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Business Leaders Respond to the Chancellors Latest Mini Budget

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Following the announcement from the Chancellor of the Exchequer Kwasi Kwarteng, Business leaders across Wales and the UK have had their say on last weeks mini budget.

Ben Francis, FSB Wales said:

“The announcement brings forward some much-needed clarity for the future for the small firms who have been strong facing competing headwinds. We are pleased to see the Government signalling its determination to back small firms.

The growth plan announced today will go some way to ease the burden small businesses have been facing. We are pleased to see many of our calls heeded, including the decision to reverse the NICs hikes introduced in April. Reversing all four, employer, employee, self-employed and the dividend equivalent is the right decision, as is the scrap of the Corporation Tax increase. This will provide some crucial breathing space for firms.

We’re also pleased to see that Government is working on incentives for international visitors and hope to see the VAT free shopping on highstreets for international visitors boost our local towns and tourism sectors.

Among the announced measures, are the Investment Zones, where business taxes will be reduced, and planning rules eased. FSB Wales will be looking to UK and Welsh Government to engage early to identify the range of potential sites across Wales. Wales cannot afford to be left behind in the mission of boosting regional competitiveness. We look forward to working with Ministers in the Welsh Government alongside UK Government Ministers to help identify the measures that are needed to help our small businesses grow and thrive.

Alongside the support announced on easing the now-significant energy burden for businesses earlier this week, today’s announcements will help provide some optimism for smaller businesses in Wales.

The new Government has signalled its intention to focus on economic growth. While this is welcome, we need to continue to ensure that smaller businesses are supported and are ‘match fit’ to help fulfil that ambition”

Amanda Tickel, Head of Tax and Trade Policy, Deloitte said:

“This Budget will undoubtedly attract international attention. With the UK now retaining the lowest corporate profits tax rate in the G20, a maximum income tax rate of 40%, and extra incentives available in investment zones, the UK is on a stronger footing to compete for international investment.

Simon Jones, Wales Tax Partner at KPMG, said:

“New Chancellor Kwasi Kwarteng has delivered a fiscal statement flavoured with a return to the economics of the 1980s aimed at driving economic growth and productivity while tackling a wide range of fiscal, social and economic challenges head on.

“Businesses saw a fiscal statement that felt very different and a clear shift in Government policy.  Gone is Sunak’s higher tax approach focused on balancing the books and instead we have a range of measures to try and halt the UK’s languishing growth figures and super-charge its economy.

“The planned rise in Corporation Tax rate has been scrapped in a move that will be welcomed by most businesses and hails a return to low-tax-broad-base approach of George Osborne.  The scrapping of the IR35 rules on off payroll working will also be welcomed by easing a significant compliance burden.

“In a surprise move the additional income tax rate of 45% is also to be scrapped, enhancing the Government’s trickle-down approach to try and get the economy moving.  Plans to cut the basic rate of income tax are being brought forward a year to 2023.

“It was also interesting to note that the issue of levelling up will now have more of a tax focus, with the announcement of new investment zones which offer a range of tax benefits that look very like a throwback to the enterprise zones of the 2010s.

“This all comes after the Chancellor announced yesterday the planned 1.25% rise will be reversed from 6 November and the levy, due to replace the National Insurance rise as a new standalone tax from April 2023, has been cancelled.

“Overall, this was a fiscal statement that felt very different and showcased a clear change of direction from the new Government.

“While parts were not as radical as predicted, such as no major stamp duty reform and only talk rather than actions on business rates, this was a statement of intent by the new Chancellor.

“It is now left for businesses and the economy in general to see these changes put in place and assess if they provide the boost that is both intended and needed to deliver growth.”

Geraint Hampson-Jones, senior investment manager at wealth manager Brewin Dolphin’s Cardiff office, said:

“The new UK government had been very outspoken on its very ambitious growth target of an average of 2.5% over the medium term.  The most common root to increasing growth comes from boosting demand and drawing people into employment but with unemployment historically low that will be difficult.  That’s the reason the Bank of England are raising interest rates, to slow demand down and avoid stoking inflation.”

