Chancellor of the Exchequer Rishi Sunak made some positive moves to support businesses and private sector growth in the Autumn Budget 2021, but there is a question of whether it’s really enough.
The Chancellor announced a freeze in the business rates multiplier increase in 2022/23, and a 50% business rates relief for the retail, hospitality and leisure sectors over the same period, to a maximum of £110,000, effectively extending pandemic support measures. Businesses will also be able to claim a business rates relief for property improvements and green technology in 2023/24.
These measures are welcome and do reflect the recommendations that ICAEW has made to the government, such as reducing the business rates multiplier, says John Boulton, ICAEW’s Director, Policy. “Government has recognised the issues that we've raised around the huge burden that business rates place on certain sectors. The system, coupled with the sheer scale of the tax, mean that problems are really acute for some businesses, and require government action.”
However, the measures announced in the Budget are really kicking the can down the road, he says. “What we're not seeing is the serious, long-term reform to business rates that's needed. There are measures, including making better use of modern technology, to make the system more reflective of current business conditions.”
Additional reliefs and a fuel duty freeze
The government also extended the £1m level of the annual investment allowance until 31 March 2023. This relief helps businesses that want to invest in plant and machinery. The bank surcharge has been set at 3% from April 2023, designed to compensate banks for the increase in corporation tax and other operating costs.
For the arts and culture sector, from April 2022 there will be a two-year tapered rate increase for theatre, orchestra and museum, galleries and exhibition tax relief (MGETR). The MGETR sunset clause has also been extended to March 2024.
The continuing freeze in fuel duty at 57.95 pence per litre for 2022/23 – the 12th consecutive freeze – will help businesses as petrol prices rise.
Support for start-ups
The Chancellor expressed is continuing support for the Kickstart scheme and the Help to Grow management and digital schemes, extending the former to March 2022 and putting more funding into the latter.
This is welcome news, says ICAEW’s Director, Communities and Business, Sarah Ghaffari, but more work needs to be done to ensure that these schemes are accessible to businesses. “The sentiment is right, but is it targeting those who really need it? We are aware that the take up of Help to Grow isn't as big as it could be. We are working closely with the Small Business Minister to find ways to address the barriers that are preventing businesses from using it.”
The Chancellor talked about creating a “science and technology superpower” through investment in a more innovative, high-skill economy. However, the R&D and innovation measures outlined in the Budget were not as ambitious as they could have been.
“The Budget was relatively ‘steady-state’ in its approach to public investment in innovative, game-changing technologies and industries,” says Shaun Beaney, ICAEW’s Manager, Corporate Finance Faculty. Some people may have hoped for more ambition, following the publication of the Innovation Strategy earlier this year.”
The Chancellor did describe the government’s commitment to invest £30bn in new green industries as part of its innovation agenda – one of the very few green measures announced in the Budget.
The government pushed back its target of £22bn per annum on R&D, from 2024/25 to 2026/27. The UK has a long-term target for UK R&D to reach 2.4% of GDP by 2027. The Chancellor said he aimed to reach 1.1% “by the end of this parliament”. “This compares favourably with the current average for the OECD Nations of 0.7% and Germany at 0.9%, but clearly is significantly lower than the government’s original ambition,” says Beaney.
“The UK is a genuine world leader in the global impact of its R&D, but it’s much further down the rankings in terms of R&D diffusion and adoption. Therefore, the government’s restated support for Innovate UK, which is at the heart of much commercialisation of innovation and science in the UK, with a core annual budget of £1bn, is very positive.”
A Bill to create the Advanced Research and Invention Agency is currently progressing through parliament. The new agency will have a budget of £800m over four years. R&D tax credits was extended to include cloud computing and data costs, which is a step forward, says Beaney.
A lack of big measures
While there were welcome measures for businesses in the Budget, it lacked any big announcements for businesses. With energy costs and taxes rising, the Budget measures really just avoid putting additional pressure on businesses still recovering from the impacts of the pandemic.
“The main issue that businesses are facing is a daily supply chain crunch, and none of these measures will really help with that,” says Sarah Ghaffari. “Whether it's labour or goods to market, those pressures are still there. They're only going to be ramp up as we approach Christmas.
“It's a tricky one that businesses will have to ride out, but I think people were looking to the government for something, whether it was some sort of grant or voucher, to help with rising costs, but nothing came out of that.”
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Autumn Budget 2021
On 27 October 2021, alongside the publication of the government's comprehensive spending review, the Chancellor will announce the details of his second budget of 2021. Read ICAEW's analysis and reaction.Read
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