Business leaders react to Autumn Statement
Spending cuts of £30 billion and tax rises of £24 billion are among the package of measures to repair the public finances outlined by chancellor of the exchequer Jeremy Hunt in his Autumn Statement this morning (Thursday).
Freezes to tax thresholds – an effective tax rise as incomes increase – were confirmed, and the income tax personal allowance threshold is to be frozen until 2028. The threshold at which the highest earners start paying the 45p top rate of tax was lowered to £125,000 from £150,000.
The tax free allowance for capital gains will reduce in 2023/24 from £12,300 to £6,000 and again to 3,000 in 2024/25.
Elsewhere, the chancellor pledged to invest more than £600 billion over the next five years in the UK’s infrastructure. And he announced a ‘refocus’ of the Investment Zones programme, which will now be used to spark a limited number of the highest potential knowledge-intensive growth cluster.
The chancellor added the UK should “combine technology and science brilliance with formidable financial services to turn Britain into the next Silicon Valley.”
Reacting to the statement, the British Chambers of Commerce said the Autumn Statement was “unlikely to boost investment.”
BCC director general, Shevaun Haviland, said: “The chancellor has stayed true to his word in focusing on financial stability and targeting support for the most vulnerable in society. But in the teeth of a recession, this statement will not increase business confidence.
“Businesses will look at today’s announcements and welcome support with business rates, and retention of the employment allowance, though the reduction in the dividend allowance will impact many smaller firms.
“Almost half of businesses tell us they will find it difficult to pay their energy bills once the Government’s Energy Bill Relief Scheme ends on 31 March 2023. The sooner we get clarity on where future support will be targeted the better.
“It is good news to hear plans to improve energy efficiency across the economy, but we need to see greater urgency as firms battle with their bills in the here and now.
“It is also good news that Sizewell C will proceed, and we are relieved that HS2 and Northern Powerhouse Rail have not been cut further. These projects will provide a major boost to regional economies as well as improving our national infrastructure.
“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.
“The chancellor’s Statement is light on green innovation, doesn’t address current labour shortages and has nothing on boosting export led-growth.”
The Federation of Small Businesses, meanwhile, said “stealthy tax grabs (would) hit small firms.”
National chairman Martin McTague, said: “Today’s Budget is high on stealth-creation and low on wealth-creation, piling more pressure on the UK’s 5.5 million small businesses, their employees and customers.
“While tackling inflation is essential, so are measures to create conditions for prosperity, growth and support enterprise. Today is a missed opportunity to avoid further economic slowdown.
“Small businesses, which account for more than 16 million jobs in the UK, 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.”
Regionally, Matt Griffith, director of policy at Business West, said: “This was a difficult budget for difficult times.
“Although there was less immediate pain than expected, the chancellor set out rising taxes and pressure on public spending in the medium term, often by freezing many thresholds below record inflation, meaning the growth path for businesses and the UK may be long, rocky, and protracted.
“The statement brings us back from the brink of the sharp rises in interest rates and damage to confidence we saw from the mini budget. The sombre tone of both the chancellor and the backbenches reflected this.
“There were also small glimmers of light in slightly better projections for growth from the OBR compared to the Bank of England.
“This, and a change to the government’s fiscal rules, means that the government avoids what would have been a damaging return to budget consolidation in the middle of a recession. However, many of the hard choices were postponed, not avoided.
“Looking specifically at taxes and spending that directly affects businesses, the research and development scheme for smaller businesses has been cut which will impact many firms in investing in new innovation at a time where stability is needed.
“Revaluation of properties for business rates will proceed next year as scheduled, with some support to prevent big jumps in bills.
“Employers’ National Insurance levels will remain unchanged, but the national minimum and living wage rates are increasing by just under 10 per cent from April 2023 based on record inflation.
“Reflecting what is in effect a new government, much of the detail of our future economic and business plan has been pushed back into reviews and future statements. There were some announcements of new small forms of devolution and some saving of previously planned infrastructure spending.
“Disappointingly, there was almost no mention of our region in plans for specifically targeted boosts to local growth.
“However, after several years of political turbulence and changing government business and economic strategies, there is now a need for a return to seriousness and stability in how government plans and delivers its economic plan.
“We cannot afford optimism of a future return to growth to be forfeited by more lost opportunities to deliver the changes and confidence business needs.”
* Reacting to a promise that the UK could be the next Silicon Valley, Swindon-headquartered BCS, The Chartered Institute for IT, said it could be – ” if we invest in professionalism, digital skills and infrastructure.”
“We welcome the Government’s ambition to build on our global strengths in science, technology and innovation, transforming the UK into the next Silicon Valley,” said group CEO Rashik Parmar.
