The Spring Statement 2023 – Budget for Growth?
Chancellor, Jeremy Hunt, delivered this year’s Spring Budget after a cloud of disruptive events culminating in the collapse of the Silicon Valley Bank.
While the UK Government, and indeed the Bank of England, was judged to have handled the collapse quickly and effectively, talk in the City has since been dominated by fears of market contagion here in the UK, in the USA and Europe. If other lenders suffer the same fate, the government will come under immense pressure to act, with the public finances potentially at risk. The volatility has prompted some to call for a re-think on elements of the UK Government’s Edinburgh Reforms package.
Hunt’s budget statement referenced these recent events with a promise for a more “diverse” financing system, that could rely on defined contribution pension funds, local government pensions and a new listings regime to unlock funding for companies particularly in the tech sector.
While the backdrop remains challenging – economic growth figures, for one, remain weak – Hunt was in a position to deliver his ‘Budget for Growth’. Presented with more fiscal headroom than anticipated and a positive overall forecast from the OBR (Office of Budget Responsibility), the Chancellor has been able to put forward a series of announcements that aim to reassure the markets, politically managed and motivated, setting a scene of growth, productivity and protection for the UK ahead of the next general election.
Here, our commercial experts provide soundbites on the impacts of some of these measures to businesses.
Whilst the budget contains measures to incentivise business investment, it is difficult to see how it will provide the immediate or short term assistance required to those businesses currently facing difficulties as a result of high inflation and high interest rates, which are therefore not in a position to invest or that may not require intensive investment. It would seem that the outlook for many companies already struggling may not change and directors and those involved in running businesses should therefore continue to exercise vigilance and take early advice when facing difficulties.
From the rolling out of levelling up partnerships to ignite place-based regeneration, to “trailblazer” devolution deals in the West Midlands and Greater Manchester, the budget offers genuine opportunities to further the government’s levelling up agenda, taking the overall levelling up funding to over £11 billion. Levelling up, however, will only work through closer collaboration between the public and private sectors.
With over £400 million also proposed for 12 investment zones across the UK to promote business investment, including through tax incentives, there are encouraging signs from the budget of movement towards facilitating growth driven by both businesses and local authorities. It remains to be seen, however, how these initial offerings will fit with the wider drive towards levelling up, whether the steps taken are radical enough to promote growth in the areas which need it most, and whether there will be sufficient support for both public and private-led development to create meaningful levelling up opportunities.
The expansion of free childcare has understandably stolen the headlines. Whilst this measure, which will assist parents to return to the workforce, is positive from an employment perspective, the UK Government’s intention to maintain only a 1% increase in day-to-day public spending suggests that there may be no end in sight to the numerous ongoing public sector pay disputes. However, whilst the disputes may continue, the effect of the resulting widespread strike action is likely to be dampened by the introduction of the Strikes (Minimum Services Level) Bill.
Hunt’s Budget for Growth has been designed with the aim of unlocking the productivity puzzle that has plagued the United Kingdom in recent years and help businesses recover from recent disruptors such as COVID-19, the Ukraine war and the cost of living crisis. Businesses and investors will be keen to see how the measures and policies announced will develop over the coming months.