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Rishi Sunak

Business world reacts to Budget

Business organisations and local firms have been responding to the government’s Budget, delivered by the Chancellor Rishi Sunak earlier today.

The key points of the Budget included:

  • Inflation is likely to rise to an average of four percent over the next year
  • The UK economy is forecast to return to pre-Covid levels by 2022
  • The economy is expected to grow by 6.5 percent this year, and by six percent in 2022
  • Unemployment is expected to peak at 5.2 percent next year – lower than the earlier prediction of 11.9 percent
  • Business rates are to be retained and reformed
  • There will be a 50 percent business rates discount for the retail, hospitality, and leisure sectors in England in 2022-23, up to a maximum of £110,000
  • £24 billion has been earmarked for housing, including £11.5 billion for up to 180,000 affordable homes, with brownfield sites targeted for development
  • A four percent levy will be placed on property developers with profits over £25 million to help create a £5 billion fund to remove unsafe cladding

The West is missing out on Levelling Up

Phil Smith, managing director of Business West said: “Avoiding a spending squeeze was important given the fragility of the overall economy and individual firms.

“However, businesses will have watched the budget with a less resolved question over whether the government will be doing enough to sustain the economy and tackle the significant challenges that businesses still face.

“Many businesses are in a tough period, with Covid recovery needing to be nurtured and companies looking to ‘make up for lost time’ in recouping lost income in the months and years ahead.

“They also face strong head winds in the face of skills shortages and rising costs, from supply chain and labour market inflation and additional business tax burdens from National Insurance and corporation tax.

He added: “The West of England also continued to broadly lose out from the Chancellor’s largesse.

“With a very long list of individual projects and schemes announced, dominated by northern constituencies and the devolved nations of Scotland, Northern Ireland and Wales.

“We are still not getting cut through in central government for the support our region needs.”

Budget not enough to meet ambition for high-growth, high-productivity, high-wage, low-tax economy

Federation of Small Businesses national chairman Mike Cherry said: “This Budget has delivered some measures that should help to arrest the current decline in small business confidence.

“But, against a backdrop of spiralling costs, supply chain disruption and labour shortages, is there enough here to deliver the Government’s vision for a low-tax, high-productivity economy? Unfortunately not. Where inflation and forthcoming tax hikes are concerned, the clouds are gathering.

“It’s good to see the Chancellor embrace our recommendation for business rates reform: changing the system so it stops hitting small firms that invest to make their premises more sustainable with higher bills.

“That said, much more will be needed to support small employers in the months ahead. Our call for an increase in the Employment Allowance to £5,000 would have made a real difference to efforts to increase wages, retain staff and create jobs as we head into the critical festive season.

“Wider rates reform is positive, especially the promise of a substantial discount on bills for the hard-hit retail, leisure and hospitality industries, alongside cancellation of an increase in the rates multiplier.

“Ambitious investment in skill development is much-needed, and should rightly go some way to putting vocational training on a par with academic qualifications.

“We look forward to more detail on how funding for T-levels, apprenticeships, bootcamps and lifelong learning will reach the smallest businesses that make the biggest impact when it comes to creating opportunities within local communities.

“Vital too is expanded funding for the British Business Bank, empowering it to extend the reach of its work and add to its thousands of existing success stories across the UK.

“We’ve always said that it doesn’t make sense for those travelling overseas to pay less in air passenger duty than those who choose to support UK holiday destinations. Today’s reforms to the levy mark a victory for common sense.

“Reform of R&D tax credits is needed – expanding eligibility to cover productivity-enhancing intangibles, not least cloud computing, marks a step forward. We hope the adjustments announced today lead to more small firms benefiting from reliefs that many have, to date, found a challenge to access.

“If the OBR’s concerning inflation forecasts come to pass at the same moment when national insurance contributions and the living wage rise significantly, many small firms will be considering their futures – we’ve already lost close to half a million over the last year.

“National insurance contributions serve as a jobs tax, one which threatens to seriously hamper our economic recovery over the coming months if the planned increase to them is left unaddressed.”

A mixed bag for retailers

Helen Dickinson, chief executive of the British Retail Consortium, said: “Today, the Chancellor spoke of a new age of optimism, but retailers will struggle to share his confidence after a Budget that does not do enough to reduce the burden of costs bearing down on our shops, our high streets and our communities.

“This budget is a missed opportunity for retail and the three million people who work in the industry, and it prevents retail from maximising its contribution to the government’s levelling up agenda.”

