Business groups cheer Budget measures, but fears remain amid cost pressures
Measures to address worker shortages and boost investment have been welcomed by business groups, but fears remain over upcoming tax and energy bill hikes, while small firms were left feeling “short-changed”.
Alongside efforts to get Britons back into work, Chancellor Jeremy Hunt also announced plans for “full capital expensing” as he looked to soften the double blow of the upcoming increase in corporation tax from 19% to 25% from April 1 and the ending of super-deduction allowance.
The British Chamber of Commerce (BCC) said the move, which will allow all investment expenditure to be set against revenue for tax purposes in the year it is spent for the next three years, was a “step in the right direction” to offset the rise in corporation tax.
The Government claims full expensing is the equivalent of a corporation tax cut worth an average of £9 billion a year for the three years it is in place.
It also said the Office for Budget Responsibility estimates it will increase business investment by 3% a year.
Shevaun Haviland, director general of the BCC, said: “But the jury is out on how much it will help businesses compared to the super-deduction scheme.”
She added: “Almost half of businesses have told us they will struggle to pay their energy bills from April, and they cannot invest when they are fighting to survive. There is little in today’s announcement that will provide comfort to these firms.
“The Government also failed to reform business rates which we have repeatedly called for.
“If the UK’s innovative growth industries are to remain competitive on the world stage, then Government must shift the dial further on investment, both within the UK and from overseas.”
The Institute of Directors (IoD) also cheered the full expensing decision – something it said it called for last summer – though it urged the Government to make it permanent.
Kitty Ussher, chief economist at the IoD, said: “Our economy has been held back in recent years because people running businesses have felt nervous of committing to investment when the climate is so uncertain.”
She said 100% full expensing is “therefore very welcome and we urge it to be continued thereafter”.
But small business groups lined up to criticise the Chancellor’s Budget for leaving them out in the cold.
Martin McTague, national chair of the Federation of Small Businesses (FSB), said small firms had been left feeling “short-changed”.
“We’ve got a Budget that on energy helps households but not small firms.
“On business taxes, it spends £27 billion extra on big businesses, arguing that small businesses are already catered for.
“This will leave to a feeling of being left behind instead of being considered equal partners in economic recovery.”
Michelle Ovens, founder of Small Business Britain, said more needed to be done to help Britain’s 5.5 million army of small companies in the face of April’s less generous energy support scheme, higher tax and rising costs.
“This Budget is optimistic for the future, but many businesses will be wondering if they will still be around to benefit from it,” she warned.
Economists at the Resolution Foundation argued the change to corporation tax would encourage the biggest firms to bring forward investment but not increase it.
Chief executive Torsten Bell said: “Announcing yet more temporary arrangements for corporate taxes is unwise, contributing to ongoing uncertainty and doing nothing to permanently raise the levels of business investment in the UK.”