What the new UK budget means for people and businesses
- Friday, March 17, 2023
- Posted By The Growth Company
UK chancellor Jeremy Hunt delivered the government’s budget to the House of Commons on Wednesday, outlining a series of new measures that will impact people and businesses across the country.
The key theme of Jeremy Hunt’s first Budget was “Getting Britain Back to Work” and improving the economy as a result, with changes planned for enterprise, employers, and workers, including adjustments to tax rates for all.
The Treasury had more leeway on spending than expected, thanks to higher tax receipts and lower borrowing costs, as well as improved forecasts from the independent Office for Budget Responsibility (OBR).
The OBR said that gross domestic product (GDP) would contract by 0.2 percent this year, rather than the 1.4 percent drop projected in November. Mr Hunt explained that, as a result, the UK will avoid a technical recession, which occurs if economic output shrinks for two consecutive quarters. In addition, the OBR predicted that the economy would return to growth over the next two years, expanding by 1.8 percent in 2024 and 2.5 percent in 2025.
Inflation, meanwhile, appears to have peaked, with the OBR suggesting it will fall from 10.7 percent in the last quarter of 2022 to 2.9 percent by the end of 2023 – close to the Bank of England’s target of 2 percent.
There was also cause for positivity on the public finances, with the budget deficit and public sector net debt both anticipated to decline over the forecast period.
Despite such potentially encouraging figures, households and businesses are struggling, and will continue to struggle, in the face of an unprecedented cost-of-living crisis – a fact Mr Hunt acknowledged at the dispatch box when he referred to the “enormous challenges” and “distress” vexing the country.
The chancellor therefore announced several policies ostensibly aimed at boosting investment, productivity, state resources, and ultimately, growth:
The energy price guarantee (EPG) will stay at its current rate until the end of June. The EPG caps the unit cost of energy, limiting an average annual household electricity and gas bill to £2,500. This was set to rise to £3,000 at the end of next month.
Mr Hunt made some significant and somewhat controversial announcements. Firstly, nuclear power will be reclassified as “environmentally sustainable” which will grant the sector access to the same investment incentives and opportunities as renewable energy. This runs alongside a £700m investment in the divisive Sizewell C nuclear plant. Hunt will also be launching Great British Nuclear in a bid for nuclear power to provide one quarter of the UK’s energy by 2050.
A positive move for the green economy relates to carbon capture. The chancellor announced a £20bn support package for carbon capture which is expected to support up to 50,000 jobs, attract significant private sector investment, and capture 20-30 million tonnes of CO2 every year by 2030.
Finally, the Climate Change Agreement scheme will be extended for two years, generating £60m tax relief for eligible businesses for energy efficiency measures.
Amy House, Director of Green Economy said “The budget provides a welcome shift away from the UK’s reliance on overseas gas.... the UK is home to a vibrant base of renewable firms, and a world leader in wind generation, but the budget seems a missed opportunity to drive change with meaningful policy to stimulate demand beyond the existing Climate Change Agreement scheme. The energy mix must include both renewables and demand reduction if net zero is to become a reality.”
Find out more about what the budget means for the UK’s Green Economy
12 new “Investment Zones” will be set up across the UK, with areas including Greater Manchester, Liverpool, and South Yorkshire identified as a possible host area. Successful proposals will be given up to £80m in financing. Mr Hunt also promised £400m in extra funding for “levelling up partnerships”.
Moreover, exporters and importers will see their paperwork reduced and will be given more time to submit customs forms.
Two new trailblazer devolution deals will see money and powers handed directly to the Mayors of the West Midlands and Greater Manchester, including a direct funding settlement, devolution of post-19 skills funding and functions and greater control of the affordable homes programme.
With this increased flexibility, it’s expected there will be an increased focus on skills training in the devolved areas; this includes closing skills gaps in important sectors and improving the career pathway for those who choose not to go to university.
“GC Education and Skills has more than 30 years’ experience in training and education and is rated as one of the ‘Top 50 Training Providers’ in the country. We have had great success in bringing people back into a learning environment and preparing people for the modern workplace.” said Jon-Paul Rimington, Managing Director of GC Education and Skills.
If you’re looking for you next step or want to explore a career in a new sector, GC Education and Skills have hundreds of courses available right now.
Parents of children aged between nine months and three years are to be offered 30 hours of free childcare in term time if they both work 16 or more hours a week.
The rate of corporation tax, paid by businesses on taxable profits over £250,000, will increase by 6 percent to 25 percent. Companies with profits between £50,000 and £250,000 will pay between 19 percent and 25 percent. In addition, firms will be able to deduct investment in new equipment and technologies from their taxable profits, while “research intensive businesses” will be able to access “enhanced credit” worth £27 for every £100 they invest.
Access to Finance Lancashire specialist Iain Duncan shares his initial thoughts on the budget - “While chancellor Jeremy Hunt’s budget didn’t see a U-turn in the upcoming increase in corporation tax to 25 per cent, there were some notable incentives designed to promote business investment.
“All capital expenditure will now be eligible for tax relief for businesses, worth a reported £9 billion per year. Business in the life sciences and creative industries will also see enhanced tax credits for research and development - to £27 for every £100 invested.”
If you’re worried about your business's finances, get in touch via A2F Lancs website and find out what funded support there is to help you and your business.
The 5p cut to fuel duty will be extended for a further year, and from August, alcohol taxes in pubs will be 11p in the pound lower than in supermarkets.
Apprenticeships for the over-50s will be expanded to encourage more people to return to work in a new sector. There will also be a voluntary employment scheme for disabled people – called Universal Support – worth £4,000 for up to 50,000 workers.
Michelle Leeson, Managing Director of Employment at GC Education and Skills says “It can be incredibly difficult for those that are furthest from the labour market to consider returning.
“By removing barriers to learning and employment, whether that improving people’s confidence, developing job search, CV writing and application skills, or more complex needs which may be holding them back, it is essential we recognise the specific needs of individuals for them to reach their full potential. The Chancellor has identified that we have vast amounts of potential going untapped in modern Britain and we are prepared to be part of the solution to that."
Growth Company Employment has already helped hundreds of people into meaningful employment, see how they can help you make those first steps in your new career.
The annual limit on tax-free pension contributions will rise from £40,000 to £60,000, while the lifetime cap will be eliminated entirely, to encourage older workers to remain in work.
Janine Smith, Director of the GC Business Growth Hub, commented:
“This week’s budget provides grounds for cautious optimism about the economy’s resilience in the coming months and years. It also contains a number of policies that will no doubt help businesses, entrepreneurs, and employees in Greater Manchester, from expanded childcare provision to new investment opportunities.
“But many difficulties still lay ahead – and many of the forecasts and policies announced earlier will not take effect for some time. That’s why it’s so important for firms to access support as early as possible.”
GC Business Growth Hub is #HereForBusiness in Greater Manchester during these unprecedented times.
The Hub provides practical guidance and expert advice on a range of subjects to help companies in Greater Manchester manage the increasing cost of doing business and thrive in a challenging economy. Supporting businesses at all stages of their growth journey with our broad range of services delivered by specialists with a passion for helping businesses across Greater Manchester to realise their ambitions.
Offering expert one-to-one and peer-to-peer business support, events, specialist programmes, funding and much more. Better still, most of the support is fully-funded and is provided at no direct cost to your business.
Find out more about #HereForBusiness and how it can support you.