“With a lot of the measures in this budget boosting demand the risk is that interest rates will have to rise further to offset them. The chancellor seems to be pushing the accelerator while the MPC is pushing the brakes.”

“The energy bill cap, reversing the NI increase, bringing forward the income tax cut, and abolishing additional rate tax are all policies that will boost demand.”

“The growth target depends much more on the UK’s ability to boost the economy’s potential capacity. That is what they will hope to achieve through changes to universal credit in order to try and reduce labour inactivity. Other supply side measures include cancelling the planned increase in corporation tax, low tax investment zones and greasing the approval process for infrastructure investment. These kinds of policies have potential but will prompt resistance making them difficult to implement.”

“The net result of the chancellor’s statement was that the government bond yield rose sharply. Borrowing costs are rising in anticipation of both higher interest rates and a deluge of new bond issuance that will be required to fund the new debt burden .”

“With many of the details pre-released, the biggest surprise was that so little was done to raise new funds or cut other spending to pay for the headline measures. Despite the prospect of higher interest rates the pound eventually fell reflecting investors’ concerns about the deteriorating public finances and scepticism that the increase in debt will translate into higher growth.”

Aashika Shah, investment analyst at Quantum Advisory said:

The Mini-Budget is a massive shake up of the UK’s finances

The UK Chancellor, Kwasi Kwarteng, outlined a series of tax cuts, stamp duty reductions and fiscal measures in a bid to boost economic growth. In an unprecedented move, these measures come as the Chancellor rejected the release of the Office for Budget Responsibility forecast.

Overall the changes herald a move to stimulate and rely on economic growth to support increased Government borrowing.  It’s a bold step from a newly formed cabinet who are looking to make their mark ahead of the next general election.

Reductions in income tax and National Insurance to come – The Government has brought forward the planned reduction to the basic rate of income tax from 20% to 19% from 2023, and scrapped the 45% top rate of income tax. The Government will also repeal the new 1.25% health and social care levy for many workers as of 6 November.

Corporation tax rises scrapped and low-tax investment zones created – The Chancellor has scrapped the planned increase in corporation tax from 19% to 25%, which was due to come into effect as of April 2023. Also announced are plans for low-tax investment zones, meaning those who live and work in these areas would see personal contributions cut, with tax burdens also lightened for firms. However, the locations and extent of this relief is yet to be confirmed.

Performance fees stripped from defined contribution (DC) charge cap to spur investment – For DC pension schemes the charge cap preventing DC schemes from applying annual charges of more than 0.75% p.a. currently limits investment strategies from using funds with a performance-related fee because it could exceed the cap if performance is strong. Today the Government announced that performance fees will be removed from the charge cap applied to DC pension schemes, in a bid to encourage pension schemes to make investments in infrastructure and high growth sectors such as science and technology.

Paul Slevin, Executive Chair, Chambers Wales South East, South West and Mid

We are pleased to see a number of measures announced in this mini budget that will no doubt provide a lifeline to struggling businesses across Wales and the rest of the UK.

“We’re particularly pleased to see the planned 1.25% rise in National Insurance reversed. This change will not only benefits workers who are set to see an increase in their take home pay but is vital for businesses who will now save on average almost £10,000. This saving cannot be underestimated in improving businesses’ ability and confidence to invest and grow.

“The repealing of the IR35 reform that we saw introduced in early 2021 is helpful for both businesses and contractors. While there is likely to be legislation remaining, its simplification will go some way towards bringing the economically inactive back to work and needs to be reversed as soon as possible.

“Welsh businesses will also be pleased to see that the scheduled increase in the main rate of corporation tax is being reversed and will remain at 19%. The original planned increase would have no doubt been a great source of worry for many, who are already facing rising costs across the board.

“The cost of living and cost of doing business crises are intrinsically linked, and so people will be reassured to see the basic rate of personal income tax reduced. Hopefully these changes will free up some much needed income for workers and provide a boost to the Welsh and UK economies.

“We also look forward to finding out more about the Government’s plans for 40 new investment zones in England and what this means for devolved nations. There is a growing concern that those including Wales are in danger of being left behind when investment announcements are made in Westminster, similar to what we have seen in freeport discussions.

