Chancellor's statement provides business leaders with a 'modicum' of confidence

Businesses across the South East continue to respond to the Government U turn on last month's mini budget. as announced yesterday by Chancellor Jeremy Hunt.

Chancellor of the Exchequer, Mr. Hunt, who is the Member of Parliament for South West Surrey, told the House of Commons that the government would reverse almost all tax-cutting proposals laid out by his predecessor and limit the energy guarantee to April 2023, in a bid to reassure the markets. While this seemingly had the desired effect, it has not won Liz Truss's any new friends, as business get to grips with operating in what is both a fluid and challenging economic climate.

Dorset Chamber Chief Executive, Ian Girling said: “The new Chancellor’s statement represented a screeching handbrake turn on the original, poorly thought out mini-budget which has badly backfired.

“Some businesses in Dorset will welcome the outbreak of common-sense although the reinstatement of the Corporation Tax increase is a major concern, and some may be disappointed by the u-turns on alcohol duty and dividend rates.

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“The renewed commitment to energy price caps for the consumer and businesses is welcome although there is now a very real sense of foreboding about prospects for support beyond April of next year.

“More generally, although this statement may have helped provide a modicum of confidence, there are still serious question marks about the future of this government and its credibility."

Mr Girling concluded by adding: “The spectre of cuts and potential tax hikes looms large, with implications for support for business. There may be more details in Chancellor’s fiscal statement at the end of October although conceivably that could easily by superseded by rapidly changing events.”

Responding to the Chancellor's emergency statement, Ross McNally, Hampshire Chamber’s Chief Executive and Executive Chairman, said: “Whatever happens politically in the coming days and weeks, the new Chancellor is right that ensuring stability has to be the number one priority for the economy right now. 

"Exasperated businesses will naturally assess their own circumstances as regards his reversal of the planned cuts to income and corporation taxes but if the government can successfully address the current market volatility this will create more headroom and certainty to plan and invest. That said, we still need a long-term strategic plan with fiscal measures and regulatory improvements in place to encourage investment and solve energy insecurity.

"We await the wider fiscal statement due on Halloween with interest.”  

Viv Watts, co-founder of AGO Hotels was less kind suggesting the government had much more to do to win back confidence of the tourist sector, she said: “In today’s mini-budget announcement, we were hopeful that announcements from the new Chancellor would not mean more bad news for business but sadly this wasn’t the case.  

“Last week we heard that corporation tax will rise from 19 per cent to 25 per cent in April 2023 and now it is clear that longer-term support on energy costs is unlikely.

"At AGO Hotels, our energy bills have increased dramatically from 8-12% to 30% of operating costs, so we know first-hand how challenging the next year is going to be. So, it is extremely worrying that the Energy Bill Relief scheme will be reviewed with no guarantee that it will run past April 2023, while corporation taxes will rise. Against this backdrop, it is unclear how the government believes it is promoting growth in businesses.

“This announcement was about showing strength and stability, with an immediate focus on un-doing some of the un-funded announcements made in the mini-budget just a few weeks ago. However, in the medium term, we need to see a more sensible approach to supporting business growth – including a reduction of VAT to 12.5% and a comprehensive review and reduction of the wildly outdated system of business rates. These are vital if we want to ensure business weathers the next 12-18 months and rising costs aren’t passed down to the consumer, further fuelling inflation.”

Responding to the Chancellor's announcement that the majority of the Mini Budget plans will now be scrapped, Tania Bowers, Global Public Policy Director from the Association of Professional Staffing Companies (APSCo) expressed anger from the trade association over the continued instability and lack of confidence:

“The Chancellor’s emergency statement has only served to add to the woes of the UK’s labour market. The initial Off Payroll repeal was clearly a casualty of the large-scale reversal announced by Hunt where nothing from the Mini Budget was saved except those policies which were already in the legislative process.

Every business across the UK has faced significant upheaval in the last two weeks where time and investment has quite frankly been wasted in addressing the initial plans and the subsequent market fall out of the former Chancellor’s announcement.

In his statement, Hunt claimed that growth requires confidence and stability – elements which the UK’s economy has lacked for the last few weeks. 

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Main image Chancellor of Exchequer Jeremy Hunt, image credit Conservative Party.