“In delivering on this, we have an opportunity to embed ethics, professionalism and standards to ‘move fast and make things, not move fast and break things’.
“As we face immense economic challenges, it is essential the UK Government continues to drive strategic investment in digital skills to futureproof and ‘level up’ our economy, public services and industries.
“With over 60,000 vacancies in the IT sector (ONS data) alone, any disinvestment in budgets for digital technology and skills will act as a brake on growth and ambitions. Our sector needs many more competent professionals from diverse backgrounds to drive the next wave of digitisation.
“The UK Government’s Innovation Strategy made it clear that the benefits of a digital Britain must be enjoyed equally by citizens across every UK nation and region. Regional investment will help areas of the UK to ‘level up’ and close the digital divide – everyone deserves to have the essential digital skills to make sure they are not left behind in the digital age.
“Investment in digital skills will benefit all sectors of the economy and improve the UK’s global competitiveness; strategic investment is essential to creating a culture of responsible computing and innovation.”
Ned Dorbin, head of South West and Wales at Business Growth Fund, said: “Business leaders operating across the South West of England, the Thames Valley and South Wales, should be heartened by Jeremy Hunt’s declaration that he wants to turn the UK into the ‘world’s next Silicon Valley’.
“This is an area of incredible innovation. We know that those brilliant entrepreneurs across the region, who are already at the forefront of world-class innovation in our academic and business communities, have the ambition and the expertise to turn the Chancellor’s vision into a reality and they should be emboldened by this renewed focus.
“But scale-ups are, of course, facing unprecedented challenges and they are also looking for stable economic conditions and an environment for growth.
“Even after today’s announcement, there remains ongoing speculation that our tax regime will eventually tighten for entrepreneurs, which results in unhelpful uncertainty.
“However, the BGF team here in the South West, Thames Valley and South Wales remains confident in the prospects of the growth economy and is committed to continuing its support for dynamic and exciting businesses that are so vital to the region’s overall economic growth.”
Reacting to the investment zones announcement, Simon Peacock of Bristol-based real estate giant JLL, said: “Investment zones may not have delivered what was suggested in the ‘mini-budget’, but they were an idea of some promise and at least worthy of exploration.
“As we look ahead, we await details for the university-focussed scheme that will replace them and hope it will come to the fore before the next Budget to support local authorities.”
On tax Karen Kirkwood, managing partner of the Bristol office of Big Four accounting firm EY said: “The chancellor may have avoided pulling rabbits from hats, but this Autumn Statement was certainly intended to make instability disappear.
“This was very much in keeping with a traditional role of an economic statement, setting out the future direction rather than revealing mass changes that take immediate effect.
“Indeed, the tax rises, outside of energy, increase significantly towards the end of the forecast period, as thresholds are frozen for the next two years.
“While the £50 billion‘ black hole’ in annual public finances remains a significant sum, the measures announced today will begin to plug it, but won’t deliver this full amount per year until 2027/28.
“However, once put into the context of the UK’s total tax receipts exceeding £1 trillion by 2025/6, it is clear why the chancellor didn’t feel the need to act too swiftly.
“The extensions to threshold freezes announced today are intended to avoid exacerbating the effects of a recession in the short term but will start to contribute to greater tax receipts for the Exchequer, particularly once inflation causes pay to rise.
“On the business side, there was comparatively little other than on energy, beyond confirmation that the UK would remain committed to the changes to international tax being discussed at the global level.
“One area of action was in the changes to tax support for Research and Development, where the chancellor differed from his predecessors and shifted support from small to big business.
“Those hoping for broader investment support will have to wait until the Chancellor next takes to the dispatch box.
“The government will be hoping that the stability of the economy is enough to maintain the attractiveness of the UK, despite the rise in corporation tax.
“Much of what we saw today was a seamless extension of the policy framework of Rishi Sunak’s time as chancellor, with the current chancellor even referring to the Mais Lecture in which the now-PM set out his economic vision.
“Businesses will hope that the incentives for investment that were part of that approach will still come to pass, perhaps in the Spring.”
Andrew Williams, MD of planning consultancy Boyer, part of Leaders Romans Group, said: “The Chancellor launched the Autumn Statement by stating three key commitments: stability, growth and public services. But the fine print also states, ‘To achieve this aim, the government has reversed nearly all the measures in the Growth Plan 2022’.
“So are these three measures of equal importance? Not surprisingly, stability – political stability ahead of the next general election – is a higher priority than growth.
“This is demonstrated by the lack of major spending commitments in development and infrastructure: the announcements regarding HS2, Sizewell C, East West Rail and Northern Powerhouse Rail are not new initiatives.
