The 2022 Spring Statement was always going to be an interesting one.
The past two years have seen unprecedented levels of government economic intervention and support, and the bedding in of Brexit.
As a result, we already had a fascinating backdrop for the Chancellor to provide his update and assessment.
Significant rises in the cost of living were a ‘known known’ (to steal a line from Donald Rumsfeld), but war in Europe added a new, unwelcome twist to the post COVID reality.
The Chancellor started with an economic update. And it wasn’t good news.
He acknowledged that inflation is at a 30-year high and will continue to rise. The current annual rate of 6.2% is forecast to hit 7.4% by the end of the year, with some forecasts suggesting that 9% may be more realistic.
Some of the inflationary pressures were already in the pipe due to more than a decade of low interest rates and QE, some had come about due to significant supply chain issues created by Brexit and the war in Ukraine.
The Chancellor revealed that almost three quarters of UK businesses are planning to increase their prices in the short term.
[See our full Spring Statement breakdown]
The economic outlook provided by the Office for Budget Responsibility (OBR) was… OK.
It wasn’t as bad as many would have predicted a couple of years ago, during the grip of COVID, and there is no denying that unemployment has remained far below the levels that many observers anticipated.
According to the OBR the UK economy will grow by 3.8% this year, followed by 1.8% in 2023, and then 2.1%, 1.8% and 1.7% in the following three years.
The Chancellor stated that a focus on growth and productivity is the key to countering this demanding economic landscape.
This mostly involved promises of what is to come:
Capital allowances – the super-deduction scheme, offering enhanced capital allowance on certain purchases of equipment and assets, is due to end in March 2023 - the Government will work with businesses and other stakeholders to consider cuts and reforms that will support future investment.
R&D Tax Credits – As UK business R&D investment is less than half of the OECD’s average as a percentage of GDP, R&D tax reliefs will be reformed to deliver better value for money for the taxpayer.
Employment Allowance – This is an allowance that allows businesses to reduce their National Insurance contributions bills and will rise from £4,000 to £5,000 from April 2022
Employee training – The Chancellor said he intends to “make use of the tax system to encourage employers to invest in adult training”.
So, what did it all mean for businesses here in Kent?
Despite a raft of measures, and one of the longer Spring Statement speeches on record, not a huge amount.
We have a full breakdown of the Spring Statement on our website, but Niyi Idowu, Partner at ATN Partnership said:
“A lot of the announcements did little or nothing to help businesses.
The increase in the Employment Allowance is more than welcome and gives a £1,000 shot in the arm for some businesses - but beyond that, this was a Spring Statement aimed at helping consumers, not businesses.”
For businesses and business owners, the 1.25% tax increase remains, with no offsetting, other than some promises down the road. It’s disappointing”
Tahmina Ahmed, Senior Client Manager, added:
“There were some rather vague commitments to reform R&D tax credits and a review of the apprenticeship levy, together with an increase in the Annual Investment Allowance, but nothing much to say.
The 5p cut in fuel duty is more of a nod in the right direction rather than a move - like falling out of an 15th floor window rather than an 18th floor one”.