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Budget 2023: South East business reaction

15 March 2023
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The headlines for Chancellor Jeremy Hunt’ Spring 2023 budget look impressive at first glance, and every chancellor talks a good talk! But what do the experts say? Scroll down  for comment as it comes in….

Childcare

  • 30 hours of free childcare for every child over the age of nine months, more child minders, schools and local authorities to be funded to increase the supply of wraparound care, so that parents of school age children can drop their children off between 8am and 6pm.

Fuel Duty

  • Fuel duty maintained at current levels for a further 12 months. The announcement means that the levy on petrol and diesel will remain at 52.95p per litre, following the temporary cut made by Rishi Sunak in last year’s Budget

Beer

  • The duty charged on a pint of beer bought in a pub will be frozen, ensuring it will always be lower than in a supermarket, and helping to attract drinkers back into pubs

Employment

  • An employment package focused on four groups: the long-term sick and disabled, welfare recipients and the unemployed, older workers, and parents. The OBR expects this package to result in 110,000 more individuals in the labour market by the end of the forecast period, said the Chancellor.
  • The government is also increasing tax relief on pensions to encourage more workers over 50 to stay in employment. The Lifetime Allowance charge will be removed from April 2023 before the allowance is abolished entirely from April 2024, and the Annual Allowance will be raised to £60,000.

Capital Allowances

  • A ‘full expensing’ policy introduced from next month until 2026 and an extension to the 50 per cent first-year allowance in the same period – a transformation in capital allowances which the government says is worth £27 billion to businesses over three years.

R&D support

  • A £500 million per year package of support for 20,000 research and development (R&D) intensive businesses through changes to R&D tax credits.
  • Further support for R&D intensive Small and Medium Sized Enterprises (SMEs), via an enhanced rate of tax relief for loss making companies; and for the UK’s world leading creative industries, through increased audio-visual tax reliefs.

Film industries

  • Tax relief expanded for the UK’s creative industries, with new measures for film and television productions and an extension of existing support for cultural organisations.
  • The chancellor said he would introduce an “expenditure credit” with a rate of 34 per cent for film, high end television and video games and a rate of 39 per cent for animation and children’s TV.
  • Current relief for orchestras, theatres and museums will also be extended for two years.

MedTech

  • The Medicines and Healthcare products Regulatory Agency (MHRA) will receive £10 million extra funding over two years to maximise its use of Brexit freedoms and accelerate patient access to treatments. This will allow, from 2024, the MHRA to introduce new, swift approvals systems, speeding up access to treatments already approved by trusted international partners and ground-breaking technologies such as cancer vaccines and AI therapeutics for mental health.

Digital Technologies

  • All of the recommendations from Sir Patrick Vallance’s review into pro-innovation regulation of digital technologies, published alongside Spring Budget today, are to be accepted. Based on Sir Patrick’s interim findings on life sciences, the government is providing extra funding for the Medicines and Healthcare products Regulatory Agency (MHRA) to “help it maximise use of its Brexit freedoms” and accelerate patient access to treatments.

AI and quantum research and innovation

  • £900 million of funding for an AI Research Resource and an exascale computer (a new level of supercomputing) – making the UK one of only a handful of countries to have one – and a commitment to £2.5 billion ten-year quantum research and innovation programme through the government’s new Quantum Strategy.
  • There will be a £1 million annual prize for the next decade for the person or team doing the most groundbreaking artificial intelligence research in the UK, Hunt said.

Defence spending grows

  • The government will increase the defence budget by £11bn over the next five years in response to growing threats across the world such as Russia’s invasion of Ukraine with a £5bn increase coming over the next two years. The government’s aspiration over the longer term is to invest 2.5 per cent of GDP in defence. This is good news for the UK’s thriving defence sector.

The UK will avoid recession

  • The UK will also avoid recession, the Chancellor said. The OBR forecasts also said inflation in the UK would fall from 10.7 per cent in the final quarter of last year to 2.9 per cent by the end of 2023.

Goodbye Local Enterprise Partnerships

  • The government is also to close down local enterprise partnerships and return responsibility to local leaders (councils) to grow their local economy. It also confirmed plans to spend close to £1 billion on 12 new low-tax zones designed to drive economic growth and reduce regional disparities.

Enterprise zones – but not for the South of England

  • Four of the zones will be in Scotland, Wales and Northern Ireland. The other eight will be in the East Midlands, Greater Manchester, Liverpool City Region, North East, South Yorkshire, Tees Valley, West Midlands and West Yorkshire.
  • Each zone will receive £80 million over five years — totalling £960 million — in government support.
  • The money could be used for tax incentives including a relief on stamp duty or business rates, or for local infrastructure.

Nuclear investment

  • The Chancellor also announced the establishment of Great British Nuclear to support new nuclear builds, making up to £20 billion available for Carbon Capture, Utilisation and Storage (CCUS). He claimed this would support up to 50,000 jobs

REACTION

CROWE

Jane MacKay, National Head of Tax: "The reference to “fixing the roof while the sun was shining”, a phrase used by George Osborne as part of his austerity budget in 2015, just reminded us that this was a Budget delivered in challenging economic times.  In fact, the measures announced probably do no more than fix a few tiles on the roof with gaffer tape, and may not be enough to stop the house itself from falling down. Looking on the bright side though, the proposal to allow 100% tax deduction for qualifying plant and machinery will reduce the effective rate of corporation tax to below 25%, and will improve cashflow for businesses that make investment in equipment, including in high tech manufacturing and does go some way to simplifying our tax rules."

