Tasting the results: is this a Goldilocks budget?
By Simon Hacker | 16th March 2023
Hot on the heels of yesterday's swift analysis of Chancellor Jeremy Hunt's budget from our partners at Hazlewoods Business Advisors and Accountants , we've been busy at Punchline talking to key business leaders in Gloucester, the county and the South West.
How do they feel about the changes Chancellor Jeremy Hunt has made? Are they too hot, too cold, or is this the Goldilocks budget, served at just the right temperature?
Between their views, let's get to the raw ingredients of what all these changes could mean for the business landscape.
As a powerful voice representing 21,000 businesses in the South West, Business West says investment remains key for the region's growth.
Phil Smith, managing director, said: "The Chancellor has acted to address the ongoing tightness in the labour market, and the announcement of an expansion of the available free childcare for parents of one and two-year-olds in England was welcome, as was the set of other incentives for people with long-term sickness, disabled people, and the over 50s.
"Considering taxes and spending that directly affects businesses, the planned increase in corporation tax from 19% to 25% in April remains in place, but a new regime of capital allowances and other reforms will be introduced to harness investment. This is a step in the right direction.
"Although the three-month extension of the Energy Price Guarantee for household energy bills is welcome, disappointingly, the scaling back of support for businesses previously announced this year remains in place, with no mention of potential changes.
"As part of the government levelling-up agenda, the Chancellor announced the introduction of 12 investment zones, plans for the development of local infrastructure and further devolution deals for local governments and Mayoral Combined Authorities.
"Regrettably, there was no specific mention of our region in plans for targeted boosts to local growth. However, the incentives announced for innovation, cyber and nuclear energy could be beneficial for thriving regional industries in those sectors.
"Overall, the return of a budget that not only addresses immediate threats and includes measures aiming at future prosperity is a positive, but the government must commit to providing the stability and confidence needed by businesses to invest and grow the UK economy."
The Federation of Small Businesses suggests reception may be all about managing expectations.
Sam Holliday, Gloucestershire Development Manager for the FSB said: "I think realistically no one was expecting a bumper giveaway budget because we know the Chancellor's coffers are virtually empty but there is still a nagging sense that small businesses were somewhat overlooked in the statement.
"The biggest, universal issue facing businesses are their spiralling energy costs and there was nothing announced about what will happen when the current support scheme ends in April. We also hoped to see Small Business Rate Relief being extended again, but if that was in the Chancellor's mind then indeed that is where it stayed, because nothing was announced.
"There were, however, some encouraging proposals. Many small business owners or their employees have faced crippling childcare costs, so reform there is to be welcomed and the decision to abandon the fuel duty increase freeze will be a relief to many.
"Best of all? The announcement that it is now predicted inflation could be less than three per cent by the end of 2023 and we may consequently no longer be facing recession. FSB surveys have shown confidence at new lows, so maybe it will start to rise again if this indicates trading conditions could, however marginally, be set to improve in coming months."
While the Institute of Directors welcomes some elements of the budget, it remains cautious.
Kitty Ussher, Chief Economist at the IoD, said: "Our economy has been held back in recent years because people running businesses have felt nervous of committing to investment when the climate is so uncertain. The introduction of 100% full expensing for the next three years is therefore very welcome and we urge it to be continued thereafter. It simplifies the system, removes confusion about whether digital investments count as capital and crucially incentivises investment by reducing the up-front cashflow risk.
"Our members have been very worried about prospects for the UK economy so will be reassured at the upgrading of official forecasts, and the news that the OBR expects a technical recession will be avoided this year. It's also hugely encouraging that they felt able to lift further their assessment of Britain's growth potential as a direct result of supply-side policy decisions announced today; this is evidence-based policy-making at its best.
"Having said that it is disappointing that the Chancellor has chosen to target R&D tax credits to some parts of the economy. While good news for the sectors concerned, it could lead to less innovation across the economy more widely. We would also like to see greater understanding of the intervention required to support businesses of all sizes to transition to net zero, particularly those who have not yet engaged with the issue."
But what of the tourism implications for our city and county? Visit Gloucestershire says pressures continue for our cost-battered tourist trade.
Steve Gardner-Collins, Director, Visit Gloucestershire, said: "Uncertain supply chains and spiralling overheads have put tourism businesses under immense pressure this winter, hospitality management are continuing to face pressures to find skills, supplies and customers and the pain of higher bills isn't over, with inflation and the cost of living squeezing households out of surplus spending.
"The biggest challenge still facing our hospitality sector? Retaining customer spend. We hope that, with brighter skies and warmer months ahead, the need to get together and socialise will hold up a still fragile tourism and hospitality sector. Given hard winter months coming to an end and a steady race week still in flow, we hope people will still take opportunities when they can afford to, to spend and get out and Think Local.
"Your local pub, restaurant, hotel and attraction needs you, and we also absolutely need lots of visitors in 2023."
Speaking of your local, Greg Pilley, managing director of Stroud Brewery , says he welcomes the caveats issued by the Society of Independent Brewers (SIBA).
Andy Slee, CEO of SIBA, said: "While it's welcome that the Chancellor has topped up the draught relief from 5% to 9.2%, by increasing overall duty by RPI, the government has eroded the benefits of the wider, big bang changes to the alcohol duty system that are being introduced in August.
"We are also disappointed in the lack of support for pubs, bars and taprooms, which are a critical part of small brewers' businesses and are facing existential threats from energy price hikes, a cost of living crisis and other inflationary costs.
"The Craft Beer Report shows the extent of the stubborn post-Covid hangover for pubs, with a worrying 20% of people having not visited a pub in the last twelve months."
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