“Whilst we do have concerns around this week’s rise in interest rates, in recent days we have also seen help announced for businesses struggling with rising energy costs. The stimulus packages will help the UK grow its way out of a recession, if it does not cause contention with attempts to subdue inflationary pressure, especially in supply chain and energy.

“It is our hope that the measures announced this week, will give businesses confidence in the future.”

Emma Jones CBE, Founder, Enterprise Nation said:

“It's bold, it's agile and it's speedy. Economists will be arguing for months to come, but small businesses will be waiting for the impact of this budget trickling down into their sales tonight.

“The new administration clearly set out its stall today and that it is firmly on the side of entrepreneurs and wealth creators. The tax cuts, both business and personal, will deliver confidence and unleash the entrepreneurial spirit that we know exists across the UK and to which the Chancellor referred so often.

“The UK's small businesses have wanted growth acceleration but have had to be content with stagnation because of barriers to growth such as access to finance, business rates and employment complexity.

“The extension of EIS and SEIS and the pension charge cap reforms will be welcomed with open arms by the small business community, and we expect more start-ups to follow with an emphasis on supporting those who are 50+ to move from unemployment into self-employment. Thanks to the removal of IR35, many experienced individuals that left the employment market will now return.

“Our view for more than a decade has been that one of the most important things a government can do is to champion entrepreneurs and this morning’s statement and announcements most seriously deliver on that.”

Kate Nicholls, CEO of UKHospitality said: 

“The stated objectives of boosting growth and tackling inflation are a positive statement of intent to rightly put business at the heart of the Government’s agenda. We support the ambition for a globally competitive tax regime, to unleash entrepreneurship, growth and investment, and we look forward to working with the Chancellor to deliver that.

“Energy support and NIC measures will allow our businesses to better plan for a tough winter ahead. Today’s announcement included many positive measures that will bear fruit in due course, and we look forward to continuing to work closely with the Government on our immediate challenges.”

Tony Danker, CBI Director-General, said:

“This is a turning point for our economy. Like Covid, the energy crisis has meant Government has had to spend massively to protect people and businesses. That means we have no choice but to go for growth to afford it.

“Today is day one of a new UK growth approach. We must now use this opportunity to make it count and bring growth to every corner of the UK. Fifteen years of anaemic growth cannot be repeated.

“Taking action to get Britain’s economy moving again by beginning construction on transport and green infrastructure projects shows immediate delivery. Planning reform is long overdue.

“A simpler, smarter approach to tax can pay dividends, and firms will be keen to make the most of the investment incentives on offer.

“It’s not perfect – it’s just the beginning – but there’s plenty business can work with. The Chancellor signalled more proposals to come this Autumn and these will be vital to sustain momentum on growth.”

Michelle Ovens CBE, Founder, Small Business Britain said:

“The focus on entrepreneurship in today's Growth Plan statement is good news for small businesses, and a hugely encouraging step towards supporting this key part of the economy in a tough financial climate.

“The energy plan already announced, cutting prices for small businesses and addressing some of the astronomical rises we have seen this summer, will give businesses some reassurance over the winter months, even if there are still questions over the long term plans.

“There is no doubt that rolling back national insurance rises, IR35 regulations and the planned corporation tax rise next year will be welcomed by small businesses and the business community more widely. In the medium to long term, this will support and encourage entrepreneurial growth, which is very welcome.

“However there remain serious challenges in the short term as entrepreneurs battle with rising costs across all areas of the business, not just in energy and tax. Finance, input prices, export and staffing all remain challenging and we continue to see businesses failing at a high rate with little to fall back on after a

very difficult few years. More will need to be done at all levels of society and government to ensure the 5.6 million small businesses in the UK can weather this winter and make the most of the supportive policies announced today.

“The direction of travel is absolutely right for small businesses. This now needs to be delivered by us all.”

