Business, science leaders welcome 'growth' budget

Business and science groups in the UK have broadly welcomed the spring Budget launched on Wednesday by Chancellor of the Exchequer Jeremy Hunt, who said he wanted to create “the most pro-business, pro-enterprise, tax regime anywhere”.

World globe and pound symbol in front of British flag.

David Sapsted

15 March 2023

Out now, the Spring 2023 issue of Think Global People magazine

Proposals to boost economic growth were unveiled in the House of Commons as the Office for Budget Responsibility (OBR) predicted that, contrary to its own forecast last autumn and those of global financial bodies, the UK would not enter recession this year.The inflation-battered economy is now forecast to shrink by just 0.2 per cent this year before growing by 1.8 per cent in 2023. Inflation itself is expected to be below three per cent by year's end.Although Mr Hunt confirmed the planned increase in corporation tax - from 19 to 25 per cent - would go ahead in April, he said Britain would still have "the lowest headline rate in the G7".

A budget for IT investment and the regions

The 'super deduction' scheme, which allows companies to offset investment against tax on profits, will be scrapped but, in its stead, the government is to adopt a new policy of “full capital expensing”, initially worth £27 billion over the next three years, which will allow firms to write off all investments in IT, plant and machinery against their tax bills.There will also be an “enhanced credit” scheme for research-intensive businesses, worth a £27 tax cut for every £100 they invest.As part of the government's 'levelling up' agenda, Mr Hunt announced the creation of a dozen new investment zones across English regions outside London and the SE, with one each also in Scotland, Wales and Northern Ireland.To qualify for £80 million in government funding and the ability to retain local business rate income, areas will need to develop proposals centred around universities or research institutes.

Labour market measures

At a time when there are still more than 1.1 million job vacancies throughout the nation, Mr Hunt also announced schemes to encourage more economically inactive over-50s back to work, and enhanced childcare allowances to enable more women to join, or return to, the workforce.Matthew Fell, interim director-general of the Confederation of British Industry (CBI), welcomed Mr Hunt's "plan for stability and growth". He said the organisation had been calling for action on people and productivity, and felt the government had delivered support for both. “Full capital expensing will keep the UK at the top table for attracting investment and puts us on an essential path to a more productive economy," he said.“Boosting childcare provision is a big win for businesses struggling to recruit and retain, and parents balancing care and career needs.“Alongside support for occupational health to help people stay in work, it shows the chancellor is listening to business on reducing economic inactivity and easing a tight labour market.“New investment zones focused on economic clusters will drive growth across the country and increased support for quantum is a further step towards making the UK the science and technology superpower it aspires to be.“Giving the go-ahead to carbon capture and nuclear are important steps that will keep the UK’s green growth story on track. With our closest rivals raising their game on green growth, moving further and faster in the months ahead is key.”Shevaun Haviland, director-general of the British Chambers of Commerce, said Mr Hunt had acted to address the unfilled jobs phenomenon blighting the UK economy.She added: "The plans for full capital expensing are also a step in the right direction to offset the rise in corporation tax, but the jury is out on how it will impact businesses compared to the 'super deduction' scheme.“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 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.”

Responses to the budget

In a statement, the Institute of Directors (IoD) said it strongly supported the decision to allow all investment expenditure to be set against revenue for tax purposes.It also welcomed the partial reversal in cuts to R&D tax credits but said that, by targeting research-intensive sectors, "it does nothing to encourage a greater culture of innovation in rank-and-file businesses".Kitty Ussher, chief economist at the IoD, commented: “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."The introduction of 100 per cent full expensing for the next three years is therefore very welcome and we urge it to be continued thereafter. It simplifies the system, removes confusion about whether digital investments count as capital and crucially incentivises investment by reducing the up-front cashflow risk.“Our members have been very worried about prospects for the UK economy so will be reassured at the upgrading of official forecasts, and the news that the OBR expects a technical recession will be avoided this year."Sir Jim McDonald, president of the Royal Academy of Engineering, said he was "delighted" by the announcement of a £2.5 billion, ten-year investment in the 'Plan for Quantum', which Mr Hunt said would give the UK a "quantum-enabled economy by 2033"."This is important for enabling continued innovation in a highly significant emerging technology where the UK has many world-class strengths and demonstrates that the government appreciates the competitive advantage of such long-term commitment in strategic technologies - a very welcome change from previous shorter-term plans," said Sir Jim."The commitment to invest £900 million to build an exascale supercomputer and establish a new AI Research Resource are also welcome initiatives for the artificial intelligence sector."Dr Daniel Rathbone, assistant director of the Campaign for Science and Engineering (CaSE), said: “I am pleased that once again science and innovation are at the heart of the government’s plans for the economy. Lives and livelihoods will be improved by science and innovation through investment zones, R&D tax credits for cutting-edge businesses, and investing in future technologies."

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