Lancashire businesses call for Spring Budget to encourage investment

By Tim Aldred

15 Mar 2023

Jeremy Hunt

Lancashire's business figures are calling for chancellor Jeremy Hunt to use today's budget to encourage investment.

Commentators do not expect there to be major announcements at the dispatch box, following a turbulent few years shaped by the Covid-19 pandemic, war in Europe and political instability in the UK.

Matthew Johnson, the associate partner at Preston headquartered chartered accountants and business advisors WNJ, said: "Experts are predicting a ‘constrained’ Budget this time out, given the weak state of the economy and the need to bring inflation down and cut public debt. However, despite all that, businesses will be looking for some positives from the chancellor, to give them belief that better times are ahead and the support is there to enable them to go for growth.

"Measures that will boost investment, encourage entrepreneurship and help our hard-pressed SMEs would be particularly welcome. So too would be signs that there is a credible longer-term plan to deliver sustainable growth, rather than a feeling that the chancellor is wholly focused on dampening down the fires currently damaging the economy, important though that work is.

“Especially welcome would be an announcement delaying the decision to cut Research & Development (R&D) tax relief. As the Federation of Small Business (FSB) points out, tax credits for small businesses doing R&D have been the single most successful feature of the last decade of innovation policy."

Matthew added: "Businesses will also be looking to see how the chancellor addresses the continuing pressure businesses are feeling from fuel prices. Will we see some form of targeted support? The 5p per litre cut in fuel duty, announced by the then chancellor Rishi Sunak last spring is coming to an end. Extending it would be another welcome move."

Tony Medcalf, tax partner at Preston-headquartered accountancy and business advisory firm MHA Moore and Smalley, added: "There have been calls for the government to announce a reduction in corporation tax but I do not think we will see that. During his leadership campaign, Rishi Sunk defended the increase in corporation tax and was keen to focus on promoting innovation and research and development. The Annual Investment Allowance is currently still £1m so although corporation tax is now 25 per cent, when you look at it, this only affects around 30 per cent of UK companies.

"I think there are going to be a lot of announcements which provide tax relief incentives for companies to invest in their productivity and growth. The capital allowances super deduction is due to end on March 31 so this could be the focus of an announcement. We could also see further support for freeports and enterprise zones

“The government is also keen to prompt investment in early-stage businesses and I think more will be announced to encourage this. One possible measure could be the extension of the Enterprise Investment Scheme.”

David Bharier, head of research at the British Chambers of Commerce, called for the chancellor to address a difficult jobs market.

He said: "New ONS figures provide further evidence of historic tightness in the labour market. Despite a slight fall, there are still over 1.12m vacancies across the UK. This confirms our own research that most firms are still trying to recruit staff. 

"Finding appropriately skilled workers is one of the top issues for businesses, and many tell us that this prevents them from fulfilling orders or expanding. There are several levers which the government can pull to ease the tightness in the market.  

"Firstly, alleviating childcare costs could give greater flexibility to those looking to return to the labour market. The government’s plan in tomorrow’s Budget to start paying childcare costs on Universal Credit up front is positive news, but further tax relief on childcare costs and reforms to increase childcare capacity are also needed.  

"Secondly, there needs to be a fuller explanation of the causes of the significant number of people out of employment due to long-term illness in order for government and businesses to invest in the right occupational health services. Occupational health services should also be made a non-taxable benefit in kind.  

"Finally, as the BCC has repeatedly said over the last year, government must reform the Shortage Occupation List to help firms fill urgent job vacancies from outside the UK when they cannot recruit locally."

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