17 October update
On 17 October, the new Chancellor of The Exchequer, Jeremy Hunt, brought forward a number of measures from the late October Medium-Term Fiscal Plan. These reversed most of the changes that had been announced by his predecessor, Kwasi Kwarteng, on 23 September.
Businesses expressed positivity about some of the measures outlined in the Chancellor’s mini-Budget. In a feedback session immediately after the announcement, CFO members of ICAEW welcomed the reversal of the National Insurance increase and the cancellation of the 25% Corporation Tax rate, and the extension of schemes such as the Seed Enterprise Investment Scheme (SEIS).
There were some concerns, however, about the seeming lack of stability with the same party in government swinging so wildly on economic policy, and some expressed doubt about the plan’s effectiveness when it comes to stimulating economic growth.
Removing the 45% additional rate of income tax was not seen as much of a benefit for businesses, as one CFO in the travel sector put it: “Our typical customer is not in the 45% tax bracket or banking sector.”
The effect of the mini-Budget on the exchange rate will be dramatic, resulting in the UK importing inflation, according to one southern retailer, but it will potentially make the UK more attractive for inward investment.
Businesses saw the moves as a big gamble despite the benefits some of the measures would provide. It will help with survival rather than growth, according to a CFO of a business services firm based in London.
As the markets responded unfavourably to the growth plan, seeing the pound fall to a 37-year low and the cost of government borrowing increase, some businesses questioned whether the government could afford to take these risks. “How does this balance the books with increasing debt and increasing interest rates? It seems imprudent in the extreme,” said a London-based CFO in the FMCG sector.
Aftermath of September's Fiscal Event
Read ICAEW's analysis and reaction to the 23 September mini-budget and the new Chancellor's statement of 17 October, confirming plans to reverse most tax cuts and scale back energy price support.
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