What will the Chancellors Spring Statement bring to UK businesses

Tomorrow – 26th March – brings the Chancellors first Spring Statement.  With the UK business landscape still reeling from the upcoming tax rises as a result of her first budget in October, what should business expect from tomorrow’s statement?

The statement is not meant to be a budget, and the Chancellor has committed to holding only one major fiscal event per year – but will she hold true to her word?  As part of her Budget rules, she only allows herself to borrow to invest – how will this play out?

The Government has been clear that it’s number one priority is to drive economic growth.  With plans to speed up infrastructure approvals, boost house building and reduce the administration costs of regulation, Ms Reeves will need to plan her financial strategy carefully.

However, part of her statement, will see her present recently commissioned OBR (Office for Budget Responsibility) economic and fiscal forecasts, which are expected to reveal a lowering of its GDP growth forecast for 2025.  Alongside the Bank of England holding interest rates, this will not be welcome news to many. Businesses are facing rising costs and losing confidence in growth plans. With the economy contracting and desire growth not happening, we would expect her to cut spending, borrow more or raise taxes.

Tax Rises

The business community are already planning for the various tax rises due to come into effect in April – primarily the Employers National Insurance rise from 13.8% to 15%; and payable from £5k; Business Asset Disposal relief CGT will rise to 14% from 10%; Employment Allowance will rise from |£5k to £10.5k and although not a tax specifically but a cost increase of a 6.7% rise in the National Living Wage alongside the new employment laws will hurt employers.  But what else could she introduce to increase income into the treasury:

• Freeze tax allowances and thresholds – currently frozen until 2028 – could she go further pulling more people into the higher rate tax bracket
• Employee National Insurance – it would be unpopular, but she could roll back the 2% reduction introduced by Jeremy Hunt in January 2024
• Business rate discounts to be reduced affecting retail and hospitality businesses
• CGT – could she bring these in line with income tax levels?

Could she row back?

With the economy suffering it isn’t beyond the realm of possibilities that she may row back on some of the tax rises introduced in the Autumn – perhaps by increasing the Employment Allowance or increasing the level at which NI is payable?

She may also want to boost business confidence and support businesses to invest and employ more people by cutting the cost of employing them.

In our view, with the economy underperforming, the pressure is increasing on Ms Reeves to cut spending.  We have seen evidence of this in recent days with announcements of cuts across the civil service and welfare benefits.

We are calling on the Chancellor to focus on actions that will deliver economic growth – a growth and efficiency drive:

• Support businesses by reducing the tax burden
• Encourage firms to invest and employ more people increasing the income from tax receipts
• Support for those businesses through business rate relief
• Be robust in cutting out wasted expenditure across the civil service that is not delivering growth
• Provide confidence that the Government is prioritising workable trade tariffs that encourage and drive international trade

We wait with bated breath and hope that Ms Reeves can hear the business outcry.