Businesses and organisations respond to 2023 Spring Budget

The Chancellor of the Exchequer, Jeremy Hunt, has revealed his Spring Budget, aimed at providing a “lasting path to growth.”

Responses to the Budget appear mixed across organisations representing businesses in the UK. While some measures have been welcomed for addressing cost of living pressures and encouraging investment, others have suggested that support in some areas is limited.

On 15 March, the Chancellor set out four pillars of his strategy to tackle low investment and higher economic inactivity in the UK: ‘enterprise,’ ‘employment,’ ‘education,’ ‘everywhere.’

The Chancellor confirmed that support for households with energy bills will continue through the extension of the Energy Price Guarantee, while a freeze on fuel duty rates will continue for the next 12 months.

The Spring Budget also included a confirmation that corporation tax would continue to increase to 25% this April as planned for companies with over £250,000 in profits.

To encourage investment, however, the Government will introduce a ‘full expensing policy,’ meaning that money a company invests in IT equipment, factories or machinery can be deducted from taxable profits. The policy will run until 31 March 2026, though the Chancellor suggested he would intend to make it permanent when responsible to do so.

An additional tax support will also be available for research and development-intensive small and medium-sized enterprises.

The Budget also included a focus on removing barriers that prevent people from remaining in, or entering, employment.

This includes a reform to pensions, seeking to remove the lifetime allowance charge, and increasing annual allowance from £40,000 to £60,000.

The Chancellor also announced that the policy of 30 hours of free childcare, currently in place for three and four year-olds, would be extended to every child over the age of nine months in eligible households by 2025 – implemented in phases over the coming years.

The Government will pay childcare costs upfront for those parents moving into work or increasing their hours while on Universal Credit, with the maximum claim increased, while schools and local authorities would be funded to increase the supply of wraparound care.

Support for parents and business investment

Responding to the Budget, Luke Wren, head of business development for Hakim Group, told OT it is “positive” to see the Chancellor recognising the importance of supporting parents, adding: “The 2023 budget will hopefully help to start to ease some of the pressure experienced during this cost of living crisis, especially those living with very young children.”

This would also be welcomed by businesses who may have previously struggled with recruitment and retainment, Wren suggested, “by allowing parents to have a better balance with both parental and career needs.”

Considering the measures around corporation tax, Wren shared: “Whilst I would like to have seen more support on business rates, Hunt’s budget encourages capital allowance alongside increased corporation tax.

“On the whole, this is encouraging, and I believe most businesses would agree that the additional corporation tax must be utilised in a way that is beneficial to those who need it most. Hopefully we will see the Government deploy these additional tax revenues responsibly,” he continued.

Wren concluded: “The UK economy has been flying on a single engine relative to comparable nations and I am hopeful that this budget will allow many areas of our economy to heal and grow from the strain of the recent past.”

Certainty for investing

The Optical Suppliers Association (OSA) said certainty about tax deduction would give optical businesses the confidence to “invest, to increase their clinical offering and to refit practices.”

OSA director, Stuart Burn, commented: “The Annual Investment Allowance (AIA) has seen a number of temporary increase extensions, with the latest due to expire at the end of this month. The Government has announced that the AIA will be permanently set at £1 million. This permanent replacement provides a greater level of certainty to businesses and removes the complexity of changing amounts.”

Burn continued: “It is intended to encourage confident business investment and will benefit optical and ophthalmology practices and manufacturing labs.”

The Climate Change Agreement scheme will be extended for two years, allowing eligible businesses £600 million of tax relief on energy efficiency measures.

Cost of living

In a statement to OT on the Spring Budget, Specsavers welcomed measures addressing cost of living pressures.

A Specsavers spokesperson said: “We’re standing shoulder-to-shoulder with our customers, including lowering our entry price point with a new £15 range, and we welcome anything that supports our colleagues and our patients amid the cost of living crisis.”

The NHS Confederation also welcomed the extension of the energy price cap, to “help prevent further worsening of health outcomes across the country,” with chief executive, Matthew Taylor, commenting: “The increase to the childcare allowance will help many healthcare workers and help the service retain more staff, and the freeze on fuel duty will be good for community nursing staff.”

News on pensions reform was also welcomed to help incentivise more medical staff to carry out extra shifts.

Improving consumer confidence but concerns for small businesses

Shevaun Haviland, director general of the British Chambers of Commerce (BCC), which represents a network of businesses across the UK, suggested that the full capital expensing plans are a “step in the right direction to offset the rise in corporation tax.”

The BCC also recognised the Chancellor’s measures to address the numbers of unfilled vacancies, provide help on childcare, and for workers over the age of 50.

However, Haviland raised concerns about the continued pressure from energy costs facing businesses, and said: “The Government failed to reform business rates, which we have repeatedly called for.”

The Federation of Small Businesses national chair, Martin McTague, commented that while the Budget contained some positives, the organisation felt there was a “lack of support” for small firms, that could lead some to feel “left behind.”

While proposals for childcare are beneficial, McTague cautioned that more work with providers is needed to make sure the proposals can work.

In particular, the FSB welcomed the news of the continued fuel duty freeze.

“The fuel duty freeze is a result of FSB’s campaigning and the springboard small firms need to help navigate the difficult roads ahead,” McTague said. “This will save them money and provide some breathing space, allowing them to focus on growth.”

Andrew Goodacre, CEO of the British Independent Retailers Association (BIRA), which works with over 6000 independent businesses across the UK, suggested that plans for new investment zones, increased capital tax allowances for investment, and local regeneration were “positive” but “long-term are not necessarily addressing the challenges faced by businesses on the High Street today.”

Summarising pressures facing businesses, Goodacre shared: “The pressures of inflation, high energy costs and energy support set to reduce by 95% in April, and wages set to increase by 9% in April. This budget may improve consumer confidence, but it does little to boost the confidence of businesses on the High Streets throughout the UK.”