A good budget? The professionals give their verdict

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.

• 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.

• 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

What do the experts think of Chancellor Hunt's Spring Budget?

Stephen Phipson, Chief Executive of the manufacturer's organisation Make UK, said: “Given the limited headroom the Chancellor had, his pursuit of continued stability and reassurance is understandable. Within this he was right to focus on significant measures to boost investment and the welcome support for childcare. Companies will be disappointed, however, that there is no extension of support for energy with the rapidly approaching cliff edge of the current scheme ending, while the planned changes to R&D tax credits remain and will be unwelcome for SMEs in particular as they are implemented in April.

“Looking forward, given the bigger picture at play and, in the face of the firepower that the US and EU are bringing to bear with their huge incentive programmes to bolster onshore manufacturing, the UK needs transformational reforms that look to the long term, with the aim of equipping businesses and individuals for the scale and pace of the challenge we are facing.”

“This can only be done through building on the Chancellors’ five key areas of growth with a radical, ambitious modern industrial strategy and policy agenda that has science, technology and innovation at its heart. Industry will welcome his reference to ‘Industrial Strategy’ and stands ready to work with and, support him, to reshape our economy and boost growth.”

On Full Expensing, James Brougham, Senior Economist at Make UK said: “Industry will welcome this boost to investment which is key to unlocking improved productivity for both the sector and the wider economy."

UKHospitality Chief Executive Kate Nicholls said: “The measures announced today are significant in incentivising people back into work and hopefully alleviating crippling labour shortages. The wider economic forecasts also give us encouragement that consumer confidence and spending are in for an upturn, albeit over time.

“The significant reforms to childcare and the measures to help the over 50s re-enter the workforce are both areas on which UKHospitality has been calling for action and we’re pleased the Chancellor has recognised the help it can offer tackling the enormous vacancies in hospitality."

Marco Forgione, Director General of The Institute of Export & International Trade said: “We are pleased to see the Chancellor announce policies which will further strengthen levelling up in the nations and regions. These new powers for UK mayors and combined authorities in skills, energy and infrastructure will benefit businesses and exporters while helping to address regional inequalities.

"However, despite many positives in the Budget, we hoped to see more specific support for micro, small and medium sized enterprises."

Thomas Clark, partner and corporate lawyer southwest law firm Moore Barlow, agreed. He 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.

“For small businesses, in the South West or further afield, I don’t think there were any major surprises in this Budget, albeit a few disappointments. The old adage, that a business standing still is moving backwards is especially true in times of high inflation. So, it will be essential for firms to leverage investment tax relief in every way they can to manage an increasingly challenging economic and fiscal environment."

“However, there does seem to be emphasis placed on increasing the workforce of the country, and with the ongoing pressures on small businesses in recruiting staff, some of the announcements will hopefully give some light at the end of the tunnel for businesses, as well as for people looking to go back to work or to delay retirement.”

Kyla Bellingall, Partner and Regional Managing Partner in the Midlands at accountants BDO, said: “The Budget answered some of the calls from Midlands businesses, as the region fared relatively well as part of the overall ‘levelling up’ agenda. As part of our bi-monthly survey of 500 mid-sized businesses, more than a quarter told us that they wanted to see tax incentives in the region. With East and West Midlands set for an opportunity to bid for funding for a new Investment Zone, this could come to fruition.

“Businesses were also hoping for a roadmap to reduce corporation tax rates. Instead, the Chancellor said that companies could offset 100 per cent of investment in IT, equipment, plant, and machinery in the UK against taxable profits, stating that it’s the most generous capital allowance scheme of any advanced economy. That said, there are practical barriers as businesses still grapple with supply chain challenges. As a result, people may struggle to get hold of the kit they want to invest in.

“All year round, businesses tell us that access to skills is their biggest challenge. Hopefully, new initiatives and incentives will open up a deeper talent pool by attracting returners and working parents back to work. Support with childcare costs will also be well received by business leaders as a way of helping employees with the cost-of-living crisis. Around one-in-ten Midlands businesses have already been trying to plug this gap, by providing other workplace benefits such as support with childcare costs for employees.”

