Businesses react to Spring Budget

The Spring Budget promised to cut through barriers to doing business and stimulate growth, but is that how Chancellor Jeremy Hunt’s economic plan was received by firms? The Chamber held a roundtable on Budget day, hosted by law firm Geldards in Nottingham, to gather the views of members. Dan Robinson summarises the discussion.

Childcare Plan Welcomed But Benefits A Long Way Off

The Chancellor’s headline-grabbing policy was to extend free childcare to one and two-year-olds, but this will be phased in between April 2024 and September 2025, delaying the benefits of bringing parents back into the workplace.

Sarah Loates, founding director of Loates HR Consultancy in Derby, called the childcare announcement “jam tomorrow”, adding: “It should happen a lot sooner. Two-thirds of my staff are single parents and they can’t afford childcare. This needs to be happening now, not next year or the year after that.”

One of the reasons for the phased rollout is a shortage of childcare workers. Corrina Hembury, managing director of Nottingham-based training provider Access Training (East Midlands), said retention has been a particular challenge because of low wages.

“We have to value the sector more because it’s an economy-enabler, but it needs sufficient funding and support to back up the provision for increased free childcare,” she added.

Tax Relief For Innovators

With the super-deduction regime – which, since April 2021, had enabled companies to claim 130% capital allowances on qualifying plant and machinery investments – ending in March, the Chamber had called for a permanent replacement to incentivise businesses to invest in research and development.

The Chancellor announced a new 100% capital allowances scheme from 1 April, which will last for at least three years. SMEs whose qualifying R&D expenditure constitutes at least 40% of their total outgoings are also able to obtain an effective credit of 27p for every £1 spent on R&D.

But Kevin Harris, Leicester office managing partner at audit, tax and consulting services firm RSM UK and chair of the Chamber’s board of directors, doubted the impact this would have on reversing the decline in business investment.

“Even the super-deduction didn’t get investment levels up because at the end of the day, investment is about confidence for the medium and long terms,” he said. “The only way we will get this is by building confidence, which is going to take time.”

Loosening Regulation For Medtech

David Watson, a partner at Geldards who leads the property team, welcomed reform to regulation of medicines and medical technologies as a “sensible” idea.

In a bid to position the UK as a global hub for innovative medtech, the Medical and Healthcare products Regulatory Agency (MHRA) will get additional funding to put in place “the quickest, simplest regulatory approval in the world for companies seeking rapid market access”.

A new model will also allow near-automatic sign-off for medicines and technologies that have already been approved by regulators in jurisdictions such as the US, Europe and Japan.

Robin Penny, managing director of Chesterfield-based hydraulic lifting equipment manufacturer Penny Hydraulics, added: “Reciprocal arrangements with other regulatory authorities could also speed up approval for our own products in those countries.”

RETURN-TO-WORK INITIATIVES LEAVE QUESTION MARKS

While the Government announced a number of initiatives to entice people back into work amid historic labour market shortages, concerns were raised about the lack of incentives for businesses to invest in people.

Over-50s were targeted via a range of schemes including “returnships” to support retraining. Welfare changes also aim to bring disabled people into employment by enabling them to work without losing their benefits, but Universal Credit sanctions will be tightened for jobseekers who don’t take up “reasonable” job offers.

Sarah Loates said labour shortages are the biggest issue impeding her company’s growth but identified quick access to healthcare as one of the main barriers to work. She also believes mental health issues are the number one reason why people who have left the workforce are yet to return. The Government has pledged £400m to improve mental health and musculoskeletal (MSK) resources for workers, but she said this was a “drop in the ocean” given the scale of the problem.

A Flat Feeling

While there was plenty of macroeconomic rhetoric about removing barriers and stimulating growth, for SMEs on the ground there was little to get excited about.

Mark Robinson, founder of Leicester-based creative agency Creative62, said: “Small businesses are the engines of the economy but there’s a feeling the Government could have gone further to support us.”

Rob Day, founder and chairman of Blueprint Interiors, called the Budget a “non-event for business”, while Kevin Harris said he is “not convinced” the Chancellor achieved his goal of removing obstacles to growth – although “small steps have been taken in the right direction”.

However, Jim Willis, director at design agency Bulb Studios in Leicester, was pleased to see the often-overlooked creative industries receive support via extended and enhanced tax relief.

He added: “There’s a huge amount of creative talent across clusters in our region, and there’s some research that’s starting to come through showing the contribution this sector makes to the economy, so it was encouraging for its importance to be highlighted.”