The Chancellors Autumn Statement is much anticipated but what will he reveal?
There is no doubt that there are tentative signs of economic recovery, but the future continues to look uncertain for UK businesses. The UK did avoid the recession that had been predicted for this year but growth forecasts from the OBR continue to show little or no growth in 2024. Inflation which had reached all-time highs is continuing its downward trajectory. Bank interest rates appear to have now plateaued but with no signs of rate decreases soon those who have committed to borrowing to invest and grow are seeking comfort from the Chancellor in other ways.
Pulse is calling on the Chancellor to support UK businesses and focus on growth now that inflation has been halved. With Government borrowing £17 billion less than predicted (although overall borrowing levels are still high), income from tax receipts increased and a small turnaround in the economy, space has been created for a tax cut which Rishi has speculated may be coming. However, he needs to encourage a positive mood whether that is in the form of support now or tempting us with measures to be introduced in the Spring Budget. Our view is that any tax cuts should be focussed on enhancing business growth and supporting investment.
Business growth enhancing tax cuts.
There is media speculation that tax cuts could be in the form of personal tax, inheritance tax or national insurance contributions. However, we call for the Chancellor to focus on Business growth enhancing tax cuts. It is no secret that businesses and global investors alike place a reduction in Corporation Tax high on their agenda post the recent increases. This would support higher investment which would support economic growth.
Encouraging new innovative businesses who support our Net Zero ambitions and to support investment in these areas, the Chancellor should be encouraging these businesses through attractive tax breaks.
Support business investment.
The economy needs businesses to invest in growth – it fuels jobs and income. The Government needs to focus on stimulating business investment. Full expensing allows a business to receive a significant cashflow benefit for large scale investment bringing it forward into the year of investment rather than over lifetime of the investment. This incentive has two years left to run. We would encourage Mr Hunt to continue full expensing past its expected end date in two years and perhaps permanently which would provide a certainty for businesses and encourage long term investment beyond 2026. Moreover, providing certainty and visibility over long term investment policy would send a clear signal that the UK is ‘open for business’.
Supporting skill development and return to work.
The labour market continues to experience some pressure. The unemployment rate has been ticking up gradually in 2023, with this trend set to continue for the remainder of the year and into early 2024. Indeed, a peak rate of 5.1% is currently forecast for Q2 2024. This should put downward pressure on the rate of pay growth.
At the same time the UK’s workforce reduced as retirement and long-term sickness rates grew because of the impact of the pandemic. Employers need the Government to encourage and support people to return to work. Initiatives should include assistance with employees wishing to retrain and reskill.