Nicolas Burquier, Managing Director of Pizza Hut Europe said:

“It’s great to see Government has acknowledged and is acting on the significant pressures facing the UK hospitality sector as a result of the rise in global inflation. Combined with the recently announced support on energy bills, the tax changes and Investment Zones unveiled today, all will offer some respite for many hard-pressed restaurants and takeaway owners like our franchisees. We look forward to continuing to work with the Government to ensure that hospitality receives the sustained support it requires as the sector looks to recover from current setbacks.”

Dr Liz Cameron CBE, Director & Chief Executive, Scottish Chambers of Commerce said:

“The Chancellor’s commitment to pro-growth and pro-enterprise policies will be eagerly welcomed by businesses. The specifics on reducing business costs, cutting red tape and boosting infrastructure development are exactly the levers the UK Government should be pulling to support economic growth.

“The plans for Investment Zones strike an ambitious tone but these plans must provide equitable benefits to the UK nations ensuring new economic activity is generated, not simply displaced from one location to another. Similarly, fixing the complex and burdensome planning system must be a joint priority for both the Scottish and UK Government if we are to attract investors.

“As we look ahead to the Scottish Government’s emergency budget, businesses and households now play the waiting game to see if the Scottish Government opts to take similar moves. With control of powers such as income tax and land & buildings transaction tax devolved to Scotland, the expectation will be for Scottish Government to deliver parity with the rest of the UK. Divergence between the nations risks dampening business and investor confidence.

“The string of policy announcements from the Chancellor signal a bold start. As firms continue to navigate unprecedented challenges in the economy, consistent collaboration and partnership will be essential between both governments and the business community if we are to move from survival to growth.”

Stephen Phipson, Chief Executive, Make UK said:

“The Chancellor has clearly recognised that we are heading for very stormy waters in the face of eyewatering increases in energy and other costs, together with a difficult international environment.  Industry will welcome today’s statement which, coming on the back of the support for energy, contains a number of positive measures to help shield viable companies from the worst impact of escalating costs and help protect jobs. The focus on prioritising growth with plans to speed up planning reforms, boost infrastructure and investment is especially welcome.

“However, this is the sixth growth plan in little over a decade which has seen ever increasing political uncertainty. This has resulted in zero certainty for business, the most important thing it needs. Government must try and reverse this process by working with industry to develop a long-term economic strategy together with a National Manufacturing Plan.

“At its heart must be a properly designed tax system and a certainty of policy that aims to transform the low level of business investment, develops the workforce of the future and equips people with the digital skills they will need in the new industries and technologies which are rapidly emerging.

“Given the tools and, the right economic environment, industry can help itself and, at the same time, help the Government meet its growth target. Now is the time to end to put in place the right building blocks for the long-term.”

Emma McClarkin, Chief Executive of the British Beer and Pub Association, said:

“We welcome the steps taken by the Government in the Chancellor’s fiscal statement. The measures announced today will mean a boost of £500m for our sector, enabling growth following successive crises and allowing us to thrive in the future. Coupled with this week’s intervention on energy bills, these commitments will make a significant difference to our pubs and brewers at an acutely difficult time.

“The Chancellor’s plans show that the Government recognises how extreme the cost of doing business has become and the enormous investment our sector makes, not only in the economy, but to the social fabric of communities across the breadth of the UK and why it must be protected. We look forward to the continued reduction of taxation on the sector at the next Budget – the need for a reduced VAT rate for hospitality and business rates reliefs remain as strong as ever.

“We will continue to work with the Government to ensure that reforms to the draft beer duty rates are brought forward as soon as possible, meaning that our pubs and brewers can contribute to, and be at the heart of villages, towns and cities for many years to come.”

Robert Lloyd Griffiths OBE, Director of ICAEW in Wales said:

“There were measures in this budget that took many by surprise but I have no doubt that our members and the businesses that they represent will be pleased with some of today’s announcements, particularly the decision not to increase corporation tax as previously announced.”

“However, the devil is in the detail and we are yet to hear what some of the measures will actually mean for Wales, such as the investment zones and changes to stamp duty. We therefore urge both UK and Welsh Governments to work together to do what is right for Wales.”

