Business reaction to Jeremy Hunt’s Spring Budget
At Business Matters we have spoken to a number of experts to gauge their opinions about Jeremy Hunt’s Spring Budget, and whilst the Chancellors announcements have gone down well, many sound notes of caution.
Gerard Grech, CEO of Tech Nation, told us: Today’s budget is a positive indication of the UK Government’s commitment to becoming a Science and Technology Superpower. We welcome the measures aimed at supporting the UK tech industry, including the introduction of additional tax support for R&D and the announcements on an AI sandbox and ambitious Quantum investment which will generate investment in new industries, whilst protecting consumers and businesses.
As a nation uniquely positioned between two economic powerhouses, the US and the EU, we must harness innovative regulation that will enable us to propel ourselves as an international hub and leader for AI, Quantum Computing, and Deep Tech. This is a critical step towards creating a distinctive, value-driven tech ecosystem in the UK, setting us apart from other tech hubs.
We must build on momentum generated and continue to foster a culture of innovation and collaboration that empowers businesses to grow and succeed.
The recent intervention by both the government and the private sector to facilitate the sale of Silicon Valley Bank is a shining example of what can be achieved through collaboration between the private and public sector and a clear vision.
John Dickie, Chief Executive of BusinessLDN, said: “With the Chancellor’s ‘back-to-work’ Budget taking place as the capital grinds to a halt because of strikes, we urgently need to get the economy moving.
“Businesses will welcome the focus on alleviating the cost of living and getting people back into the labour market. Given Londoners face the highest childcare costs in the UK, expanding the current free 30 hours from the age of nine months during term-time is a big boost for parents and carers. But a bolder and more comprehensive childcare plan is needed to ensure the sector can expand to meet demand and to address the juggling act that parents and carers face. Maintaining the Energy Price Guarantee at the current level for households will be a lifeline for those struggling to pay their bills but this won’t help businesses and sectors at risk of turning off their lights when costs rise sharply next month.
“With corporation tax rising, enabling businesses to offset investments in the UK against their profits is a positive signal amid strong international competition – but these allowances should be made permanent to avoid firms bringing spending forward rather than sustaining it. Reinstating R&D tax credits will also enable ambitious small companies to go for growth.
“Excluding London from the list of 12 investment zones is an own goal given the critical role the capital will play in supporting growth across the UK and its own high levels of inequality. Devolving additional powers to other parts of the country will give local leaders the ability to prioritise growth where it is most needed and deliver much better bang for our bucks. The Government now needs to deliver on its pledge to use this as a blueprint for devolution for other parts of the country, including the capital.
“It is disappointing that the Government has missed an opportunity to launch an independent review of the benefits of VAT-free shopping – a measure that would more than pay for itself by attracting high spending tourists to the UK and support 78,000 jobs across the country.”
Sam Martin, CEO of Peckwater Brands, said: “Hospitality is a lynchpin of trade and employment, and can be a major driver for economic growth and recovery. Yet the sector is also more significantly impacted by today’s challenges than most, as they are both energy intensive and subject to the inflated price of goods, notably food costs.
“To allow hospitality to thrive, businesses required a major overhaul of the business rates system, a shot in the arm to staffing, and increased support with energy costs. The measures laid out for hospitality in the Spring Budget fall short of the level of support that industry leaders have been crying out for over the past year.
“Hospitality can be a driver for the economy and a source of both jobs and tax revenue, but without the right conditions to grow, we will likely see businesses shut down by high business rates, unaffordable tax bills and short staffing. Short-term support with energy bills may keep the lights on in the coming months, but without further action, the possibility of a return to pre-pandemic levels appears slim. I only hope more can be done to prop up businesses affected by rising costs, and that people will continue to support pubs, bars and restaurants in their communities.”
Zoe Haimovitch, Senior Director of Strategic Projects at HiBob told us: “Today’s announcement from the chancellor that the budget will expand free childcare to all children over 9 months old is welcomed news to working mothers. The UK’s childcare system is the most unaffordable in the developing world. Layer on top of this the current cost-of-living crisis, and we can see clearly why women, who take on a disproportionate share of unpaid caregiving, are excluded from the workforce. It’s an issue that’s not only impacting families and businesses, but it’s now impacting the overall economy.
“New research from HiBob finds that in the UK, less than 20% of companies offer childcare as a benefit and less than one in three (32%) women get extended paid maternity leave. This represents a huge percentage of mothers with no support from their employer, giving them one of two options – Pay a small fortune for childcare or stay home. Delivering on the promise of additional childcare support, could have an enormous impact. Childcare has been over-looked for far too long.”
Alistair Nichol, tax partner at Evelyn Partners, the wealth management and professional services group, reacted to today’s Budget, saying: “Today’s Budget focused on a promise to grow the UK economy. The Chancellor’s speech was full of aspiration and affirmation (and four E’s), but it remains to be seen whether sustainable economic growth can be spoken into existence. A healthy and thriving economy needs investment from across the public and private sector, from entrepreneurs and SME owners, to Private Equity, Financial Institutions and other institutional investors nationally and internationally. Historically the UK offered a high degree of confidence around long-term investment – I hope there is sufficient substance in this Budget to continue rebuilding this confidence.
“The announcement of a 100% deduction for qualifying capital expenditure is certainly better than a simple cessation of the 130% super deduction regime without replacement. And from one perspective, given the 25% corporation tax rate from 1 April, from the Government’s perspective the tax relief offered by the replacement regime is close to equivalent. I don’t think that is how most businesses are likely to see things in the round, however. Hopefully this is not a sign of a wider dissonance between the Government’s aspiration and businesses’ motivation.
“Few expected the Chancellor to row back from the planned hike in corporation tax from 19% to 25% from April. However, business will be disappointed by the lack of a clear roadmap to bring down corporation tax in the coming years. Businesses think and plan long-term, and they need the clarity to make investment decisions. The Chancellor did announce the intention to maintain the 100% deduction for qualifying expenditure indefinitely when affordable – it would have been nice if a similar indication of the Chancellor’s thinking could have been given on corporation tax.
“Much like the ambition to being a fully ‘quantum economy’ by 2033, we won’t know the state of the UK economy following today’s Budget until we can measure it.”
On childcare, Shreya Nanda, SMF Chief Economist, said: “Changes to childcare policy are overdue – this was one of the biggest spending items in the Budget, and the OBR estimate that it will have the biggest impact on the economy, increasing GDP by 0.2% by 2027-28.
Providing greater flexibility and support for parents is important to reducing barriers to returning to work – our research has shown that a lack of affordable childcare is a key obstacle to mothers with young children returning to work. But the Government must make sure that the funding provided is adequate to provide the care promised; and to accompany the increase in funding by action to bring costs down.
It is striking that most of the expanded childcare offer won’t kick in until after the election – this potentially creates a headache for whoever is in government in the next Parliament in ensuring that it is adequately funded.”
Insurance provider for the self-employed, Qdos CEO, Seb Maley, told us: “Childcare reform aside, anyone working for themselves has a right to be deeply disappointed by this Budget. There are 4.3m self-employed people in the UK who contribute hundreds of billions to the economy every year. Why isn’t more being done to support them?
“The Chancellor completely ignored the IR35 legislation in his speech. This smacks of irony in a so-called back to work Budget. The government wants retirees to return to work but won’t address the issues plaguing IR35 reform. These tax changes forced many freelancers and contractors into early retirement, at a huge cost to the economy.
“Fix IR35 and retirees might be attracted back, solving skills shortages and boosting the economy. It’s a simple solution to what is a massive problem.”