The CBI welcomed the spending review’s commitment to longer-term investment in the economy but said there was a sting in the tail in the size and scope of the £3m apprenticeship levy.
Director-general Carolyn Fairbairn said: “Businesses will be pleased to see the Chancellor staying the course on deficit reduction, his commitment to an industrial strategy, and the emphasis on nurturing a vibrant business community.
“Standouts include maintaining spending on infrastructure; ramping up housebuilding; support for energy-intensive sectors and for advanced manufacturing.
“Business recognises there are tough choices to be made in balancing the books, but many are reaching a tipping point, where the cumulative burden of the living wage, apprenticeship levy and business rates risk hurting competitiveness.”
She described the Apprenticeship Levy, set at 0.5%, as a significant extra payroll tax on business, which by widening the net, will now catch more smaller firms.
“We welcome the creation of a levy board to give business a voice on how the money is spent and will work with the Government to ensure a focus on quality,” she said.
“Many firms will be disappointed to have been kept hanging on for a much-needed review of business rates until next year’s Budget.
“Firms will be reassured by the protection of the science budget, but the shift from grants to loans for Innovate UK could dampen bold and gamechanging innovation, particularly amongst smaller businesses.”
The Institute of Directors (IoD) said the apprenticeship levy would be a “big hit” on businesses.
Head of employment and skills policy Seamus Nevin said: “Employers are committed to tackling the skills shortage and apprenticeships will be a big help. Businesses are keen to work with Government but the focus needs to be on quality training, not just the race to reach the targeted three million apprenticeship starts.
“The Chancellor cannot pretend the apprenticeship levy is anything but a payroll tax – and a considerable one which will raise £12bn over the parliament. At 0.5% of payroll, it will be a big hit to big employers. With the OBR also saying that employers could pass the cost of the levy onto employees, the government must also be careful of the impact the levy, combined with the incoming national living wage, could have on wage growth and job creation.
“Moreover, businesses still need clarity about how they will get more out of the levy than they put in. It is a worry that the government are working on the assumption that up to one-quarter of the money collected will be spent on administration and bureaucracy, rather than the apprentices themselves.”
The levy will be paid by businesses with pay-roll bills of more than £3m.
The IoD welcomed changes to UK Trade and Investment, the Government’s export and inward investment body.
Head of EU and trade policy Allie Renison said: “While there is some contradiction between the Government committing to such an extremely ambitious exports target and continuing to chip away at UKTI’s budget, we welcome the focus on reforming and refocusing UKTI to deliver more targeted value-add activity for business.
“Not all of UKTI’s services have always been value for money in terms of business take-up, so concentrating on the practical needs of enterprise to expand abroad is vital. Businesses will only consider exporting if they have the right information about new markets. The focus must be to deliver UKTI services digitally wherever possible to cut costs without making it harder for businesses to get the information they need and value. A live database of export opportunities, for instance, is easy for UKTI to run, easy for businesses to access and will help British firms win business overseas.
“While there is a pressing need to better integrate commercial expertise and know-how into trade promotion initiatives, UKTI should take care not to try and compete with the direct support offered by the private sector, but rather collaborate and act as a facilitator for business.”
