Reactions to Chancellor of the Exchequer, Jeremy Hunt Spring Budget 2023
The long-awaited Spring Budget 2023, presented by Chancellor of the Exchequer, Jeremy Hunt, has finally been released. In a speech exceeding an hour, the Chancellor unveiled a range of measures aimed at reducing unemployment, boosting the economy, and providing support for businesses. These measures include changes to taxation, inflation, childcare, investment and infrastructure.
Mr. Hunt opened the floor to the Spring Budget with a resounding declaration, “In the face of enormous challenges, I report today on a British economy which is proving the doubters wrong.”
The Autumn Budget of 2022 was presented during a challenging period for the UK economy, which further emphasised the government's top priorities of stability, growth, and public services.
“In the autumn we took difficult decisions to deliver stability and sound money. Since Mid-October, 10 year Gilt Rates have fallen, debt servicing costs are down and mortgage rates are lower, and inflation has peaked. The International Monetary Fund says our approach means the UK economy is on the right track.” Continues Mr Hunt.
As the Chancellors speech settles, let’s take a look at reactions to this years Spring Budget and the detailed agenda:
Jeavon Lolay, head of economics and market Insight, Lloyds Banking Group: “Growing the economy is a key part of the Government’s agenda and our data shows that staff shortages are constraining economic activity. The new policies on childcare and pensions should help raise the productive capacity of the UK economy by improving labour market participation.
“Our data shows economic optimism is on the rise but inflation remains firms’ greatest concern. Business leaders will welcome the increased investment in regions and technology, which should go some way in building their confidence in the UK economy.”
Rich Wagner, CEO of Cashplus Bank: “As a bank serving UK small businesses, we have seen how higher inflation is squeezing margins and affecting confidence for many of our customers, particularly micro businesses, self-employed and sole traders who represent a significant proportion of private enterprise in the UK.
“The fuel duty cut and energy price guarantee extension are welcome and give businesses more certainty, but our customers have told us that their biggest concern for the next 12 month is taxation so, I believe the rise in corporation tax risks sending the wrong message to businesses and those looking to invest in the UK. I would also like to see more targeted measures on business rates and other taxes to support the nearly six million small businesses that are so critical to the UK economy.
“It’s not just about supporting existing businesses, but also whether we are doing enough to encourage people to start their own company. The measures to expand free childcare will help many current and would be businesses. Likewise, relaxing immigration rules and encouraging older people to return to the workforce will help many businesses recruit more easily and encourage people back into the job market.”
David Ovens, Joint Managing Director of Archangels: “We welcome the UK Government’s decision to reverse cuts to the R&D tax credit regime for small businesses. These credits will continue to play an important role as a source of cash for early stage, often loss making, companies, particularly in the technology and life science sectors. Combined with the Government’s plan, unveiled last week, to make the UK a beacon of science, technology, and innovation, there are promising signs that our policy makers are beginning to realise the potential of these sectors to our prospects for economic growth.”
Ifty Nasir, CEO and founder of Vestd: “The Chancellor is said to have wanted this budget announcement to be ‘boring’ but startup and SME founders will have watched with interest to see what support he would offer for businesses in a continuing tough economy. This is a critical budget for many.
“Jeremy Hunt previously unveiled plans to grow the UK’s economy with a strategy focused on four pillars, or “four Es”: enterprise, education, employment and everywhere. So today’s news of the 12 new investment zones across the UK shows an encouraging commitment towards innovation and entrepreneurship.
“While the tax break regime announced in the budget is also welcomed, this just offsets the already planned rise in corporation tax from 19% to 25% in April. Even so, with more than 5.5 million SMEs in the UK it is hoped that some tax relief will help reduce their tax burdens and provide some benefits across their business.
“Ultimately, the most reassuring act we saw from the government this week was the rescue deal for the UK branch of the Silicon Valley Bank which saved thousands of tech startups who have invested with them. So, while startups and SMEs will be happy with some tax relief, there are still some things on their wish lists that won’t have been addressed."
“I would encourage those founders and CEOs that may be disappointed by the announcements in today’s budget, to look towards existing tax relief schemes which are dramatically under-utilised by startups and SMEs. The Enterprise Management Incentive (EMI) scheme, for example, is currently used by just 14,200 eligible SMEs, despite the frankly enormous benefits for companies operating a scheme.”
Nick Nesbitt, Partner & Head of Medical Financial Planning at Mazars: “It’s a good news day for doctors and GPs. In a matter of minutes, Jeremy Hunt has written off two of the key drivers behind the mass exodus of GPs, doctors, surgeons, and consultants from the medical workforce. Abolishing Lifetime Allowance, and at the same time hiking the Annual Allowance to £60,000, removes almost all NHS scheme members from pension allowance tax charges. Now only the very highest earners will need to be aware of the thresholds. Whilst the Chancellor has not abolished the tapering of the Annual Allowance for the highest earners, further increases to the level at which such tapering applies will remove more doctors from risk of tapering. The Spring Budget changes, with the wider upheaval of the NHS pension scheme, will change the very face of the workforce and should tackle some of the staffing challenges that have plagued the NHS in recent years. Now is the time for GPs and doctors to rethink their pension and retirement strategy and with so much significant change, advice is crucial to ensuring that retirement plans match long term financial goals.”
Steve Malkin, CEO and founder of sustainability and net zero certifier Planet Mark: “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. There must also be greater long-term investment in supporting our nation’s SMEs to reduce their energy bills through reducing their emissions. This is especially important in lieu of any additional immediate government support on energy bills and as they make up around 90% of all UK companies. While tax relief on energy efficiency measures is welcome, an urgent nationwide awareness campaign for SMEs on how to cut emissions, alongside more ambitious energy efficiency incentives, will be necessary to make the UK a green growth superpower.”
