Politically, the Budget was a quiet affair, with Phil Hammond escaping the usual roasting which he might have expected from an abrasive media, the rigours of the 24/7 news cycle, and the tumult of Brexit all around. Economically, this was a reasonably measured budget, which delivered some positive news for business – save of course, for the gloomier forecasts by the Office for Budget Responsibility (OBR). Here is our summary of business related measures:
- The OBR downgraded its growth forecast for 2017 from 2% to 1.5%
- Forecasts for 2018 – 2021 were also revised down to 1.3% – 1.6%, though given the margin for error, this is perhaps not something to be unduly worried about; we are still growing and the downgrade is hardly surprising given the uncertainty created by the Brexit negotiations. As Philip Hammond said: “The challenge for us as a nation is to prove them wrong.”
- More worryingly, productivity growth was revised down by an average of 0.7% a year up to 2023 – this does have a real impact on people’s real earnings and a post-Brexit Britain will certainly have to rise to this challenge.
- Employment will increase by 600,000 people by 2022
- Inflation (CPI) is forecast to fall from its current 3%, considered the peak, towards 2% target later this year
- £3bn will be set aside to enable Government departments to prepare for Brexit – if shocks are minimised to some extent as we leave the EU, this, in theory at least, should generate some confidence for business.
- Rises in business rates will be indexed against CPI, instead of the higher RPI, which represents a saving to business of £2.3bn. This shift will help boost the competitiveness of those businesses with a physical presence, particularly in retail and manufacturing and has been welcomed by business groups. But most are saying that more needs to be done to reform the rates system to ensure that it reflects a modern economy.
- £2.3bn has been allocated for investment in research and development
- The VAT threshold will remain at £85,000 for two years, helping small businesses in particular. Two years is not long though!
- The government has pledged £500m support for technology such as 5G mobile networks, full fibre broadband and investment in AI
- A further £540m is pledged to support the growth of electric cars, including more charging points
- Digital economy royalties relating to UK sales will be subject to income tax as part of tax avoidance clampdown.
- A fairly paltry £30m has been allocated to develop digital skills distance learning courses