Shevaun Havilland, Director General of the British Chambers of Commerce said:

“Businesses will welcome many of the measures announced today that should boost economic growth, relieve cost pressures and encourage investment.

“The announcement to reverse the increase to National Insurance Contributions (NIC) is a big win for the British Chambers of Commerce and the business community. This is much needed support for companies during these difficult times.

“Firms will also be glad to see the Annual Investment Allowance made permanent. It is a crucial tool which gives them the confidence to push ahead with investment, and will add greater certainty to their plans, now we know it is guaranteed to remain.

“Business wants to create the wealth that funds Government spending, and plans for Investment Zones, and steps to encourage new funding in our growth industries have the potential to do just that.

“Investment Zones could also finally deliver on the Government’s long-standing promise to level up, if the scheme is truly UK-wide. But lessons must be learned from the past, otherwise they can simply displace growth and investment from one area to another without creating new economic activity.

“This is a bold start, and we now await further detail on the further reforms the Treasury announced, to see if this will develop into a comprehensive long-term economic strategy.

“All eyes will also now turn to the forecasts by the Office of Budget Responsibility in the autumn for reassurance on public finances.”

Ben Willmott, head of public policy for the CIPD said:

On the Energy Bill Relief Scheme:

“The Energy Bill Relief Scheme will support the ongoing viability of many firms over the winter and no doubt save thousands of jobs. However, it’s crucial that the Government is ready to extend this beyond the initial six months and provide targeted assistance to employers under the most pressure if energy costs remain very high levels or spiral further. As we learnt with furlough, it’s vital businesses have a clear view of what support will be available to them in good time so they can make the right decisions for their organisation and avoid unnecessary job cuts.”

On securing growth through tax cuts:

“The Government cannot expect tax cuts alone to stimulate growth across the economy. It needs to have a broader plan to boost business productivity by making key reforms to skills and other areas of policy that can boost employers’ investment in training, people management capability and new technology. Reforming the failing Apprenticeship Levy and working with the regions to radically improve locally delivered business support services would be good places to start.”

On the reversal of the employer NICS increase:

“The Government's decision not to push ahead with the planned increase to employer National Insurance contributions will be a huge relief to many employers. We’d urge employers, where they can, to reinvest this back into supporting their people at this difficult time. Some employers have already told us they intend to use the money that would have been spent on this to help their employees during the cost of living crisis. For example, by funding a higher pay rise, a one off cost-of-living bonus, or other financial wellbeing benefits such as an increase in employer pension contributions.”

On removing the bankers’ bonus cap:

“At a time when so many people’s wages and incomes are falling behind inflation, the decision to lift the cap on bankers’ bonuses is unlikely to be understood or agreed with beyond the very few that will directly benefit. There are also questions over its effectiveness as a means of boosting performance and growth, and whether the behaviours it incentivises could reignite the sort of risk taking among financiers that led to the financial crisis. Rather than rewarding the few, businesses should be thinking about how they can lift pay and reward for all their workers.”

On measures to get claimants back into work:

“The bespoke support announced to help benefit claimants get back into work and earn more is positive. However, the Government must recognise that many people seeking work or to earn more money need access to flexible jobs, for example, if they have caring responsibilities or health conditions. Evidence shows that working parents, carers and older workers particularly value, and are more likely to need, flexible working, highlighting the importance of the Government meeting its previous commitment to help create more flexible workplaces. Any measures to incentivise people to seek work or to earn more would need to be proportionate and recognise the individual circumstances of claimants.”

On a review of business regulation:

“It’s important that any forthcoming review of business regulation alluded to by the Chancellor does not include plans for unnecessary tinkering with employment laws. The UK is already one of the more lightly regulated labour markets among developed economies, with a high proportion of workers in permanent employment and lower than average unemployment. Business surveys consistently show that most employers, including SMEs, don’t regard employment regulation as a significant obstacle to growth, so are unlikely to welcome or benefit from changes to legislation in this area.

“A more productive first step for the Government would be to deliver on previous commitments to improve labour market enforcement and support the creation of more flexible workplaces. These changes would help raise employment standards overall, create better-quality jobs and underpin a push for growth.”