Reaction to the Chancellor's budget for growth

The Spring Budget has come and gone and it's been dubbed by Chancellor Jeremy Hunt a budget for growth. He set the scene by talking about the way the UK has avoided a 'technical' recession and the prediction that inflation would go down to around 2.9 per cent by the end of this year.

When it came to the cost of living crisis he confirmed that the energy price cap for a standard household would be held at £2,500 a year until the end of June in the hope that wholesale prices will come down. 
Businesses and their energy bills didn't get a mention in the main speech. Instead he focussed on big picture energy products around carbon capture and nuclear to help us to become more sustainable. No mention of solar or other renewable energy opportunities. 

There were other measures which make headlines including more money to keep leisure centres open; money to help the voluntary sector deal with suicide; the Brexit Pubs Guarantee; freeze on fuel duty. 
Twelve investment zones were mentioned, none in the South of England though more money will be made available for 'high quality regeneration projects' and more for mayoral combined authorities. Even potholes got a wad of cash.

When it comes to business, it seems that Local Enterprise Partnerships role might change with economic strategy being moved to local authorities from 2024. The corporation tax rise will go ahead. 
There was some tweaking around business credits yet nothing very meaty, perhaps the most useful thing will be support with childcare costs allowing more parents to return to the workforce and also the launch of 'returnships' to get the over 50s back to work. 

Here's what some small businesses concluded: 

Dave Southby of Dave Southby Financial Planning, based in Wroughton, near Swindon said:

“Overall it was very positive. The big question answered was around the life time allowance. There was a lot of speculation on this leading up to the Chancellor’s announcement with many, including me, thinking the allowance would be going up. I did not expect it to be removed and it is certainly something I welcome. The pension annual allowance was also increased by 50%, from £40,000 per annum to £60,000, another very welcome announcement. 

“Also announced was the Money Purchase Annual Allowance (MPAA) will increase from £4,000 per annum to £10,000 per annum. This will give people more flexibility in retirement and will potentially allow them to pay more back into their pension if they return to work after retiring.

“Unfortunately the Chancellor did confirm the increase in corporation tax which will affect many businesses. This increase stresses the importance of financial planning and reviewing other potential tax efficient means of extraction i.e pensions, especially with the new relaxed pension tax rules.

“I really liked the announcement of child care now being offered straight after maternity leave. I think this is going to relieve a lot of pressure on families and help women in particular get back into work. This is a huge barrier currently for many women.

“I feel the overall economic outlook looks very positive over the next few years so fingers crossed we see the growth they are expecting.”

Liz Hutchings, founder of Total Guide to said:

“Now we've all gotten used to the idea of the corporation tax rise to 25% for businesses with profits of more than £250,000, the new full expensing, allowing 100% of qualifying expenditure, to be written off against taxable profit may slightly ease the burden for some of those businesses. 

“A key one for me personally and fellow parents in businesses is the new 30 hours of childcare funding. Sadly, this won't benefit me personally by the time it comes in, but I really feel that it will help businesses with recruiting. The difficulty in recruiting has not gone away since the pandemic so this will incentivise a strong workforce back to work.” 

Martin Gurney, tax partner with Haines Watts Swindon:

As an adviser to owner-managed businesses, I see the challenges that they face on a daily basis.  

Broadly speaking, two of the most significant of these are: (i) increase in customers postponing purchase decisions due to inflation and fuel cost concerns; and (ii) difficulty in recruiting.  

We were already relatively confident on the broad content of the Budget – the Chancellor had ensured that the principal elements had been pre-announced so as not to shock the economists, markets or the economy, and therefore we were also pretty confident that the Chancellor would maintain the conservative mantra that the Budget must be balanced in order to ensure continued economic stability.

So what exactly has the Budget given us:

1. The Chancellor announced that the Budget measures has been reviewed by the OBR {Office for Budget Responsibility] who were forecasting:

• a fall in inflation to 2.9% by the end of 2023
• a reduction in national debt over 5 years by 3% of GDP

Hopefully this helps boost confidence in the economy such that business activity levels begin to increase

 2. The Chancellor highlighted the fact that there are more than sufficient people in the UK capable of filling current job vacancies, therefore he needs to make it easier for those who want to get jobs and make it less financially beneficial for those who avoid work to continue to do so.  He is attempting to do so by: including:

improving access to work for the sick, disabled and those with special needs

• increasing child-care support 
• removing the pension disincentive facing older so that their pension fund is not eroded by continuing to work 
• Hopefully this helps reduce the number of job vacancies

3. The Chancellor recognised that the government needs to help stimulate economic activity and growth, and therefore made the following changes:

• a 100% tax deduction, without limit, for qualifying capital expenditure incurred over a three year period
• an enhanced R+D relief for companies spending more than 40% of their total outgoings on R+D activities
• an increase in pension savings allowances from £40k p.a. to £60k p.a.

Overall, no big ‘give aways’ – instead, the Chancellor believes that stimulating confidence, encouraging full employment, and stimulating economic activity are the keys to long term economic growth and stability.  Time will tell if he’s right…

Julianne Ponan MBE is the CEO of snack brand Creative Nature which sells across the UK and to 18 countries nationwide. She said:

“Innovation comes from small businesses and specific funding of R&D needs to be offered to small businesses including more funding from the Department of Business and Trade to help businesses drive exports of UK manufacturing. This did come in part however it’s unclear what a ‘qualifying business’ is and the 40 per cent spend might mean small yet mighty innovations don’t get the same credit. 

“Energy bills for manufacturers in food should have been looked at as it is pushing up the cost of product whilst businesses are already dealing with raw material and packaging rises. No mention of that. The focus was on carbon capture and nuclear yet we need help on the ground now. I was also disappointed that corporation tax will rise to 25 per cent for larger SMEs and that is a big chunk of money to find. 

“There is a big skills gap where small businesses are finding it hard to hire/ find the right people. Childcare costs are also ridiculously high which means the incredible talent pool of parents are excluded from the job market. Hopefully the plans announced around this will help and many of those helped will be women.”