After a number of years of economic uncertainty, this Budget provided an opportunity for the government to deliver clarity, predictability and confidence for corporates so that they may be better positioned to contribute towards UK growth.
Treasurers (the financial risk managers in any organisation) prefer to work in an environment where there is as much certainty as possible, especially around funding availability and access to talent. Today’s announcements—if they are supported by achievable goals—are a positive step towards facilitating this.
On that basis, we welcome a number of the measures announced today, including the road map for corporate taxation and the specific pledges to cap corporation tax at 25% and to maintaining the full expenses system of capital allowances for the rest of this Parliament. We also welcome recent commitments made to consult on a new Industrial Strategy. This should encourage investment and help treasurers address funding new rounds of capital expenditure.
The Chancellor also confirmed changes to the fiscal rules and the treatment of debt on capital investment. While considerations will need to be made around value for money for taxpayers, measures to improve public services and infrastructure that improve productivity and ultimately support business are certainly welcome.
However, a number of proposed changes will have a significant negative impact on business in the UK, notably the increases in NICs for businesses and CGT allowances. While any increase in business taxes is unpopular, it is the unintended consequences of such decisions that are most concerning. Such changes will likely cause disruption among the business community – and be particularly challenging for smaller companies who, given their pivotal role in many supply chains, are key to the long-term success of the economy. These smaller businesses are already managing tighter working capital alongside higher funding costs, and we hope that the unintended consequences of today’s announcement are not the final straw.
While the Chancellor did outline measures to help reduce costs for smaller businesses, overall, we believe there was a missed opportunity to do more on funding capabilities. Access to funding is an important issue for helping smaller businesses grow, but we do need opportunities to encourage lending, too. Areas such as sustainable finance and digitisation are huge growth areas and we’d hoped the Chancellor would have looked at these areas.
