Franchise Focus Business News…

Yesterday saw George Osborne deliver a divisive budget to the House of Commons amidst frequent pines of disapproval from the opposition benches countered by cries of support from the ranks of the coalition. In his opening remarks, the Chancellor of the Exchequer laid bare the grim economic state currently facing Britain, with a deficit destined to reach 85% of GDP still some years away from a resolution.

Despite this pessimistic outlook, yesterday’s budget did deliver some news that should be well received by franchises across the country. One such announcement was that Britain would reduce its corporation tax rate to 20% in 2015, undercutting most other developed nations, in the hope that this would safeguard British competitiveness and continue to attract FDI. Businesses big and small will rejoice at having their tax burden lessened, allowing them to commit more capital for growth. Such a move has already been utilised in Ireland for several years and it is hoped that that its usage in Britain will help businesses – including franchises – to expand and begin hiring again. This will come to the delight of franchisors in the UK hoping to open new outlets and/or acquire new franchisees.

Additionally, the implementation of a new employment allowance will save a sleuth of small businesses having to pay employer national insurance further alleviating a portion of the tax base that franchisees and franchisors might fall under. Being a labour-intensive business model, franchising has huge employment potential across the plethora of industries it operates in, and so any measure that minimises employment costs will prove highly beneficial.

Other positives for franchises fall on the consumer front.  Reduced taxes on products such as beer could help boost consumption, as could measures that would see certain parents able to claim back up to a fifth of child care costs by 2015, freeing up more of the household budget to go to discretionary spending. These may furnish franchises operating in all industries with more custom as the squeeze on working class families is reduced.

More specifically, the budget also outlined means to stimulate construction by facilitating Britons with a new ‘help to buy scheme’ to purchase houses. If this proves a success, it could guarantee a boon in business for a range of franchises involved in the construction industry, not to mention financial franchises with an interest in mortgages and property.

David Cameron’s recent concession to hold a referendum on Britain’s EU membership should the Conservatives be re-elected has sent shock waves across the continent as well as at home, with many countries pondering what such an unprecedented event could engender for the future of the apparently floundering European project. The UK – where EU membership has polarized the public arguably more so than in any other member state – has recently seen a surge in support for Eurosceptic parties, most notably UKIP, a trend that may have coerced the Conservatives into conceding a referendum for fear of losing votes at polling time.

But while EU membership increasingly divides British citizenry, businesses have had a more black and white reaction to this news, finding it altogether unsettling. The message from the British business community has been largely uniform; an EU exit would deny UK companies FDI and rob Britain of its status as an English-speaking gateway to the massive European market. This could entail a substantial loss of revenue for British companies, including franchises that – while perhaps not relying on FDI directly – certainly benefit from its spin-off effects in the wider economy. As such, could such an exit leave the UK franchising industry facing tougher times?

So far, the reaction from the British business community has been unanimous; an EU exit is a bad thing for trade. Indeed, Pimco Chief-Executive Mohamed El-Erian went one step further; according to a recent article in The Telegraph, he claimed that secession from the single market could endanger living standards, contrasting sharply with the Eurosceptic perspective arguing that the billions of taxes paid to the EU yearly could be put to better use at home. The Federation of Small Businesses – the largest representative body for self-employed and small business owners in Britain – maintains that an exit would remove UK companies from 500 million potential customers on the continent, given the high proportion (70%+) of British SME’s that export, typically to other EU member states. The FSB is adamant that a free common market minus constricting regulation is ultimately desirable for British businesses regardless of size. Furthermore, overseas franchises seeking to use Britain as a platform from which to launch their European operations will be deterred should the country’s EU membership be jeopardised.

However, as many franchisees operate with a local focus and are generally impervious to the vagrancies of international trade, a British departure from Europe should not endanger their enterprise to the degree that an exporting firm might be. This being said, should said exit entail a decline in living standards and as a consequence catalyse a drop in disposable income then this trickledown effect will eventually impact upon franchisees as well.

An interesting choice awaits the British public, the outcome of which could have lasting repercussions for franchising.

In this week’s Franchise Update, we report on Lord Carter’s controversial Digital Britain report and the Association of Certified Chartered Accountants’ call for more guidance for small businesses on tax law.

Click here to download this week’s Franchise Update, or watch in the player below:

The Digital Britain report published Lord Carter of Barnes, Minister for Communications, Technology and Broadcasting has been met with controversy from industry officials. David Frost, Director General of the British Chambers of Commerce (BCC), has hit out saying that the report is not ambitious enough. Visit Culture.gov to read the the Digital Britain report and decide for yourself.

A new ACCA policy paper highlights certain areas that the association believes require specific attention by governments across the world, including simplifying legislation, tightening the rules on the difference between tax avoidance and evasion and making green tax laws more explicit and accessible. Visit the ACCA’s website to find out more about green tax laws and more!

This week, ACCA certified accountant Anita Brook of Accounts Assist, published an interesting article on choosing the right medium for your business. It is important for entrepreneurs to consider this option carefully when starting their own business. The following options may be available to you:

Sole trader: This means that you will be the sole individual registered with HMRC in order to pay income tax etc. This option can avoid a lot of paperwork registering Companies Houses, but can be more costly and difficult to sell on.

Partnership: This is made up of between “two and twenty” people and all liability is shared between the partners. Even though it is not required by law, Anita advises partners to draw up a Partnership deed to avoid complications.

Limited Liability Partnership: LLP’s can offer great flexibility to partnerships, as it creates a company and thereby removes responsibility from the individual. However, the creation of an LLP can involve a lot of paperwork and higher accountancy fees.  

Limited: A Limited Company requires directors, who have defined roles with the company. Therefore, the danger of disputes is lessened. Limited companies exist as entities separate from their shareholders, which removes them from any liability. However, there is a considerably higher amount of paperwork and accountancy fees involved.

There are obvious benefits and downsides to each of the business structures above, to find out more visit Anita’s article, and also visit Franchise Direct’s directory of the latest business opportunities.

Watch this week’s episode of Franchise Update to find out about innovative and enterprise awards as well as business funding available to you today.

Download Franchise Update UK: 28/04/09, or view in the player below

The 2009 winners of The Queen’s Enterprise Awards have been announced and Franchise Direct is delighted to announce the success of one of the franchise opportunities featured on our site - EnviroVent. EnviroVent won an award for Innovation for their filterless energy saving extractor fan. Well done EnviroVent!

Government representatives are encouraging small business owners to avail of business funding schemes in order to keep their businesses going throught the recession. At a seminar in Swindon, Business Minister Pat McFadden said that the Government is increasing the lending available from the banks and easing cash flow pressures by allowing businesses to delay payment of taxes and business rates. Visit the Business Link website for more details.