Business & Economy
‘A game-changer; pushing the boundaries; falling short of truly ambitious action’ – business leaders react to Spring Budget
March 15, 2023
From new investment zones complete with £80 million cash pots, to Levelling Up Partnerships, low-carbon pledges and increased relief for loss-making research and development-intensive SMEs, Chancellor Jeremy Hunt’s Spring Budget was packed with promises. Here, North East Times Magazine looks at some of the headline pledges and gauges the reaction of business leaders across the region and beyond.
After previous freeport success in the south of the region, the area’s trade environment has been handed a further boost, with Tees Valley announced as one of 12 new investment zones.
Cherry-picked too was the proposed North East Mayoral Combined Authority – the body that would replace the North of Tyne Combined Authority and North East Combined Authority as part of the region’s £4.2 billion devolution deal – with the Government promising such districts would offer access to £80 million across five years, including tax reliefs and grant funding, to catalyse job creation.
Tees Valley Mayor Ben Houchen [pictured, below] called the move a “game-changer”, adding: “We’re already working to unlock key investment opportunities in our region with two new Mayoral Development Corporations, but making it easier for businesses to invest here will prove a huge boost to our plans.”
The Conservative regeneration boss also praised the Chancellor’s decision to make up to £20 billion available for carbon capture, utilisation and storage work, which he said would bolster the ambitions of the Net Zero Teesside Power project, which promises to deliver the world’s first commercial scale gas-fired power station with carbon capture capabilities on former Redcar steelworks land.
Rhiannon Bearne, policy and representation director at the North East England Chamber of Commerce, said: “The investment zones are positive news and will complement existing and expanding devolution arrangements.
“Opportunities for local leaders and stakeholders to maximise the impact of these plans are welcome.
“But there were also some missed opportunities on tax deductions, and a lack of incentives to encourage businesses to invest in workforce development, notably freeing up the Apprenticeship Levy.”
Also reacting to the investment zone news was Michael Stirrup, chief executive at Durham-based digital firm Waterstons, who added: “We welcome their creation.
“They will help attract other businesses, widening the talent pool and raising skills.”
Elsewhere, there was “relief” at Mr Hunt’s move to introduce an increased rate of relief for loss-making research and development-intensive SMEs, with eligible firms able to claim back £27 for every £100 spent on R&D.
Sara Andrews, tax incentives and reliefs partner at accountancy and business advisory firm Haines Watts [pictured, below], said: “In these uncertain times, innovation is crucial to help businesses bounce back and thrive in the long-term.
“The support from the relief for smaller R&D intensive businesses will hopefully offer confidence for those organisations to press ahead and push the boundaries of their respective industries.
“That being said, we’re hoping for further clarity from the Government on what this will actually look like in practice, and who will reap the rewards of the support.”
Dr Sam Whitehouse, chief executive at Newcastle-based LightOx [pictured, below, centre], which is developing light-based treatment for early-stage mouth cancers, also touched on the R&D support.
He said: “Life sciences remains a thriving sector in the North East, and the new enhanced research and development tax relief rate is hugely welcome.
“For businesses like ours, this means greater investment, helping us to further accelerate the development of our innovative cancer drugs.”
Anthony Andreasen, director at Gosforth-based RMT Accountants & Business Advisors, added: “The additional research and development tax incentives will be welcomed by businesses operating in the North East knowledge economy, which is an increasingly important part of the overall regional economy.
“The North East already punches well above its weight in sectors like video game development and media production, and the Government’s hope will be these new measures will match these businesses’ expectations and ambitions.”
He also highlighted opportunities following the corporation tax rate rise.
Anthony added: “It’s disappointing the tax rate increase from 19 per cent to 25 per cent has been confirmed, but the Chancellor’s new full capital expensing system will give North East firms a greater range of options for making investments in technology, machinery and plant, which could help them put expansion plans into action and realise more of their growth potential.”
Elsewhere, Mathew Bell, commercial partner at George F. White, focused on changes to the Annual Investment Allowance.
He said: “The Chancellor has confirmed that the super deduction is coming to an end, as well as the reversion of the Annual Investment Allowance from £1 million back to £200,000.
“In place of this, the Chancellor has approved an initial three-year, full expensing method for qualifying capital expenditure.
“This will not simply mean all capital expenditure qualifies, as it will still need to be correctly quantified by a specialist and correctly identified.
“On face value, this is exceptionally generous.
“However, the Chancellor’s statement that 99 per cent of all businesses were covered by the £1 million Annual Investment Allowance may not be as generous as initially perceived, and for the majority of the 99 per cent of companies, this will not be as lucrative as the super deduction regime.
“At first glance, this isn’t the support that the majority of businesses were hoping for.”
Becky Bowness, head of tax at Armstrong Watson [pictured, below], added: “There was good news for those looking towards making higher pension contributions with increases in the Annual Allowance to £60,000, and the removal of the Lifetime Allowance, making pensions a much more attractive investment/retirement vehicle.
“For companies, the proposed increase in the corporation tax rate will go ahead but on a positive note, and to replace the super deduction, companies will be able to claim 100 per cent relief on qualifying capital expenditure without any cap.
“However, for many family-owned businesses, the £1 million Annual Investment Allowance provided this relief already.
“While the Chancellor positioned many changes as incredibly positive with a view to stimulating growth, it is clear there was not a huge amount of content, and many of the changes will have relatively limited impact on most small and medium-sized businesses.”
And the Government was criticised by IPPR North, with the think-tank accusing the Chancellor of making only a “shuffle forward” in meeting its promises.
Zoë Billingham, IPPR North director, said: “The Budget fell short of truly ambitious action to shift the dial on regional inequality.
“Four years on from the promise of ‘levelling-up’, with an election looming, the Budget was the Government’s last chance to go big on regional inequality.
“To speed up ‘levelling-up’, we need promises kept and ambitions to close inequalities raised even further.”
And Shevaun Haviland, British Chambers of Commerce director general, said action on business rates was notable for its absence.
She added: “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 the Government must shift the dial further on investment, both within the UK and from overseas.”