Autumn Statement 2022: What does it mean for business?
Greater Birmingham Chambers of Commerce
The Autumn Statement is presented to the House of Commons by the Chancellor of the Exchequer and provides an update on the Government’s plans for the economy based on the latest forecasts from the Office of Budget Responsibility.
Chancellor of the Exchequer Rt Hon Jeremy Hunt MP shared that unprecedented global headwinds were having a significant impact on the UK’s economy, and that the measures announced in the Autumn Statement would seek to rebuild the economy whilst focusing on stability, growth and public services.
As a result of the measures announced in the Autumn Statement, the Government expects 70,000 jobs to be saved, inflation to fall sharply in the middle of next year, and for borrowing to more than half in the next five years.
What was announced?
Taxation
As well as action to help households with the Cost of Living, the Chancellor confirmed that the planned increase in Corporation Tax to 25% for companies with over £250,000 in profits will go ahead. However, more than two thirds of actively trading companies will not see an increase in the rate of Corporation Tax they pay due to the Small Profits Rate.
Additionally, the additional rate threshold for Income Tax will decrease from £150,000 to £125,140 from 6th April 2023, and other personal tax thresholds within Income Tax, National Insurance and Inheritance Tax will be fixed for an additional two years, until April 2028.
Noting that the tax system should continue to adapt to reflect consumer behaviour, the Chancellor announced the introduction of Vehicle Excise Duty on electric cars, vans and motorcycles from April 2025.
The Government will also extend the Energy Profits Levy to the end of March 2028 and increase its rate by 10 percentage points to 35% from 1st January 2023. A new, temporary 45% Electricity Generator Levy will be introduced from 1st January 2023 to help fund Government support for energy bills and vital public services.
The Autumn Statement maintains the National Insurance Contributions (NICs) Secondary Threshold for employers at £9,100 until April 2028 and the VAT registration threshold at £85,000 for two years from April 2024. 40% of employers will not be affected by decisions on the threshold for employer NICs due to the employment Allowance.
As part of the ongoing review of the R&D reliefs, the Chancellor announced reforms of the reliefs to ensure taxpayer money is spent as effectively as possible; however, the Government maintains that it remains committed to supporting R&D and the amount of support provided to innovative businesses through R&D tax reliefs is forecast to increase. The Government also announce it will reduce the Dividend Allowance from £2,000 to £1,000 from April 2023, and to £500 from April 2024.
On business rates, the Chancellor announced he will freeze the multipliers, increase relief for retail, hospitality and leisure to 75%, and reform transitional relief on the revaluation by exchequer funding the scheme and abolishing downward caps. The Government’s commitment to reforming the business rates system by delivering more frequent revaluations remains.
The Annual Investment Allowance has also been set at its highest ever permanent level of £1 million from 1st April 2023, amounting to full expensing for 99% of UK businesses to write off the cost of qualifying plant machinery investment in one go.
Employment and Skills
The Chancellor has confirmed an increase in the National Living Wage for over 23’s, from £9.50 an hour to £10.42 an hour, from April 2023. This represents a rise of 9.7% and will be worth £1600 to the full-time worker.
The Chancellor has also provided a boost to the schools budget, increasing it by an extra £2.3bn per annum next year and the year after, enabling schools to invest in high quality teaching and target support to children who need it most.
The Chancellor highlighted that there has been an increase in economically inactive working age adults and that employment levels have not returned to pre-pandemic levels. As a result, he has announced that the Department for Work and Pensions (DWP) will conduct a review into the issues holding back workforce participant which will conclude early into the new year.
The Chancellor has also announced the intention to ask 600,000 people on universal credit to meet with a work coach, in an attempt to increase their hours and their earnings.
The Government will also look to invest 218 million into DWP to crack down on benefit fraud and error and the Chancellor has also announced that a review of the state pension age will be published in early 2023.
The Government will also look to tackle the issue of staff shortages for the NHS. The Department for Health and Social Care will publish an independently verified plan on the number of doctors and nurses that will be needed
Environment
The Government remain committed to the targets set out at COP 26 one year ago, including the 68% reduction in the UK’s own emissions.
The Government also remain committed to the Sizewell C Nuclear Power Plant and have announced that contracts will be signed in the coming weeks. The power plant will bring significant benefits including the creation of 10,000 highly skilled jobs and the provision of reliable, low carbon energy.
The Chancellor has also set a new target of a reduction of 15% energy use in buildings by 2030. To achieve this target, the government has provided an additional 6bn of funding from 2020, in an attempt to deliver this new ambition on energy efficiency. The Chancellor has also announced the intention to develop an energy efficiency taskforce and committed to an energy independence plan.
The energy price guarantee will continue from April 2023 for an additional 12 months, with the cap set at £3000/year. With prices forecast to remain elevated throughout next year, this would provide an average of £500 support for households in 2023-24. In order to protect the most vulnerable, an additional Cost of Living Payment of £900 will be provided to households on means-tested benefits, of £300 to pensioner households, and of £150 to individuals on disability benefits.
