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The chancellor, Jeremy Hunt, today (15 March) delivered his first Spring Budget.
It was, he claimed, “a budget for long-term, sustainable, healthy growth that pays for our NHS and schools, finds good jobs for young people, provides a safety net for older people…while making our country one of the most prosperous in the world.”
He said he hoped the measures he announced would “remove the obstacles that stop businesses investing, tackle labour shortages that stop firms recruiting, break down barriers that stop people working and harness British ingenuity to make us a science and tech superpower”.
The Institute of Export and International Trade’s director general, Marco Forgione, said that the budget included a lot for IOE&IT members and the wider trading community, but that it was disappointing not to see more specific support especially for exporting micro, small and medium-sized enterprises (MSMEs).
“We are pleased to see the Chancellor announce policies which will further strengthen levelling up in the nations and regions, which we called for in our letter to him prior to the spring budget. The 12 new investment zones will also accelerate much-needed research and development, essential to ensure the UK remains competitive in trade in services.
“But we had hoped to see more specific support for MSMEs. A targeted industrial strategy that brings together a clearly defined import and export strategy is essential, and the recent formation of the Department for Business and Trade should be an opportune moment to make this happen.”
Forgione added IOE&IT would continue to push for the formation of a taskforce to consider the needs of MSME exporters. You can read Forgione’s full comment here.
Immediate reactions
According to the Times this budget was “not bold and not bonkers”, with better than expected news on the state of the UK economy – although it added that huge cheers for “avoiding a technical recession” were a bit over-cooked.
This was a package of measures aimed at boosting business investment and getting more people back to work. A huge investment to reduce the cost of childcare will capture many of the headlines.
The UK financial services industry welcomed the budget with Miles Celic, chief executive of industry body TheCityUK, saying it boosted business investment and drove growth right across the UK, reports the FT.
“Our industry will play an important enabling role on this agenda by facilitating investment over the coming years in line with the Chancellor’s vision for a secure and clean energy future,” he added.
Hospitality businesses, which have called on the chancellor to use the budget to relieve rising cost pressures, were divided on whether it went far enough. UK Hospitality welcomed measures to encourage people back into work, which could help relieve staff shortages, while the whisky industry condemned a tax rise on the spirit.
Mark Kent at the Scotch Whisky Association said it was the largest tax increase for decades and meant that 75% of the average priced bottle of scotch whisky will be collected in tax.
The economic impact
Elsewhere, leading economist, Trevor Williams, co-founder of FX Guard, said it was a budget aiming to focus on both stability and growth. Williams highlights that most of the key announcements had already been shared with the media, potentially to avoid any risk of repeating events from last autumn.
“There were no surprises. The government did not want any repeat of the debacle of the Liz Truss government's September 2022 ‘mini budget’. It contained lots of small measures, underpinned by a much better economic outlook produced by the OBR. The gains from a better fiscal position are retained over the forecast period, leaving the potential for up to £30bn or so of tax cuts ahead of the next general election.”
You can read an analysis of the budget from Williams here.
The business reaction
Speaking for the CBI, Matthew Fell, interim director general, agreed this was a “strong second act” in the plan for stability and growth.
“The CBI called for action on people and productivity and the government has delivered support for both. Measures to help households and businesses will secure the growth we need to boost living standards for all.”
Fell welcomed full capital expensing and said plans to boost childcare and support for occupational health showed the chancellor is “listening to business on measures to reduce economic inactivity and easing a tight labour market”.
The CBI was also happy with the new investment zones, which he said “will drive growth across the country and increased support for quantum is a further step towards making the UK the science and technology superpower it aspires to be.”
Stella Amiss, PwC’s tax policy and regulation lead, questioned the limited amount of government money behind the scheme.
“We have confirmation of the 12 new investment zones with anticipated support in skills, infrastructure, tax incentives and business rates relief...great to hear, but will the £80m per zone go far enough?”
The impact on business
Kitty Ussher, chief economist at the Institute of Directors, welcomed the announcement of 100% full expensing of capital expenditure.
“The economy has been held back in recent years because people running businesses have felt nervous of committing to investment when the climate is so uncertain. The introduction of 100% full expensing for the next three years is therefore very welcome, and we urge it to be continued thereafter. It simplifies the system, removes confusion about whether digital investments count as capital and crucially incentivises investment by reducing the up-front cashflow risk.”
She added that the better news on the economy was also to be welcomed by business leaders.
“Our members have been worried about the prospects for the UK economy, so will be reassured at the upgrading of official forecasts and the news that the OBR expects a technical recession to be avoided this year.
“It’s also hugely encouraging they felt able to lift further their assessment of Britain’s growth potential as a result of supply-side policy decisions announced today; this is evidence-based policymaking at its best.”
But it wasn’t a completely positive report card.
“It is disappointing that the chancellor has chosen to target R&D tax credits on parts of the economy. While good news for the sectors concerned, it could lead to less innovation across the economy more widely. We would also like to see greater understanding of the intervention required to support businesses of all sizes to transition to net zero, particularly those who have not yet engaged with the issue.”
PwC’s head of tax policy Jon Richardson claimed that huge investment in carbon capture technology was a reponse to US Inflation Reduction Act.
“Chancellor responds to US Inflation Reduction Act with £20bn for carbon capture technology development," he tweeted.
