What does the Chancellor’s Spring Statement mean for businesses?

Today (Wednesday 23 March), the Chancellor Rishi Sunak delivered his spring statement, but what does it mean for your business?

Clouds are forming on the horizon for the UK economy and whilst Rishi Sunak has tried to take the sting out of things, it is obvious that the perfect storm of rising energy prices, interest rate hikes, inflation and the war in Ukraine means that now is the time to prepare your business for the challenges ahead.

Here is a summary of some of the key points from the Chancellor’s announcement:

• Inflation is expected to average 7.4% this year, which is higher than previous estimates.
• Fuel duty to be cut by 5p per litre from 6pm tonight until March 2023.
• National Insurance threshold to be raised by £3,000, meaning workers can earn £12,570 without paying the tax. The Chancellor said it was a £6 billion tax cut, worth £330 per year for employees.
• The basic rate of income tax to be cut from 20p to 19p in the pound before the next election in 2024.
• The Chancellor pledged to cut taxes on business investment when the “Super Deduction” ends next year, while Research and Development (R&D) Tax Credits will be reformed. From April 2023, business will be able to claim relief on the storage of their vital data and pure maths research.
• The Employment Allowance will increase by £1,000 to £5,000, making it cheaper for firms to hire workers. Employment Allowance is a relief which allows eligible businesses to reduce their employer National Insurance contributions (NICs) bills each year. It is estimated that around 30% of all businesses will benefit from this increase.

Existing business support measures also highlighted in the announcement:

• From 1st April, as announced in Autumn Budget 2021, eligible businesses will now be able to receive a temporary business rates relief worth almost £1.7 billion.
• Help to Grow: Digital programme – Free impartial advice on how technology can boost performance, delivered through a new online platform. Eligible businesses can also claim a discount of up to 50% on the costs of approved software, worth up to £5,000.
• Help to Grow: Management programme – a practical management training programme, with 1-1 mentorship, delivered across the UK by leading business schools accredited by the Small Business Charter. The 12-week programme costs just £750 and is 90% subsidised by the government as part of its Plan for Jobs to help businesses to drive growth and create jobs.
• The temporary super-deduction. Under the super-deduction, for every pound a company invests, their taxes are cut by up to 25p.
• Increasing the Annual Investment Allowance to £1 million.

For many businesses, an inflationary economy and rising interest rates will be a new experience. Margins being squeezed, supply chain constraints and less consumer spending will affect every sector so, businesses need to take stock and make sure that their liquidity is sufficient to ride out what looks likely to be a difficult 18 months. Attention to every element of your cost base and maximising margins whilst ensuring that funding is in place, if needed, will put you in good shape. Every economic contraction offers opportunities so not all is doom and gloom. Talk to us today for an appraisal of your current and future needs, we have a range of services available, all fully funded by the European Regional Development Fund (ERDF), and access to over 100 sources of finance.

For free and impartial support, contact the Access to Finance team via info@a2fcornwall.co.uk or call 01872 300386.

You can find more information on the Chancellor’s spring statement on the gov.uk website.