But business leaders in Coventry and Warwickshire gave a lukewarm reaction to the Chancellor’s Budget.

Corin Crane, chief executive of the Coventry and Warwickshire Chamber of Commerce, said: “The Chancellor made all of the right noises at the beginning of the Budget as he talked about providing stability and growth.

“The Chamber has been calling for support to help businesses recruit and there were plenty announcements around that. In terms of enticing over-50s back into the workplace, it was high on the agenda, but whether there was actually enough in reality to get people to get back into work remains to be seen.

“The childcare support is genuinely exciting and that could be a really big deal – it’s just a real shame that it is going to be staged until 2025 because, as we know from speaking to so many firms, there is a real need now.

“The changes to R&D Tax Credits puts an onus on businesses to be spending 40 per cent on R&D which is a large chunk of money and won’t apply to the vast majority of firms. There’s no real encouragement for many businesses to invest in R&D based on that.

“Of course, the potential for the investment zone in the West Midlands obviously caught our attention and it’s important that Coventry and Warwickshire benefits from that.”

On the government's nuclear announcement, Steve Malkin, CEO and founder of sustainability and net zero certifier Planet Mark, said: “It was encouraging to hear the Chancellor class nuclear as environmentally sustainable. This is a pragmatic step forward given the climate emergency we are facing. However, this must come alongside greater investment into renewables, on land and sea, if we are to secure economy-wide decarbonisation."

Michael Blaken, Accounts Director at Swindon-based accountancy and law firm Optimum Professional Services said: "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."

Tom Bromwich, of Coventry agency Bromwich Hardy, said it was disappointing that the Chancellor has retained a planned rise in Corporation Tax to 25 per cent – and announced little in the way of incentives to open up the supply of employment land.

“Considering what has gone before, we have no issue with the Chancellor taking a modest and cautious approach to the handling of the economy. We need as much stability as we can get, with plenty of signs that the next few months could remain challenging.

“But the rise in Corporation Tax may well act as a disincentive to investment and actually end up costing the Treasury more than it will receive by hiking the rate.

“And we know beyond doubt that a lack of suitable employment land is one of the great issues facing our region at the moment and is holding back the growth ambitions of very many companies. We would like to see real moves to start tackling this longstanding problem rather than just measures which tinker around its edges."

Matt Lewy, a lawyer advising on carbon capture and storage projects at Bristol-based Osborne Clarke, welcomed the announcement:

"Particularly eye-catching was the allocation of £20bn to carbon capture utilisation and storage (CCUS) projects. This is a welcome announcement, particularly as the UK faces competition for international investment in this space following the US's Inflation Reduction Act and the EU's recent response.

"UK carbon capture and storage is now moving forward at pace, with clusters at HyNet Liverpool Bay and the East Coast, together with the reserve cluster in Scotland.

"The government intends to announce the short list of projects selected to connect to the first carbon capture facilities in the UK in the coming weeks, as well as details of an extension round later in the year.

"Alongside the gas power, industrial and chemical facilities and hydrogen plants that have applied to connect to the CCUS transport and storage networks, we are looking forward to further details."

James Watson, head of decarbonisation at Osborne Clarke, added:"That nuclear will be categorised as environmentally sustainable in the UK's green taxonomy (subject to consultation) will likely not generate the controversy it once could have given that the EU green taxonomy is taking the same position.

 "I am pleased that the government has said that the transition to net zero is "essential to long-term prosperity", reiterating the economic case for decarbonisation.

"But it is disappointing that we will have to wait until the Autumn Statement later in 2023 to see a substantive response to the $370 billion of subsidies and incentives available to the US green economy under the US Inflation Reduction Act. The EU has already proposed relaxing state aid rules and other measures to enhance the competitiveness of the EU's net-zero industry in reply to the IRA. In a post-Brexit world, we hoped to see the UK government take the opportunity to create a swift independent response."