“The new form of investment zones is a means of enabling growth in the areas already geared up for it – avoiding the problem of introducing development to the areas most resistant, which previously cost the Government two by elections and condemned the Planning White Paper to the scrap heap.
“Jeremy Hunt’s considerably revised investment zones will benefit existing R&D clusters, presumably including the already prosperous Oxford / Cambridge / London ‘golden triangle’. But how does the sit with the levelling up agenda, the express aim of which is to redirect growth in the areas that need it most?”
At accountancy and law firm Optimum Professional Services in Swindon, accounts director Michael Blaken said that on the face of it the Autumn Statement seemed less severe than the media had predicted.
“Cuts to dividend tax won’t have a huge effect on those who are basic rate tax payers. However, decisions will have to be made by those company owners who plan to stay within the basic rate band, because they will be feeling the pinch with the cost of goods and services increasing,” he said.
“The increase in company car rates had also been hinted at in the run-up to the Autumn Statement. News of business rates re-evaluation, carrying with it the promise that two thirds will be no worse off, was also expected.
“Employers are struggling to fill roles, in the face of historically low unemployment, so the measures announced to encourage people back into the workforce are positive.”
Michael welcomed news that the recent Stamp Duty Land Tax cuts will remain in place, helping to keep momentum in the housing marketing.
“However, those who invest in second homes have been targeted, with the marked reduction in Capital Gains Tax allowances, so they may also be reviewing their investment strategies going forwards.”
Mike Lloyd, managing partner Haines Watts Swindon, said: “Historically the comments we always hear after a budget speech – which in reality this is – are ‘there will be winners and losers’ and ‘the devil is in the detail’.
“For the first time I can remember whilst the latter may well be the case, I can’t really see any winners as even those receiving inflationary increases in pension will be hit by tax and energy hikes.
“The reduction in the level where the 45 per cent tax rate kicks in and the windfall taxes will be more palatable to most than the freezing of tax allowances.
“The reality is the government had few options when we have an economy reeling from a combination of Covid-19, Brexit, the war in Ukraine and the global energy cost crisis.
“It is difficult to find positives in a combination of overall spending cuts and tax rises. Short term this will be a tough time for both businesses and families.
“Whether it is successful in reining in inflation and restoring confidence in our economy, only time will tell.”
New measures for Business Rates were also announced, with Andrew Kilpatrick of Swindon-based commercial property agent Kilpatrick & Co providing the following analysis:
1. From 1/4/2023 new rateable values will come into effect based on rents as at 1/4/2021, instead of the current rateable values based on rents at 1/4/2015.
2. The 2023 Rating Revaluation is due to last for 3 years, with the next revaluation due in 2026.
3. Instead of increasing by inflation, the business rates multiplier will remain at 49.9 pence (small properties) and 51.2 pence in the pound, (large properties).
4. For the 2023 Revaluation, there will be no downwards transition, keeping bills artificially high(great news!) and upwards transition will remain, but at new levels, phasing in rates increases resulting from the Revaluation at five per cent, 15 per cent and 30 per cent, for small, medium, and large properties in 2023-24.
5. Retail, Hospitality and Leisure Relief – Support for eligible retail, hospitality, and leisure businesses is being extended and increased from 50 per cent to 75 per cent business rates relief up to £110,000 per business in 2023-24.
6. Business Rates – Improvement Relief – In the 2021 Autumn Budget the Government announced a new improvement relief to ensure ratepayers do not see an increase in their rates for 12 months as a result of making qualifying improvements to a property they occupy. This will now be introduced from April 2024. This relief will be available until 2028, at which point the Government will review the measure.
7. Business Rates – Supporting Small Business Scheme (SSBS) – Bill increases for the smallest businesses losing eligibility or seeing reductions in SBRR or Rural Rate Relief (RRR) will be capped at £600 per year from 1 April 2023. This means no small business losing eligibility for SBRR or RRR will see a bill increase of more than £50 per month in 2023-24.
“Whilst a freeze in the rates multiplier is welcome, a tax rate of 50 remains unacceptable and in my view it is somewhat disingenuous of the Government to suggest the freezing of an already excessive tax rate amounts to “a tax cut worth £9.3 billion over the next five years, which is clearly inaccurate when the Revaluation has a three-year lifespan and since when does not increasing a tax amount to a tax cut?” said Andrew.
“The abolition of downwards transition is good news and may help retailers struggling to survive in today’s High Streets and encourage them to keep shops open. However, the upwards transition, whilst looking good in principle, will have significant impact on large warehouses and industrials, where rents have increased significantly since 2015 and who will be facing rates increases of 30 per cent from next April.
- This is a breaking news story and more reactions will be added as we receive them.