• Swindon & Wiltshire News
• Thursday March 16 2023
• Author Name: Peter Davison

Did Spring Budget put a spring in the step of the business world?

Join Business Biscuit’s Experts for analysis of the government’s Spring Budget 2023.

The chancellor of the exchequer Jeremy Hunt delivered his 2023 Spring Budget yesterday (Wednesday) with much-trailed help for working parents and incentives for the early-retired to return to the workplace – all in a bid to fill the estimated 1.5 million vacancies in the UK’s post Brexit / Covid workforce.

Parents of two-year-olds will get 15 hours of free childcare per week – increasing to 30 hours by 2025 – as part of the government’s ‘back-to-work budget’.

The government is also increasing tax relief on pensions to encourage more workers over 50 to stay in employment.

The employment package also focussed on the long-term sick and disabled, and welfare recipients, including the unemployed. The Office for Budget Responsibility said the move should result in 110,000 more people returning to the workplace.

There were also new incentives around R&D, tax reliefs for the UK’s burgeoning film industry, and incentives for the med-tech and AI industries.

Enterprise Zones were announced in a near-£1 billion package – but none will be in the south of England. And Local Enterprise Partnerships are to be abolished, with responsibility for local economic development returning to local councils from April next year.

But what do our local army of experts think about the contents of the budget?

Phil Smith, managing director of Business West, said: “The Chancellor has acted to address the ongoing tightness in the labour market, and the announcement of an expansion of the available free childcare for parents of one and two-year-olds in England was welcome, as was the set of other incentives for people with long-term sickness, disabled people, and the over 50’s.

“Considering taxes and spending that directly affects businesses, the planned increase in corporation tax from 19 per cent to 25 per cent in April remains in place, but a new regime of capital allowances and other reforms will be introduced to harness investment. This is step in the right direction.

“Although the 3 months extension of the Energy Price Guarantee for households’ energy bills is welcome, disappointingly the scaling back of support for businesses previously announced this year remains in place with no mention of potential changes.

“As part of the government levelling up agenda, the Chancellor announced the introduction of 12 investment zones, plans for the development of local infrastructure and further devolution deals for local governments and Mayoral Combined Authorities.

“Regrettably, there was no specific mention of our region in plans for targeted boosts to local growth. However, the incentives announced for innovation, cyber, and nuclear energy could be beneficial for thriving regional industries in those sectors.

“Overall, the return of a Budget that not only addresses immediate threats and includes measures aiming at future prosperity is a positive, but the government must commit to providing the stability and confidence needed by businesses to invest and grow the UK economy.”

Sam Holliday, development manager for the West of England at the Federation of Small Businesses, said: “I think many small business owners will feel they have been overlooked again by
this Budget. We had hoped, for example, to hear that there would be new support announced for when the current business energy help scheme comes to an end this month and we were also hoping to see business rates reduced for many more SMEs. Neither of these were even mentioned sadly.

“There were some pluses however on issues such as childcare, fuel duty and R&D tax incentives but perhaps best of all was the news that inflation could be less than three per cent by the end of the year and we may no longer be facing a recession. This will be reassuring for businesses trying to plan ahead at a time when small business confidence in this region is at an all-time low.”

Michael Blaken, accounts director at Swindon-based accountancy and law firm Optimum Professional Services, said: “Many of the Chancellor’s measures were announced ahead of the Budget, so we knew about the pensions reforms and childcare support packages, both of which are designed to remove barriers to people working.

“With such a high vacancy rate, and employers finding it hard to recruit, these announcements will be good news for business.

“The changes to pensions – increasing the amount that can be paid in annually and removing the lifetime allowance – could also benefit business owners, who might now be able to put more into their pensions and so mitigate their Corporation Tax liabilities.

“Freezing fuel duty and energy relief measures will be welcome for businesses and individuals alike, and freezing the beer levy is always good news.

“Finally, if the OBR forecast is correct, and inflation does fall to 2.9 per cent by the end of the year, that will bring some stability to the economy and help businesses to plan with more certainty.”

Dave Southby of Dave Southby Financial Planning, based in Wroughton, said: “Overall it was very positive. The big question answered was around the life time allowance.

“There was a lot of speculation on this leading up to the Chancellor’s announcement with many, including me, thinking the allowance would be going up.

“I did not expect it to be removed and it is certainly something I welcome. The pension annual allowance was also increased by 50 per cent, from £40,000 per annum to £60,000, another very welcome announcement.

“Also announced was the Money Purchase Annual Allowance (MPAA) will increase from £4,000 per annum to £10,000 per annum. This will give people more flexibility in retirement and will potentially allow them to pay more back into their pension if they return to work after retiring.

“Unfortunately the Chancellor did confirm the increase in corporation tax which will affect many businesses. This increase stresses the importance of financial planning and reviewing other potential tax efficient means of extraction i.e pensions, especially with the new relaxed pension tax rules.

“I really liked the announcement of child care now being offered straight after maternity leave. I think this is going to relieve a lot of pressure on families and help women in particular get back into work. This is a huge barrier currently for many women.

“I feel the overall economic outlook looks very positive over the next few years so fingers crossed we see the growth they are expecting.”

And Martin Gurney, tax partner with Haines Watts Swindon, said: “As an adviser to owner-managed businesses, I see the challenges that they face on a daily basis.

“Broadly speaking, two of the most significant of these are the increase in customers postponing purchase decisions due to inflation and fuel cost concerns; and difficulty in recruiting.

“We were already relatively confident on the broad content of the Budget – the Chancellor had ensured that the principal elements had been pre-announced so as not to shock the economists, markets or the economy, and therefore we were also pretty confident that the Chancellor would maintain the conservative mantra that the Budget must be balanced in order to ensure continued economic stability.

“So what exactly has the Budget given us?

“The Chancellor announced that the Budget measures has been reviewed by the Office for Budget Responsibility, who were forecasting:

• a fall in inflation to 2.9 per cent by the end of 2023
• a reduction in national debt over five years by three per cent of GDP

“Hopefully this helps boost confidence in the economy such that business activity levels begin to increase

“The Chancellor highlighted the fact that there are more than sufficient people in the UK capable of filling current job vacancies, therefore he needs to make it easier for those who want to get jobs and make it less financially beneficial for those who avoid work to continue to do so. He is attempting to do so by: including:

• improving access to work for the sick, disabled and those with special needs
• increasing child-care support
• removing the pension disincentive facing older so that their pension fund is not eroded by continuing to work

“Hopefully this helps reduce the number of job vacancies.

“The Chancellor recognised that the government needs to help stimulate economic activity and growth, and therefore made the following changes:

• a 100 per centtax deduction, without limit, for qualifying capital expenditure incurred over a three year period
• an enhanced R+D relief for companies spending more than 40 per cent of their total outgoings on R&D activities
• an increase in pension savings allowances from £40k p.a. to £60k p.a.

“Overall, no big ‘give aways’ – instead, the Chancellor believes that stimulating confidence, encouraging full employment, and stimulating economic activity are the keys to long term economic growth and stability. Time will tell if he’s right…”