The Chancellor seeks to reduce the impact of economic uncertainty for small businesses in the Spring Statement
Rishi Sunak delivered his Spring Statement 2022 yesterday in the context of the Russian invasion of Ukraine and the significant uncertainty created in the global economy and energy markets and creating future uncertainty in the UK economy. The Chancellor also sought to balance these challenges in the face of the UK’s strong economic recovery, as we emerge from the pandemic and the strong labour market conditions, leading to high tax receipts and lower borrowing. Rishi Sunak was in no doubt of the impact in terms of the cost of living crisis and the economy overall and it was likely that further measures will be required in the Autumn to reduce the impact as the fall in living standards and on small businesses takes hold.
With a two-pronged approach focusing on reducing impact on households and impact on businesses and increasing productivity, the Chancellors policy has direct implications for the UKBAA investment community in our support of small business growth across the UK and the impact on the availability and capacity of private sector investment to back innovation and small business growth.
The Key actions announced focused on small business growth and innovation included:
- Increasing the Annual Investment Allowance
- Supporting Management development and strategic growth capacity – through the Help to Grow programme
- Cuts to fuel duty
- Increasing Employment Allowance
The Chancellor also showed his commitment to developing a new culture of enterprise, focusing on
- Cutting and reforming taxes on business investment to encourage firms to invest in productivity and innovation
- Encouraging businesses to offer more high quality employee training, including the potential reform of the Apprenticeship levy
- Delivering on the pledge to increase public investment in private sector innovation and R&D through tax relief framework and leveraging private sector investment.
Key Policy announcements included:
- Increasing National Insurance Thresholds and reducing Class 2 NICs payments for low earners
- Increasing the Employment allowance, reducing employers NICs by up to £5k for eligible employees
- Reducing the basic rate of income tax to 19% from April 2024
- Temporary cut to Fuel duty
- Green Reliefs for Business rates- for eligible plant and machinery used in energy generation storage
- R&D Tax relief reform enables businesses to claim reliefs from April 23 for all cloud computing costs
Creating the conditions for Private Sector led Growth:
- The Super Deduction Capital Allowances scheme, introduced by the Chancellor in March 2021 allows businesses to write off costs of qualifying plant and machinery investments against taxable profits . The Government recognises the importance of this scheme and is considering a number of ongoing measures to support capital investment post 2023, including recognising that more can be done compared with other G7 measures.
The Chancellor set out the main actions taken to support the growth of Business Innovation, including:
- British Patient Capital Funds and the new Future Fund Breakthrough Fund
- Pensions and institutional investors- Addressing the barriers for investment in venture supporting access t talent through
- The new Talent Visa framework – enabling access to core talent to support innovation and core sector strengths
- Addressing the Listing rules – to support the pathway to access to public markets
- The Help to Grow Programme – to develop core Management and Leadership skills among small businesses delivered through Business Schools and a new private mentorship programme
- The R&D Tax reliefs scheme is seen as a vital component and in addition to opening up to cloud computing and is under further review with further announcements due in the Autumn 2022
- EMI Scheme review to assess skills and attracting talent for innovation and high growth- the review of the existing EMI scheme in 2020 demonstrated the effectiveness of the scheme to recruit and retain core talent .
Clearly these measures are aimed at shoring up the impact of these economic shocks to households and businesses in the short term, but we recognise that these are very uncertain times. At UKBAA we will remain vigilant as to the implications for investment in innovation and small business growth and will support further actions on behalf of the investment and entrepreneurial community over the months ahead.