Spring Budget 2023: impacts and analysis

A Budget for Growth.
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In his Spring announcement, Chancellor Jeremy Hunt unveiled what he called a ‘Budget for Growth’, with headline takeaways in the form of an increase in funding for childcare, keeping the energy price cap, and pensions and benefits overhauls. 

Some reassurance of falling inflation and economic stability was offered to businesses up front, with the surprise projection that the Office for Budget Responsibility predicts that inflation will fall to 2.9 per cent by the end of this year and the avoidance of a technical recession. 

Despite confirming that corporation tax rate hikes will go ahead in April to aide post-Pandemic recovery, the Chancellor has introduced measures for both capital intensive and capital light businesses that should alleviate that burden and encourage investment in UK business - in an effort to bolster long-term economic growth. 

Additionally, the ability to rapidly expense qualifying capital expenditure against taxable profits and access to enhanced tax reliefs for R&D intensive and creative industries make the rate change much more palatable. After all, the headline rate is just a rate, it’s what that rate applies to that really drives the tax liability.  

The Chancellor, who has previously declared his ambition for the UK to become a "science and technology superpower", set out a vision of the UK as a world leader in some of the industries of the future; AI, Life Sciences, Green Industry, Creative Industries and Quantum Computing.  We expect consultation ahead of the Autumn Statement on opening pools of capital for investment whether from pension funds or through lighter regulation opening opportunities easier access to capital markets.  We have repeatedly called for making it easier for UK innovative companies to access capital for both start up and scale up and so all of this will be welcomed by businesses. 

Importantly, industries need people and, in addition to the expected relaxations to the current pension regime to allow many older workers to remain or return to the workforce, there was also a surprise decision to scrap the £1m cap on tax-free pension savings. For those who do return, the possibility of redirecting their experience and skills to new industries through ‘Returnerships’ is intriguing. Additionally, for the wider workforce, improved access to childcare and decoupling some benefits from employments open up the ability to work and be rewarded rather than penalised for that work.  

Overall, the Chancellor’s measures propose to tackle “the two biggest barriers that stop businesses growing” - investment incentives, and labour supply, as well as supporting the UK in a return to sustainable growth in a relatively benign inflationary environment in the next few years following the fallout from the mini-Budget in September. Although, it’s fair to say that announcements were in danger of being overshadowed by the publicised problems in some European banks.  

Webinar: Unpacking the Spring Budget 2023

We held our Spring Budget webinar on Friday 17 March where we unpacked the Chancellor’s announcements and analysed what they mean for businesses and individuals. If you missed it, watch here.

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