MHA

James Kipping, Partner at MHA, believes the jury is out as to whether the increase in annual pensions allowance and scrapping of the lifetime pensions allowance will encourage affected workers to postpone their retirement plans:

“Today’s 50% increase in annual pensions allowance from £40,000 to £60,000, alongside an increase in the adjusted income threshold to £260K, presumably prevents annual allowance charges from applying to most highly skilled workers that the Government is trying to encourage to remain in the labour market.    

“These individuals, largely senior doctors and NHS consultants, could previously have suffered the “double hit” of an income tax charge on contributions and a further charge of up to 55% of the value of their pension savings more than the lifetime allowance (LTA). Removing both charges will be financially rewarding for many, however only time will tell whether it has the desired effect of encouraging people to remain in work.

“The removal of the LTA of just over £1m is somewhat surprising. Its abolition will cost the government approximately £835m per annum by 2027/28, making it one of the costliest measures announced in today’s Budget. Those affected should remain vigilant and monitor whether it paves the way for the government to bring uncrystallised personal pensions within the scope of inheritance tax in future budgets.”

PARIS SMITH

Huw Miles, managing partner of Paris Smith LLP:

“The stand out announcement from Jeremy Hunt in today’s Spring Budget, which also came as a welcome surprise, was the announcement of a new scheme to allow every pound invested by businesses in IT equipment, plant or machinery for the next three years to be deducted in full from taxable profits.

“This is a huge change and has the potential to be a massive incentive to drive business investment – something which has been an issue since the financial crisis. The Chancellor claims this is equivalent to a £9bn tax cut, and that the UK will be the only European country to have full expensing. The Office for Budget Responsibility expects this measure to drive a 3% increase in investment.

“One of the biggest challenges businesses are facing is labour shortages and there were some welcome announcements that could help, most notably the extension of free childcare for working parents and measures to encourage more over 50s back into work.”

MOORE BARLOW

Thomas Clark, partner and corporate lawyer southwest law firm Moore Barlow, said: “It seems that this was a largely uninspiring Budget for small businesses. The impact of increasing the small business investment allowance and introducing R&D credits is likely to be little compensation for the negative effects of a significant corporation tax increase for those businesses which do not plan on making investments which qualify for relief.

“I speak to business owners all the time who have ambitions to grow their companies and play a fundamental role in re-energising the UK economy. Stop-gap incentives do at least appear to show the Chancellor trying to encourage businesses to invest in driving growth and boosting productivity. But whether it can have the desired effect when delivered in conjunction with an increase in the overall tax burden on remains to be seen."

HAMPSHIRE CHAMBER OF COMMERCE

Ross McNally, Chief Executive and Executive Chair of Hampshire Chamber of Commerce, said: “Businesses will be reassured by much of what the Chancellor announced on investment and skills development.

“While he left in place the planned rise in Corporation Tax, firms keen to invest in IT, plant and machinery will welcome the chance to offset more of their expenditure against tax through the more generous system of annual investment allowances. 

“This is a clever move that balances the need for market stability with making the UK a more competitive place for international firms to invest in, so ultimately helping with job creation and raising skills.

“He also struck a decent balance between restoring business confidence and leaving the door open for government intervention to pump-prime new and emerging sectors such as quantum computing, AI and green tech. He reached many of the touchpoints on investment that will help with the vision for the UK to be a technology-based superpower.

“Businesses in the life sciences supply chain, one of the key sectors for Hampshire, will be cheered by his enhanced tax credits for research and development.

“And we welcome the Chancellor’s support for a long-term solution on cost-effective energy through carbon capture, usage and storage. This is something Hampshire Chamber is actively pursuing with partners in the Solent Cluster initiative. Greater tax relief on energy efficiency and sustainability will be a massive force for good on the way to net zero.

“The only downside to the Budget was the lack of explicit focus on the South. While Jeremy Hunt talked of ‘enterprise, everywhere’, many in our region will continue to see ‘levelling-up’ as simply meaning support for the Midlands and the North.”

DUTTON GREGORY SOLICITORS

Paul Sams, Partner and Head of Property for Dutton Gregory Solicitors, said:

“We predicted that this would not be a Spring Budget to remember, it was a positive move to introduce the price cap on energy bills, the introduction of the childcare reforms, and reassurance that inflation will decrease by over half to 2.9%, however there were some missed opportunities, particularly for the property industry. There were a number of simple initiatives that could have had a transformative impact on the UK’s property sector, with every new transaction pumping circa £10,000 into the wider economy.  This should have included a Help to Buy Scheme that would have actively increased the number of first time buyers, and incentives and support for landlords to make the investment into retrofitting eco-friendly technologies into their Buy to Let properties.”

ELLIS JONES SOLICITORS

Nigel Smith, managing partner at south coast law firm Ellis Jones Solicitors, said: “Some of the measures in the Chancellor’s Budget for Budget for Growth are welcome.   

“Although the focus on retirees, those with long-term illnesses and parents struggling with childcare costs may grab the headlines, their reintegration into the workplace will need to be carefully managed.

“The workplace may have changed considerably for some of those returning to work while others may have expectations around flexible and remote working, or a four-day week. They may have protected characteristics or be subject to other provisions of employment law.

“The Chancellor’s Budget may be a rallying cry for the economically inactive to re-enter the jobs market but it is also a clarion call for employers and HR officers to revisit their policies and procedures to ensure they are appropriate for every stage of the process, from recruitment to onboarding and eventual employment.”


Stephen Emerson is the Managing Editor of The Business Magazine and is responsible for the publication's print publications and online properties including the newly launched Biz News websites in Hampshire and Dorset.

Stephen has been a journalist for 20 years and has worked at local, regional and national publications and led a team which made The Scotsman website one of the fastest growing news sites in the UK with over eight million monthly users.

He has a keen interest in technology, property and corporate finance and telling the stories of the people behind the successful firms in these sectors.

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