Gerard Grech, CEO of Tech Nation, comments on Budget: “Today's budget is a positive indication of the UK Government's commitment to becoming a Science and Technology Superpower. We welcome the measures aimed at supporting the UK tech industry, including the introduction of additional tax support for R&D and the announcements on an AI sandbox and ambitious Quantum investment which will generate investment in new industries, whilst protecting consumers and businesses. As a nation uniquely positioned between two economic powerhouses, the US and the EU, we must harness innovative regulation that will enable us to propel ourselves as an international hub and leader for AI, Quantum Computing, and Deep Tech. This is a critical step towards creating a distinctive, value-driven tech ecosystem in the UK, setting us apart from other tech hubs.
“We must build on momentum generated and continue to foster a culture of innovation and collaboration that empowers businesses to grow and succeed. The recent intervention by both the government and the private sector to facilitate the sale of Silicon Valley Bank is a shining example of what can be achieved through collaboration between the private and public sector and a clear vision.”
Caroline Plumb, CEO of Gravita: “With businesses currently battling a range of threats, it was crucial that the Chancellor promoted productivity and sustained growth for the fast-growing businesses that underpin the economy. Importantly, the Government has reinforced its pledge to make the UK a ‘science superpower’ by introducing an enhanced R&D credit to offset the cuts to the tax credits scheme. In turn, the Chancellor may have prevented innovative, research-intensive businesses from transferring their activities offshore to territories with a more friendly corporate landscape.
Beyond this, the new policy around ‘full capital expensing’ will go some way to reducing concerns over the increases to corporation tax. Smaller businesses will also be grateful to see the increase of the Annual Investment Allowance to £1m, allowing them to deduct the full value of all their investment from taxable profits. With interest rates and energy prices still a concern, these policies coupled with specific commitments around key areas of our innovation economy including medtech, AI and quantum, will provide confidence for growth businesses to invest for the longer term.”
Marc Goldberg, CEO of Commercial Finance at Together: “Recommitment to the levelling up agenda, with £58 million ringfenced for projects in the North West, and the further promise of £80m over the next five years for 12 new investment zones – which will be dominated by regeneration projects in Greater Manchester, Liverpool, the Northeast, South Yorkshire, the Tees Valley – is a welcomed move and puts the North of England squarely on the map from an investment perspective.
“Whether this funding is a success or not will be judged by the take-up of jobs within local communities, ability to properly support up and coming businesses in the zones and impact to our regional economy which may have narrowly missed the trap of a recession this year; but is still hampered by high energy costs and skills shortages.
“Thankfully, the steps taken towards encouraging more into work, such as support for over-50s, childcare funding and internships will certainly help address some of the skills shortage. Combined with the levelling up agenda, this could provide a more positive outlook for the UK economy.”
Douglas Reid, Tax Director at ABGI: “We welcome the reduction in proposed cuts to tax relief for what the Government has deemed as ‘R&D intensive’ businesses, however the arbitrary cut-off point requiring companies to invest 40% of their total expenditure will penalise those who fall only marginally short of that figure.
“This will add a further layer of complexity for companies that do invest in innovation and may lead to the redesign of corporate structures with the goal of clearing the 40% threshold to maximise tax reliefs.”
Mark Smith, Partner R&D Incentives and Grants Ayming UK: The Government clearly recognises that its decision to cut tax relief for all SMEs in November undermines its ambition to make Britain the next Silicon Valley. In particular, the Government’s new funding for R&D-intensive businesses will allow the UK’s most innovative companies to do what they do best. The structure the Chancellor ran through sounds sensible and clear, with 40 per cent of spend being a straightforward figure and goal for others to work to.
“However, it is a lot more targeted and therefore not as accessible. Forty per cent of spend on R&D is very high, so only a very small portion of UK businesses will be eligible. The government estimates about 8,000 businesses could benefit, which is about 10% of current claimants. All other small businesses that don’t meet the threshold will still see a cliff edge in funding, which will most certainly have an impact on the UK’s innovation as a result.
“Furthermore, while its definition of “research-intensive SMEs” is clear, we don’t know which companies and what activity will be eligible. It would be great to see green innovation incoprotated into this. It was a little disappointing not to hear more mention of funding relating to R&D in environmental technologies, which the UK could be a world leader at. To drive forward the sustainable transition, specific tax incentives must be considered around green R&D. If they can include that in definitions, it could provide a boost both to our innovation and net-zero objectives.
“As we enter the new tax year, businesses outside of the life sciences and tech sectors will be allocating their innovation budgets without knowing how the reduction to the scheme will affect them. The sooner the Government can provide clarity, the better.
“In addition, the Government’s new rules around capital expenditure will help to stimulate innovation. These will allow companies to reduce their tax burden by investing in assets that are then used for R&D activity. It is less direct but ultimately allows businesses to invest more.”
Ecolibrium Founder and CEO Chintan Soni: “It was pleasing to see the Chancellor’s Spring Budget focus on investment incentives for the UK’s enterprise economy. R&D investment rightly featured, with Hunt stipulating that SMEs that spend more than 40% of expenditure on R&D can claim a credit “worth £27 for every £100 they spend”. This will reinforce the UK position as a destination for leading edge R&D investment in forward-leaning sectors.
“As a tech-led business in the decarbonisation sector, we welcomed measures designed accelerate high growth industries, specifically in the green and digital technologies. In addition to tax breaks, we saw additional investment in innovations such as carbon capture and storage and a new £1m annual “Manchester Prize” for the firm that has achieved the “most ground-breaking British AI research”, as well as additional funding for computing power.”
