• Swindon & Wiltshire News
• Tuesday October 18 2022
• Author Name: Peter Davison

Business community reacts to chancellor’s statement

Business leaders have been reacting to the statement by newly-appointed chancellor Jeremy Hunt yesterday (October 17) which reversed many of the tax cuts and spending promises announced last month by his predecessor, Kwasi Kwarteng.

The government was forced to roll back on the commitments it made just three weeks ago after turmoil in the financial markets as a result of its unfunded tax cuts.

Business leaders have been largely supportive of the new chancellor’s efforts to restore stability.

Rain Newton-Smith, chief economist at the CBI, said: “The chancellor is acting swiftly and firmly in looking to restore confidence to markets and businesses.

“Macro-economic stability is the number one priority right now – the pre-condition to economic growth.

“Businesses will work closely with the chancellor on an affordable plan for sustainable economic growth that drives investment and supports living standards.”

Martin McTague, national chairman of the Federation of Small Businesses, said: “The chancellor is right to highlight the need for stability, following all of the political turmoil and chopping and changing which has made it virtually impossible for businesses to plan and make investment decisions.

“A key tenet of bringing stability is to deliver swiftly and without fail on the commitments which have been kept today on the small business energy support package and the reversal of the hike in National Insurance. These are vital measures to ease the acute cost of doing business crisis.”

But, he added: “The decision to de-couple those paid through dividends from the reduction in National Insurance will be a blow to many small business owners trying to keep their heads above water. Dividend taxation doesn’t just hit investors – it hits hard-working entrepreneurs with bills to pay.

“In time, as public finances allow, we would like to see the Government revisit this, along with issues such as IR35 rules, and the level at which the hiked rate of corporation tax kicks in.

“Small businesses want to be growing and investing, but will need economic conditions to improve and sky-high operating costs brought down in order for them to be front and centre of future economic recovery.”

Shevaun Haviland, director general of the British Chambers of Commerce, said: “Following the economic turmoil of the last few weeks he had to press the reset button.

“But businesses will be dismayed by the decision that looks set to strip back the energy support for firms from next April. This will be a hammer blow for many who were already worried about how they will survive.

“The government must commit to a full consultation with firms ahead of that cliff-edge to provide some certainty on where any targeted support will go. Energy costs keep business owners awake at night, alongside rising inflation and interest rates.

“Keeping support for the NICs reversal in place will be some relief for hard-pressed firms, but on its own will not be enough.”

Phil Smith, managing director of Business West, said: “Employers and businesses will be relieved that the most important aspects of the mini budget for jobs and skills in the South West has been retained by the new chancellor’s emergency statement today, with the cut to National Insurance progressing as planned.

“Firms look to the Government to provide a stable environment for investment. Today’s cancellation of £32 billion of unfunded tax cuts, plus substantial tightening of the energy price support beyond Spring 2023, seems to have been well received by the markets which will help keep business borrowing costs and foreign exchange rates on a more sustainable footing than otherwise.

“Our recent Quarterly Economic Survey found that only nine per cent of the 400 businesses which responded feel confident in the nation’s economic prospects while record numbers of firms are worried about inflation, and this was before the turmoil which followed September’s mini budget.

“Many concerned firms have approached us in financial distress from unprecedented headwinds caused by political and market instability and international financial credibility.

“We therefore welcome the measures introduced today which we hope will lead to increased business confidence and greater economic stability which is the bedrock for business investment.”

Chris Sanger, head of tax policy at EY, said: “This ‘turn it off, and start again’ approach, familiar to anyone who has ever had a computer crash, was designed to address the financial turmoil that the UK has faced over the last three weeks.

“But it went beyond reversing the largesse of the previous chancellor – it also reversed the proposed pre-election giveaway announced by Rishi Sunak and accelerated by Kwasi Kwarteng.

“In keeping the basic rate of income tax at 20 per cent, rather than dropping by one pence from April 2023, the chancellor has reinforced the message that the cupboard is bare and needs to be restocked before further is available.

Martin Gurney, tax partner at Haines Watts Swindon, said: “There was a naivety to their previous announcement. The adverse market reaction to the October statement, and unprecedented criticism from IMF amongst others, put this next announcement very much in the global shop window.

“They need to try to restore confidence in their economic policies, backed up by OBR data, therefore it was somewhat inevitable that they would have to reverse their ‘spend your way out of a crisis’ plan.”

And Rob Stokes, director of Swindon-based accountancy and law firm Optimum Professional Services said: “With such turbulence in the markets, the UK economy as a whole, and with so many changes going on at Westminster, this is a very uncertain time for businesses.

“It does make planning for the future very difficult, and today’s news that the Corporation Tax rise will be re-introduced in April after all only adds to the confusion.”