Sunak Budget wins positive response but with qualified support
3 Mar 2021
Chancellor Rishi Sunak has made significant concessions in his Budget to assist British manufacturing in its effort to recover from the economic effects of the global pandemic.
His announcement provided a combination of good news and bad, with an array of extensions to lockdown aid and incentives but also tax rises and a staged return to much of the pre-lockdown regime.
Key features of Sunak’s speech in Parliament today include:
‘Super-deduction’ tax breaks to enable companies to deduct their investment costs and encourage billions in investment
Continuation of the business rate holiday until June, followed by a 75% discount
A rise in corporation tax in 2023 for firms with profits of more than £50,000 profits rising to 25% for profits exceeeding £250,000
A hold on corporation tax rises for firms with profits of less than £50,000 at 19%
Continuation of the reduction in the VAT rate until the end of August, followed by an interim 12.5% rate until April 2022
Extension of the furlough scheme to fund wages until September end
A Help to Grow scheme to enable SMEs to develop abd scale up
Increased incentives to hire apprentices and trainees
A visa scheme to help start up wishing to hire talent from abroad
Chief executive of Make UK Stephen Phipson described the corporation tax rise as “a price that needs to be paid in terms of fairness and to help the economy return to more bullish times”.
Of the super-deduction, he commented:
“Today’s announcement should help turbocharge investment to ensure that those plans turn into reality in the short-term. In the mid to longer-term it should also provide a base that will support Government and industry’s efforts in achieving net zero and positioning the UK as a leader in digital manufacturing.”
However Paul Struthers, MD of FTSE 100 tech firm Sage, welcomed initiatives on furlough, business rates and the Help to Grow scheme for SMEs, he expressed doubts about the workings of the super deduction plan.
“However, super-deduction does not incentivise investment in technology and digital tools, and presents a missed opportunity for the small business community – who we know, want to invest but can’t,” he explained.
“Today’s Budget is not about 2021 or the next parliamentary term, but about laying the foundations for the next decade of UK economic progress and productivity. SMEs created 73% of net new jobs after the last recession, with the right support, they will do the same again..”
Make UK’s director of policy Verity Davidge described the Help to Grow plan as having significant potential to transform small firms and overcome some ongoing problems.
“Improving management skills has long been underestimated in its importance in boosting UK productivity. If manufacturing is to reap the full benefits of digitalisation and adapt to new working practices, manufacturers know improving management skills is key,” she commented.
“Today’s announcement of additional support through Help to Grow can prove pivotal for manufacturers as they look to upskill and retrain workforces to embrace and digital and green future.”
Mark Smith, Partner – Innovation Incentives at Ayming UK expressed disappointment with the Government's research and development tax credit incentives, including the capping of these at just £20,000 for SMEs.
“There was a lot of rhetoric around innovation in this budget, but there wasn’t enough commitment to anything concrete, which is a little disappointing because there were changes to implement from the last consultation," he charged.
"[The]research found a consensus that we should incorporate costs of certain technology, such as cloud computing and data use, into R&D schemes. The cost rules were written 20 years ago, back when the world saw the first camera phone and cloud tech didn’t even exist. Why wait to make this change? From an R&D perspective, we are seeing too much reviewing and not enough action."
For the Chancellor’s full speech to Parliament today (Wednesday) click here.