The Chancellor has highlighted that from 2025, projections suggest half of all new cars will be electric. As a result, electric vehicles will no longer be exempt from Vehicle Exercise Duty, from April 2025. This will ensure that all road users begin to pay a fair tax contribution as the take up of electric vehicles continues to accelerate.
Infrastructure
The Government reaffirmed its commitment to delivering East West Rail, core Northern Powerhouse Rail and HS2 to Manchester. In addition, further commitments were made to supporting digital infrastructure investment via Project Gigabit with an ambition to reach at least 85% gigabit capable broadband coverage by 2025 and nationwide coverage by 2030.
Innovation & Technology
The Chancellor has highlighted the need to be more effective at turning innovation into world class businesses. Therefore, the Chancellor has introduced regulatory changes in 5 key growth sectors. These are Digital technology, Green industries, Life sciences, Financial Services and Advanced Manufacturing. Sir Patrick Vallance will be asked to advise on how the UK can better regulate emerging technologies.
Public spending on R&D will increase to £20 billion a year by 2024-25, which would represent a cash increase of around a third compared to 2021-22; the largest ever increase in R&D spend ever over a Spending Review period. The Chancellor has also announced the intention to reform Tax Credits to ensure money is spent effectively.
Similarly, the Chancellor has announced that the Government will bring forward the Digital Markets, Competition and Consumer Bill to provide new powers to the Digital Markets Unit in the CMA. This is to foster more competitive digital markets.
The Government will look to refocus the previously announced Investment Zones programme. Investment Zones will now centre on universities in left behind areas to build a limited number of clusters and the government will be working with local stakeholders to ensure its success.
The Government has also today published a consultation response, looking to set out the final reforms of Solvency II. These reforms will unlock tens of billions of pounds for investment across a range of sectors.
International Trade
The Chancellor also announced the removal of tariffs on over 100 goods for two years to help put downward pressure on costs for UK producers. The measure will remove tariffs as high as 18% on goods ranging from aluminium frames used by bicycle manufacturers to ingredients used by UK food producers.
Levelling Up
The Government will deliver the Levelling Up White Paper commitment to sign a new ‘trailblazer’ devolutions deal with the West Midlands Combined Authorities by early 2023. The Chancellor noted that the Government is in discussion with Mayor Andy Street to devolve powers to deliver levelling up in areas such as skills, transport, and housing. The Government will also explore the potential to provide single departmental-style settlements at the next Spending Review to the West Midlands Combined Authority, which could give local partners more flexibility and accountability over key economic growth funds.
What is the GBCC’s response to the 2022 Autumn Statement?
The Chancellor set out to create a fiscal package anchored in pragmatism and by and large, Mr Hunt delivered a plan designed to reassure both the markets and businesses across the country. With businesses suffering from eye watering overheads, many will be relieved to see additional support for paying their business rates and help with their energy bills beyond April – the next few months will be crucial to ensuring the parameters of the scheme are designed to help the most vulnerable firms.
A commitment to delivering HS2 in full coupled with reassurances around additional infrastructure and R&D spend was also welcomed – if the UK is to maintain its place as a global destination of choice, improving connectivity and raising productivity levels remains essential. Reassurance over long term net zero commitments were also good to see – now it’s crucial the commits to delivering the Trailblazer Devolution Deal for our region in order support low carbon storage on a regional level which will reduce energy costs for local businesses in the long term. Increased spending for schools is much needed, however, we would urge the Government to match this ambition when it comes to vocational training.
Importers will welcome the removal of tariffs on certain products, however, more needs to be done to support businesses that are struggling to expand their overseas reach – smoothing trade relations with our European counterparts and tackling the issues around the Northern Ireland protocol remain at the top of the priority list. Nevertheless, many businesses will be concerned at the lack of a bigger plan around tackling recruitment challenges – expanding the parameters of the shortage occupation list and encouraging more firm led investment in human capital would be sensible starting points.
Whilst we appreciate Mr Hunt’s hands are largely tied by sharper borrowing forecasts, cuts to the dividend allowance will do little to foster an entrepreneurial platform that encourages growth and many businesses will be left disappointed that no action was taken on VAT reform given the crippling cost pressures that firms face on a daily basis. The Office of Budget Responsibility painted a fairly sobering picture on the longer-term economic projections and within this context, it’s essential Mr Hunt uses this Statement as a springboard to boost business confidence and create a blueprint that will drive growth across all parts of the country.
Further support
Greater Birmingham Chambers of Commerce has a range of support options available to support businesses in the region as economic conditions continue to have a damaging impact.
The Low Carbon Support Grid identifies regional and national options available to businesses to support and fund low carbon activity. The support grid can be found here.
The Managing Energy Costs Webinar highlights the steps businesses can take to reduce the impact of rising energy costs on their businesses. The webinar can be found here.