She said the business rates news “falls far short of the truly fundamental reform that is needed and was promised in the government’s 2019 manifesto.”

“While the Government’s 50 percent bridging relief for 2022/23 may prove to be beneficial for the smallest businesses, it will do little to support the businesses that pay two thirds of retail business rates and employ 1.5 million people.

“With no reduction in the burden, this will lead to the unnecessary loss of shops and jobs and fails to incentivise investment in all parts of the country.

“This is bad news for every member of the public who wants a vibrant high street in their local community, with retail at its heart.”

On the rise to National Living Wage, she added: “The retail industry strongly supports the intention to raise wages in the industry and has been working hard in recent years to secure the productivity improvements needed to ensure such increases are sustainable.

“Currently, retailers are grappling with an assortment of government-imposed costs – higher National Insurance Contributions, higher Corporation Tax, sky high business rates – at a time when sales are slowing and supply chains are experiencing significant disruption.

“Unfortunately, the combined impact of additional costs will add to the pressure on prices – with three in five retailers saying that prices will rise before Christmas.”

Not much in it for middle income earners

Michael Blaken, head of accounts at Optimum Professional Services, said: “There seemed very little in the Budget that hadn’t already been announced, that was noteworthy.

“The measures were generally aimed at helping people on low incomes, or businesses in specific sectors.

“The Chancellor confirmed the increase from April of the National Living Wage and the National Minimum Wage and his ‘rabbit out of the hat’ at the end was to announce an imminent reduction in the Universal Credit taper – which he dubbed a ‘tax on working’ – from 63 percent to 55 percent.

“For those middle income earners, there was very little, other than perhaps the announcement that fuel duty will be frozen.

“Little was said about taxation, other than the Annual Investment Allowance remaining at £1 million until March 2023, which is welcome.

“We are interested to see what the planned reforms to business rates will be, and the new investment relief and business improvement relief sound positive, but as is always the case the devil will be in the detail.

“Businesses that have done best out of this Budget are those in hospitality, leisure and retail, which will enjoy a 50 percent cut in their business rates, and those which can benefit from R&D.”

A very neutral budget

Martin Gurney, partner at accountants Haines Watts Swindon, said: “We would typically spend hours after the Budget writing about the impact of tax changes within the Budget and their implications for our clients. The Chancellor has, to a significant extent, relieved us of this burden.

“In terms of new tax measures introduced, there were very few. The Chancellor has attempted to bolster the struggling Arts and Creative sectors by enhancing the creative tax reliefs available, and similarly tried to help the Retail, Hospitality and Leisure sectors through rates discounts.

“At the same time, he announced a move to expand R&D tax relief to cover cloud computing and data costs, with the focus of R&D relief moved to UK activity, in line with other jurisdictions.

“We already knew about the changes to the rates of corporation tax from 2023, and nothing was done to amend or withdraw these changes, but the Annual Investment Allowance threshold of £1m was extended to 31 March 2023.

“Overall, a very neutral Budget designed to keep the economy stable in times of inflationary pressures and supply chain concerns.

“And finally, tomorrow is promised to no one. The Chancellor did not make any amendments to income tax but he did state his desire and intention to reduce tax rates by the end of this parliament. Watch this space I guess!”

Support for house-building welcomed

Russell Glimstead, regional director of Barratt David Wilson Homes South West, said: “We welcome the support for housebuilding, increased investment in the planning system and the opening up of more sites on derelict and brownfield land.

“It is vital that we continue to increase housing supply to tackle the country’s shortage of homes, helping to create jobs and economic growth.

“Equally, it is really positive to see support for improving the efficiency and sustainability of new homes.”

Tom Brennan, at TED Mortgages Swindon, added: £24 billion earmarked for housing, and £11.5 billion for affordable housing for 180,000 homes – hopefully this will allow more people to be able to get on the property ladder where they are otherwise being priced out.

“Affordable housing is essential to be representative of society and as it stands there is currently not enough. £5bn to remove unsafe cladding should be a given.

“Inflation is still high, and the cost of living is expected remain higher through autumn and the winter.

“With basic living costs increasing people should be looking at what areas they can save money to try to at least limit the impact of the increase on food and energy costs.

“Reviewing personal spending at a time when costs are increasing will be very important.

“Key areas to review will be mortgage payments, loans, and credit cards where paying interest and household bills. Shopping around for better deals on these expenses with be time well spent.”

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