Yesterday (15 March) UK Chancellor Jeremy Hunt announced the Spring Budget which included a swathe of measures to support households and businesses as inflation continues to soar and cost pressures mount.
Among the strategies outlined aimed at boosting the economy were supporting more parents into work through childcare initiatives, changes to pension tax rules, tax relief on draft drinks in pubs, cuts in fuel duty, supporting disabled people into work and an apprenticeship aimed at over 50s.
Elsewhere, the Chancellor announced an extension to the energy price guarantee which keeps the household bill at GBP2,500 (US$3,000) until the end of June by capping the unit price of electricity.
How businesses are affected by the Spring Budget
- Corporation tax on profits over GBP250,000 will rise from 19% to 25% in April but businesses will be able to offset 100% of UK investments against their profits to bring down tax bills.
- An “enhanced credit” has been introduced for small and medium-sized businesses if they spend 40% or more of their total expenditure on research and development. They can claim credit worth £27 for every £100 spent.
- Up to £600m in tax relief on energy efficiency measures has been announced for businesses, in a bid to reduce energy use by 15%.
Amber Mace, UK&I consumer products & retail sector leader, at Ernst & Young said of the Spring Budget the expensing of capital expenditure for the next three years will be welcome news for consumer products and retail businesses, with the move at least partially offsetting the corporation tax rate rise from 19% to 25% next month.
“Towns and cities that are dependent on their High Streets have been particularly affected by the squeeze on consumer spending, but details of 12 new proposed UK Investment Zones could see accelerated development, time-limited tax benefits and wider support for local growth within towns and cities across the UK. This, combined with overseas R&D costs remaining allowable for another year, should also have a positive impact for the sector. The labour market measures also appear supportive, with retail likely to welcome childcare reform in helping both current employees and others looking to return to work – although the benefit will not be felt for some time given the staged rollout.”
But the British Retail Consortium says the Spring Budget announcement does not go far enough in supporting businesses that are under increasing pressure from rising costs.
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“Many businesses are weighed down by a myriad of higher costs right through the supply chain. Government must do more to limit one of the biggest drags to retail investment, which is oncoming regulatory burdens heading down the track, or risk a crash in business investment and further inflationary pressures,” said, Helen Dickinson, Chief Executive of the British Retail Consortium.
“The Chancellor understands the need to train people to re-enter the workforce, yet he missed a key opportunity to fix the issues with the Apprenticeship Levy system that would support this very goal. Over the last three years, businesses have lost GBP3.5bn in unused Levy funds. To break this cycle of wasted investment, it is vital that Government allows businesses to use their hard-earned Levy funds for a wider array of skills courses. Without spending a penny, the Chancellor would increase investment in our workforce, helping businesses to prepare the UK economy for the skills it needs.
“While the Autumn Budget brought in some welcome changes to the Business Rates system, further reform is needed. The broken Business Rates system remains a drag on business investment, jobs, and economic growth. Rates must be paid in full whether firms are making a profit or a loss. This makes Business Rates the final nail in the coffin for many struggling stores; shutting shops, costing jobs and preventing new stores openings. The Chancellor should make good on the Conservative 2019 pledge to reform Rates and lay out a clear roadmap for future reforms.”
Meanwhile, Paul Lynch, head of UK experience and commerce UK&I, Merkle, added: “While the UK seems unlikely to enter a technical recession this year, this is not a time to relax. The government must continue to show support to retailers and implement actionable measures going forward to ensure they can thrive.
“We need to engage businesses to invest back into our highstreets to drive footfall and improve the economy. But we need a way to revolutionise the highstreets’ offering; retail how we know it is on a downward spiral. We need assistance from the government to support the digital revolution within our shops and towns.
“But the onus isn’t all on the government. Retailers need to improve their offerings to shoppers to entice them back. For example, coffee shops or bakeries could be the initial reason customers visit a store. But there, they can shop while they eat, whether that’s electronically or through physical showrooms. Similarly, a menswear store could partner with a barber shop to offer haircuts; but the store also is a showroom for the men’s brand. Here, we need to start thinking collaboratively to provide an unusual and unique offering to shoppers.”
“There has been a spike in economic inactivity post-pandemic; to encourage the younger workforce back, the government must introduce ways of engaging them through digital roles and enable UK employers to recruit locally.
“Businesses also need to remain competitive with new talent. The employment market is improving for employers, but staff have higher expectations than ever – it’s not as easy as increasing wages. To attract and retain talent, businesses have to offer more in terms of benefits packages and perks.”