While the business community welcomed elements of the chancellor’s autumn statement yesterday (17 November), there were calls for more business support and a more focused strategy on growth and trade.
Confirming the UK was already in recession, Jeremy Hunt delivered a sombre address to the Commons laying out plans to cut public spending and raise revenue to fill a £55bn fiscal hole through £30bn of spending cuts and £25bn of tax rises, to restore Britain’s credibility and curb inflation.
As well as continuing support for energy bills and an inflation matching uptick in pensions and benefits, Hunt said business would receive support worth £13.6bn over next five years to help firms with business rates, reports the BBC.
As covered in the IOE&IT Daily Update, import taxes were removed on more than 100 goods, including some food products, for two years to reduce costs.
Plans for a possible online sales tax were scrapped and chief scientific adviser Sir Patrick Vallance is to lead review into how post-Brexit regulation can support emerging technologies.
OBR verdict
Running the rule over the budget, the Office of Budget Responsibility (OBR) said the economy would shrink 1.4% next year and would not regain pre-pandemic levels until late 2024.
It forecast that inflation would remain at 7.4% next year, with living standards projected to fall by 7% in the next two years, wiping out the previous eight years’ growth.
The chancellor insisted that the tax rises and spending cuts were required due to an “international crisis” and played down the idea that any of the problems were homegrown, reports the FT.
“It is a recession made in Russia, a recovery made in Britain,” he said.
Shadow chancellor Rachel Reeves turned Hunt’s words on him calling the economic situation “a crisis made in Downing Street”, reports the Guardian.
“No one was talking about cuts to public spending two months ago. And no other advanced economy is cutting spending or increasing taxes on working people as they head into a recession,” she said.
Reeves – ‘tougher windfall tax’
Although Hunt has increased the tax take on energy companies, Reeves accused him of not going far enough and said it was “unforgivable” to be “leaving money on the table”, reports the Telegraph.
The Government is extending the windfall tax on oil and gas giants from 25% to 35%, with a 45% levy to be imposed on electricity generators.
Speaking this morning, she said: “One thing yesterday which was a big mistake of the Government was not to extend the windfall tax in the way that Labour has been arguing for because every pound left on the table on windfall tax is a pound that could be spent in easing these cost-of-living pressures that exist at the moment.”
Growth policy
On growth, Hunt said that changes to leftover EU regulations in five key industries - digital technology, life sciences, green industries, financial services and advanced manufacturing - will be reviewed by the end of next year, reports the Telegraph.
He confirmed that EU rules governing the insurance sector, Solvency II, would be rewritten to release “tens of billions of pounds” of capital to be spent on infrastructure.
Former Brexit secretary David Davis welcomed changes to the policy of investment zones to focus on fewer than the 40 envisaged by former PM Liz Truss,
Davis tweeted that he was “glad the Government is rethinking the policy” and said “Investment zones are quite a good idea, but only if they are applied properly”.
Business response
While appreciating the magnitude of the task facing the chancellor, business organisations took him to task on the need for more business-focused aid.
At the CBI, chief economist, Rain Newton-Smith, said the chancellor deserved credit for delivering stability and protecting the most vulnerable, but called for more to be done on growth.
She backed the freeze in business rates and commitments on R&D spending and major infrastructure, such as Sizewell C, HS2 and Northern Powerhouse Rail, but asked for “a serious plan for growth that can lift us all out of the current crisis”.
“Businesses will view a freeze in NICs thresholds and further windfall taxes as the sharpest stings in the tail. Firms will also need more detail on what happens with the business energy support scheme in the coming weeks,” she said.
‘Recipe for deeper recession’
The National Chair of the Federation of Small Businesses (FSB), Martin McTague criticised the budget as being “high on stealth-creation and low on wealth-creation”, reports City AM.
He said small businesses “were already facing an acute cost of doing business crisis through soaring costs, falling revenues, shrinking availability of affordable finance, and a rise in invoices being paid late”.
“On top of all that, they now face even higher taxes, cuts to innovation, and a recipe for a longer and deeper recession,” he added.
Vision required
Stephen Phipson, chief executive of Make UK, said that access to labour remained one of manufacturers’ biggest problems which the chancellor did little to address.
“Without a fast improvement, Government will need to urgently consider options such as radical changes to the shortage occupations migration list or access to labour from our closest neighbours, if we are to deliver growth,” he said.
Welcoming a focus on growth sectors, he added that a “visionary approach to policy and growth which matches the multiple challenges we face” was required.
“This is essential if we are to improve productivity, take advantage of the UK’s undoubted strengths in its academic base and boost growth across all areas of the UK,” he said.
Business cycle
The boss of one of Britain’s export successes, Brompton Bicycle, said businesses needed greater clarity on energy support, reports the BBC.
Will Butler-Adams, the boss of Brompton, said it was facing an increase in its energy bill of £1.5m a year.
“That will have a big impact on our business - it will impact how we invest, how we recruit and how we decide to run our business,” he said.
FDF – ‘improve EU deal’
The Food and Drink Federation chief executive, Karen Betts welcomed “positive news on tariff suspensions”, reports Food Manufacture, but highlighted concerns over energy costs and labour shortages for food businesses.
She also called for “commitments to improve the implementation of the EU trade deal and regulatory reforms to reduce costs to businesses and to help our sector weather the inflationary crisis”.
Boost exports
Institute of Export & International Trade director general, Marco Forgione, told BBC News this morning that the Autumn Statement had been above all a political statement, in that it was intended to keep markets calm, but didn’t offer enough for business on growth.
“The only way to get the UK economy growing again is to get more trade going. We need a long-term, integrated strategy to support imports and exports and we need to invest in a modern, digitally enabled border.”
Yesterday, Forgione issued a response to the budget, highlighting the positives and negatives for exporters and importers.
Business confidence
BCC director general, Shevaun Haviland, said that despite a focus on stability and support for the vulnerable, the chancellor’s statement would not increase business confidence.
“The chancellor’s statement is light on green innovation, doesn’t address current labour shortages and has nothing on boosting export led-growth,” she said.
She added: “The Government must do more to improve conditions for businesses to invest and grow, otherwise we will be starting from a weak base to power our recovery once global economic conditions stabilise.”
Speaking to the BBC this morning, the chancellor said he had “great confidence” the UK would be able to remove trade barriers with the EU, but said rejoining the single market was the wrong way to promote growth.