Written By:

Ian Price
Director
CBI

 

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With a General Election fast approaching, all eyes were on the Chancellor for what is likely to be the final fiscal event before voters in Wales go to the polls.

While pre-budget punditry focused on how to square the circle between limited headroom and voter-friendly tax cuts, Welsh businesses were far more interested in understanding the Government’s plan for delivering sustainable economic growth and injecting much needed momentum into the local economy.

In what many expected to be a ‘retail’ budget, the Chancellor kept his focus on addressing the structural challenges facing the economy. While eye-catching announcements for business were thin on the ground, Welsh business leaders can look back on the Budget as the Chancellor’s third act in his plan to build sustainable momentum into the economy – while maintaining welcome discipline in the fight to bring down inflation.

Having delivered a sizeable down payment to business confidence in last year’s Autumn Statement, alongside a bumper incentive for private investment, the Chancellor built on that platform by prioritising policy clarity and a focus on delivery and he announced that Wales will receive £170m in Barnett consequentials over the next fiscal year.

For example, further detail for UK providers on how childcare reforms will be implemented was hugely welcome and – and is something that CBI members have been asking for. The Welsh Government will be looking to establish how this announcement can be applied at a devolved level.

When combined with the reduction in high marginal tax rates for working parents and the cut in National Insurance Contributions, it also represents a sizeable intervention to incentivise work at a time when access to labour represents a major obstacle to business growth.

There was also welcome news that the government plans to build on the full capital expensing announcement made in the Autumn Statement. New draft legislation will extend the provision to leased and rented assets, meaning that even more companies can potentially benefit and investment with confidence in their UK operations.

The announcements that the Investment Zones programme – two are planned for north east and south east Wales – would be extended from five to 10 years were particularly welcome. The extension of Freeport tax reliefs to 2031 will help support the delivery of the major projects in Milford-Haven/Neath Port Talbot and Anglesey.

There is optimism for the nuclear sector following the Government’s announcement it had purchased the Wylfa nuclear site, along with Oldbury on the River Severn, from Hitachi. On renewables, Wales’s geographical strengths for offshore wind will be boosted by the £120m earmarked for the Green Industries Growth Accelerator. It was also good to see a focus on additional funding for automotive and aerospace R&D projects, with Airbus a key employer in north Wales.

Welsh creative industries will also be looking to utilise the £1billion of new tax reliefs for the sector that were announced in the Spring Budget. From Doctor Who to Michael Sheen’s new BBC Cymru drama, The Way, our film and TV industry is thriving and supports around 8,000 jobs locally and it was positive to see a focus on people’s talents in this booming sector.

Where there will be some hesitation is on the ambition shown regarding the UK’s green growth industries and the transition to net zero, particularly around electric vehicles with some reports that sales of new EVs have slowed recently. The CBI’s own analysis shows that the UK’s Net Zero Economy grew by 9% over the last year, emphasising the huge green growth potential.

While the announcement on the timings for the new grid connectivity process was welcome, extending the energy profits levy weakens the sector’s competitiveness and sends out the wrong signal to investors keen to get behind the country’s push towards green growth.  With the UK needing to increase investment from the £10bn a year it currently spends to £50bn by end of the decade, we need to double down on our ambitions.

Finally, one area of missed opportunity was around the enabling role that Welsh business can play in addressing the high levels of economic inactivity in the labour market. With many workers at risk of leaving employment because of health problems, it was disappointing to not see any movement on our asks to use the tax system to deliver on health incentives – such as making Employee Assistance Programmes a fully tax-free service.

For a Budget that wasn’t supposed to be ‘for business’, the Chancellor made some reassuring moves that will help generate the economic momentum we need in Wales. Sober and sensible might not garner much fanfare, but the Chancellor’s ‘third act’ budget might just have been the one we needed at this time.