30 Oct 2018
The government’s latest budget was unveiled yesterday by Chancellor Philip Hammond in the final budget before Brexit in March next year.
Giving his reaction to the Autumn Budget 2018, Dr Adam Marshall, Director General of the British Chambers of Commerce (BCC), said: “In an atmosphere of unprecedented uncertainty and heightened political noise, the Chancellor has demonstrated that he is listening to business concerns by delivering a Budget that supports investment and growth.
“The Chancellor responded directly to the BCC’s calls for bold incentives to turbo-charge business investment, for steps to support high street businesses struggling with business rates, and for measures that cut the cost of apprenticeships for SMEs. Philip Hammond has sent important and positive signals to businesses across the UK, many of whom have been wavering on investment and hiring. Crucially, the Chancellor has avoided major increases to business tax to fund the government’s spending priorities, which would have undermined the confidence boost to firms from his commitments to supporting enterprise and growth.
“We are delighted that the Chancellor has listened to the voice of Chambers of Commerce and has boosted the Annual Investment Allowance to £1million. This will be a huge shot in the arm for businesses across the country, giving many thousands of firms renewed confidence to invest and grow.
“While today’s Budget measures were largely positive for business, the final and most important piece of the jigsaw is a comprehensive Brexit deal that gives firms the clarity and precision they need. The pro-business measures announced in the Budget will only yield their greatest possible results when paired with a Brexit deal that delivers certainty on the UK’s future terms of trade beyond March 2019.”
On raising the Annual Investment Allowance, a key ask of the BCC Budget Submission, Suren Thiru, Head of Economics said:
“Increasing the Annual Investment Allowance to £1m was the central ask of the BCC and we’re delighted the Chancellor has listened to our call for bold measures at this time of uncertainty. This announcement will provide a major enticement for firms to invest and grow. It will give companies across the UK the confidence to push ahead with investments in plant & machinery, property and staff training.
“We are also pleased that the Chancellor delivered on our call to incentivise investment in new buildings through a 2% capital allowance.”
On the VAT threshold, Suren Thiru, Head of Economics said:
“We are pleased that the Chancellor listened to our call to keep the VAT threshold unchanged over the near term, providing much needed certainty to firms across the UK. Against a backdrop of Brexit uncertainty and the rising cost of doing business, a reduction in the VAT threshold could well have proved to be a tipping point for some of our most promising young firms.”
On the digital services tax, Suren Thiru said:
“While businesses understand the need to build a tax system fit for the future, the government must tread very carefully in introducing a digital services tax. Tight classifications of exactly which businesses will fall under the scope of these new rules are important to avoid unintended consequences or confusion for the industry as a whole. The government must work closely with business and international partners as this evolves to ensure the UK can continue to compete effectively on the global stage. We welcome the Chancellor’s acknowledgment of the challenges, and look forward to engaging with the government on this.”
On the introduction of Making Tax Digital, Suren Thiru added:
“We are disappointed that no action was taken to alleviate the impending administrative and cost burden associated with the implementation of Making Tax Digital, despite low business awareness of this change and the deadline coinciding with the UK’s departure from the EU. With only a few months to go before its introduction, we would urge the government to look again at the pressures that Making Tax Digital is placing on firms at a time of significant change.”
On the changes to SME co-funding for apprenticeships, Jane Gratton, Head of Business Environment and Skills said:
“The BCC called for co-funding to be dropped for SMEs but at least the Chancellor has met us half way. This is good news for employers, the workforce and young people starting their careers. Apprenticeships are key to solving the skills crisis that is now crippling businesses across most regions and sectors, but the costs can be prohibitive for smaller firms. Reducing the cost of Apprenticeship training for SMEs will help firms to invest in workforce skills to boost their productivity and competitiveness, as well as creating more jobs, and better career development opportunities for people of all ages.”
On support measures for UK high streets, Hannah Essex, Co-Executive Director of Policy and Campaigns, said:
“We’re delighted that the Chancellor has heeded our calls to offer rates relief for the high street by cutting bills for the vast majority of high street firms. It’s crucial that we support our town centres as they find their place in a changing world.
“An alarming number of high street firms, both large and small, are closing or being earmarked for closure. This deterioration has cost thousands of jobs since the start of 2018. While there are long-term structural changes taking place, including changes to consumer habits, the tipping point for many of these firms has been the unnecessarily large burden that business rates place on them. Therefore, this short-term reduction in rates will be very welcome news to those on the high street who require urgent respite.
“We will continue to call for fundamental reform of the broken business rates system to alleviate the pressure on all businesses.”
On investment in potholes and local roads, Hannah Essex, Co-Executive Director of Policy and Campaigns, said:
“Local roads are the lifeline of many business communities, and there’s little that frustrates drivers more than seeing them riddled with potholes. Roads in disrepair cause delays and disruption, and add costs for companies who need to transport goods, components and people quickly. Funds to rectify these issues are welcome but research suggests that these proposals won’t meet the full cost of bringing the UK’s road network up to scratch.”
On investment in rural broadband, Hannah Essex added:
“Gaps in broadband stifle business productivity and competitiveness. In today’s world, access to a reliable connection is a basic requirement for most firms, whether they are based in cities or rural areas. For the UK to prosper as a modern and dynamic economy, we need to see major progress in the delivery of digital infrastructure in every part of the country, and the question now is will the funds be enough and targeted in the right places”.
Commenting on the latest forecasts by the Office for Budget Responsibility, Suren Thiru, Head of Economics at the BCC, said:
“Despite the upgrades, the OBR’s latest outlook paints a rather subdued picture of the UK’s economic prospects over the near-term with growth expected to remain well below its long-run average throughout the forecast period. Significantly, the OBR’s latest forecast implies that by 2020 the UK economy will have experienced its second weakest decade of average annual GDP growth on record.
“The OBR’s latest economic forecast also implies that UK growth will remain unbalanced with a continued reliance on the services sector and consumer spending to drive growth. In contrast, net trade’s contribution to overall economic growth is forecast to remain limited. Measures such as the increase in the Annual Investment Allowance however will help to lift business investment over the near term.
“As expected, the OBR has confirmed that the UK’s fiscal outlook is healthier than they expected in their previous forecast. However, if UK economic growth remains subdued, the UK’s ability to generate tax receipts may prove more of an uphill struggle than the OBR currently expects. More needs to be done to strengthen and widen the UK’s tax base, including for firms looking to invest, recruit and grow their business.”
View the budget grid of announcements from the Budget and a map detailing Barnett consequentials for devolved nations.