is how far this Budget has gone in securing the future for the rest of the manufacturing sector. It was gratifying to see a further year of 40% capital allowances. But the size of the spending give-away for consumers suggests there will be less room for any further reductions in interest rates this year, which looks set to leave the pound worryingly strong.