New measures announced by Chancellor Rishi Sunak during his Spring Statement on Wednesday will provide additional relief for businesses amid growing uncertainty and rising costs, said industry participants.
Sunak said he would be cutting fuel duty rates by 5p per litre, the largest cut ever – worth around £5bn – until March next year in a bid to deal with the ongoing energy crisis as prices soared to their highest levels in decades earlier this month.
“We expect that these cuts will help facilitate trade and ease some of the burdens facing supply chains in Britain,” said Alistair Baxter, head of receivables finance at Taulia. “However, we should make no mistake that this will not fix all of the issues facing CFOs.
“The ongoing energy crisis coupled with the fact inflation is set to hit eight percent later this year will force CFOs to think strategically about supply networks and about embracing a greener way of transporting goods, including freight and electric vehicles.”
Sunak also announced he would raise employment allowance to £5,000 providing a tax cut worth up to £1,000 for half a million SME’s starting in two weeks’ time.
Alex Henderson, tax partner at PwC UK, said the increase is a welcome announcement for entrepreneurialism and growth in the UK.
“While small businesses are likely to be the most vulnerable to rising costs, this is good news for the rest of the economy too: small businesses of today can be the large businesses of tomorrow.
“The Chancellor clearly has ambitions to support businesses to scale ups, to improve growth and to improve productivity in the economy,” said Henderson. “Tucked away in the detail of the Treasury papers is a further review of employee share incentivisation for growing businesses.”
Rob Pursell, global CFO at NSC Global said the announcement on employment allowance was welcome but he expected more from the Chancellor’s Spring Statement.
“[I] would have hoped to see measures to ease the financial pressure from increasing production costs as well as supply chain disruption and shortages of both labour and commodities in the wake of the Covid pandemic,” he said.
The Chancellor also announced the new business rates discount he introduced in the Autumn Budget, that would cut rates by 50 percent for businesses in the retail, hospitality and leisure sectors allowing them to claim up to £110,000, would be extended.
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However, Jane Mackay, head of tax at Crowe, said Sunak failed to provide assurance to employers.
“He mentioned the effects of Covid-19 and the conflict in Ukraine – but there was no mention of the contribution of Brexit on wage inflation and supply chains,” Mackay said. “Brexit would have allowed him to do more with tax relief for key sectors, including for our manufacturers.”
Sunak promised further incentives for businesses around research and development (R&D) and the promise of a tax cut on business investment to be announced in the Autumn Budget later this year.
Toby Ryland, corporate tax partner at HW Fisher, branded the Spring Statement as a “missed opportunity” for businesses as potential tax incentives expected to be announced in the Autumn Budget “may well be cancelled out” by the upcoming corporation tax rise from 19 percent to 25 percent in April 2023.
“There was little to no cheer for businesses in the Spring Statement today,” he said. “There were small promises to increase R&D and capital investment expected later this year, however given the pressure to increase employee salaries immediately the financial strain on businesses remains acute.”
Chris Sanger, head of tax at EY, said Sunak’s measures were “few but targeted” preparing for a fuller Autumn budget.
“Today the Chancellor not only provided some “jam” today but reached out for the recipes to ensure that he can deliver cakes in the real Budget in the Autumn,” he said.