All in all, Jeremy Hunt announced good news when he presented the 2023 spring budget.
Let’s start with the most important, beer duty will not rise. Even the Tories have not dared to risk raising it.
To put it more seriously, Mr Hunt said the British Economy is unlikely to go into recession. It’s close to it, but it won’t. I predicted the same a few months ago, but that is beside the point.
Inflation is at a high of 10.7% but will fall to 3% by the end of the year.
The bad news for businesses is that the previously announced corporation tax rise has taken effect, and the tax has risen from 19% to 25%. The Chancellor pointed out that the UK still has the lowest corporation tax rate in the G7 countries. I can see how many business owners breathed a sigh of relief at this news…
Here are some of the key changes:
- A 3-year policy of “full expensing” for businesses means the investment a company makes in IT equipment, plant or machinery can be deducted from taxable profits.
- Bad news is that firms that invest in R&D and make a loss will only receive a subsidy of £18.60 instead of the previous £33.3. This news mainly affects SMEs. One of the reasons was that there was a lot of fraud and misuse of this scheme by companies.
- Good news is that businesses in the most advanced technology sectors, such as AI and fintech, that invest at least 40 per cent of their expenditure in R&D will receive an increased tax credit of £27 for every £100 spent.
- Larger companies will benefit from an increase in the RDEC grant rate from 13% to 20%.
- Eligible expenditure will be extended to cover the cost of cloud computing.
- Quantum computing developments will be given additional support, with the government planning to invest £2.5 billion over the next ten years. Supercomputing research will also receive a further $900 million.
- Good news for us here in Sheffield is that South Yorkshire is one of 8 priority investment zones designated by the government to receive £ 80-80 million each from the budget over the next five years in tax breaks and grants. These zones will focus on green industries, digital technologies, life sciences, creative industries and advanced manufacturing in partnership with local universities.
The budget has a clear technology and innovation focus. These measures are, in my view, positive and forward-looking and will improve the UK’s position as an investment destination. It also suggests that the government is more serious about supporting businesses to overcome technological disadvantages compared to other advanced economies such as France or Germany.
It would be good if the government also took action to provide the skilled people needed to support the ambitious plans to increase competitiveness and modernise the UK Economy. The shortage of skilled workers is currently one of the biggest problems for the growth of firms.
And we know that it is not worth investing in equipment if no one can use it.
