The Spring Statement 2022 took place on 23 March. Rishi Sunak, the Chancellor of the Exchequer, had a tough task ahead of him. Inflation has risen to 6.2%, reaching a 30-year high. Supply chain issues are causing issues in many key sectors. And fuel, energy and labour costs are increasing. That’s led to 73% of UK firms planning to raise their prices to cover rising business and operational costs.
UK business leaders want the Chancellor to ‘protect UK plc from the global crisis’ that we’re faced with. So, did the Chancellor’s mini-budget live up to these expectations?
We’ve summarised the main business points of the Spring Statement so you can spot the opportunities and options for your business.
Investment, innovation and growth
The Chancellor and the Office for Budget Responsibility (OBR) predict that the UK economy will grow by 3.8% this year. Projections are then for growth of 1.8% in 2023, and then 2.1%, 1.8% and 1.7% in the following three years. The OBR also now predicts that inflation will hit 7.4% by the end of the year. That’s likely to increase the challenge of full recovery for some businesses.
What’s needed to overcome this demanding economic landscape is a clear focus on growth and productivity for UK businesses. So, did the Chancellor deliver on this need for growth and innovation? There are measures here to support this aim, but it’s likely to be a slow and steady kind of growth for most businesses.
Key measure announced include:
Employment Allowance – the Employment Allowance allows smaller businesses to reduce their employers National Insurance contributions bills. This allowance will rise from £4,000 to £5,000 from 1 April this year. The cut will be worth up to £1,000 for half a million smaller businesses and starts in two weeks’ time.
Business rates – to support the decarbonisation of non-domestic buildings, the government is introducing targeted business rates exemptions for eligible plant and machinery used in onsite renewable energy generation and storage, and a 100% relief for eligible low-carbon heat networks with their own rates bill.
VAT change – homeowners installing energy efficiency materials such as solar panels, heat pumps, or insulation will see VAT cut on these items from 5% to zero for five years.
Capital allowances – the current super-deduction scheme offers a capital allowance on qualifying purchases of equipment and assets. Super-deduction will end in March 2023, but the Chancellor indicated that the Government wants to offer more help around capital investment for UK businesses. The Government will work with businesses and other stakeholders to consider cuts and reforms that will support future investment.
Employee training – UK employers spend half the European average on training for their employees. This lack of qualifications is affecting our innovation and productivity. The Chancellor said he intends to make use of the tax system – including the operation of the Apprenticeship Levy – to encourage employers to invest in adult training.
R&D Tax Credits – R&D reliefs play a big part in encouraging research and development (R&D) and innovation. UK business R&D investment is less than half of the OECD’s average as a percentage of GDP. To tackle this shortfall, R&D tax reliefs will be reformed to deliver better value for money for the taxpayer. The scope of the available R&D reliefs will also be expanded to cover data, cloud computing and pure maths, to broaden the eligibility to a wider range of businesses, sectors and development.
Other measures – The Help to Grow: Management and Help to Grow: Digital schemes were also highlighted by the Chancellor as previous evidence of their commitment to provide support for enterprise, however he stopped short of expanding this scheme as ACCA and others had campaigned for. And the rise to £1 million for the Annual Investment Allowance will also help support businesses that are looking to invest in their future success.
Helping hard-working people
"We will take a principled approach to cutting taxes to build a stronger economy”
The Chancellor acknowledged the need to support hard-working families and businesses as part of this statement. He reinforced the Government’s and Parliament’s support for the people of Ukraine in the conflict. Ukrainian/Russian war. But he also made it clear that this commitment to providing support may well begin to impact on the UK’s own economy, in time.
However, the Chancellor does have a plan for combating the cost-of-living crisis. Mr Sunak wants to take a ‘principled approach to cutting taxes’ and to be disciplined in making decisions that will build a stronger economy. He set out the framework for this ambition with a new three-point plan for taxation.
The Government’s plans will:
Support families with the cost of living
Provide the conditions for growth
Share the profits of this growth fairly
Measures to support this include:
Rise in the NIC threshold – the Government will raise the threshold for the amount people can earn before they pay National Insurance. From July, people will be able to earn £12,570 a year without paying a penny of income tax or National Insurance.
Cut to fuel costs – fuel duty has been cut by 5p from 6pm on 23 March 2022. This will help to cut fuel costs for many workers who are paying over the odds when commuting. It will also lower the pressure of rising fuel costs for businesses and their fleets.
Planned cut to basic rate income tax – the Chancellor was adamant that he wants to cut income tax to help those on lower and middle incomes. He stated a promise to drop the basic rate of income tax from 20% to 19% by the end of the current parliament. This will mean a cut in tax costs for many workers from 2024 – as long as the economic conditions allow it.
National Living Wage and Minimum Wage – don’t forget that the National Living Wage and National Minimum wage are both increasing from 1 April 2022. You can find the new rates for all age groups here.
There’s no simple way to overcome the UK’s economic issues at a stroke. But there are positive, practical steps in this year’s Spring Statement. A wealth tax may have been a more immediate solution for raising public funds quickly or a windfall tax on oil companies – as were suggested by the Shadow Chancellor, Rachel Reeves, in her response to the statement. But these interventions were a step too far for this Conservative Chancellor.
By announcing measures to support innovation and enterprise in the future, the Chancellor is taking positive steps for UK businesses. And by reducing the pressure of the cost-of-living crisis, working families and businesses have more ability to keep ahead of costs and bigger bills.
Helping clients fund their plans for 2022
"People, capital and ideas”
That’s how the Chancellor believes we can create a culture of enterprise for UK businesses. And we know that UK business leaders are in a positive mood for enterprise and innovation, despite the demanding business landscape.
Over three-quarters (76%) of UK business leaders are feeling optimistic about 2022 for their business. That’s one of the key findings of our recent Get Fit For Business report. But has the Spring Statement done enough to support and fund the business world’s ambitious plans for the future? If you're looking to grab the growth opportunities, we can support you in funding and realising your goals.
Capitalise for Business is the ideal platform for starting a funding search, checking your credit profile or getting the business finance support you need. Our network of 100+ different lenders and specialists can quickly talk to you about routes to funding, credit improvement, innovation funding and R&D tax reliefs.
Get in touch for a chat about how Capitalise can supercharge your success in 2022.
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