The Chancellor of the Exchequer, Jeremy Hunt, presented his Spring Budget to Parliament on Wednesday 15 March 2023.

The stated aim of this budget statement was to deliver on three of the five key priorities set out by the Prime Minister in January: to halve inflation, grow the economy, and get debt falling.

While there were a number of measures aimed at bringing the 6.7 million of inactive people in working age (excluding students) back into employement, and to help households struggling with the cost of living crisis, there were few measures set to directly benefit businesses in general, or the merchanting sector in particular.

Any direct intervention focused primarily on tax allowances for research and development, with a number of industries (film production, carbon capture, Ai, nuclear energy, for example) receiving specific support.

One of the flagship announcements was the creation of 12 investment zones, that will give the selected areas access to £80 million of support for a range of interventions, including skills, infrastructure, tax reliefs and business rates retention.

With the aim to "empower democratically elected local leaders," the government announced its intention for the functions of Local Enterprise Partnerships (LEPs) to be delivered by local government in the future.

Therefore, the Department for Levelling Up, Housing and Communities, and the Department for Business and Trade will consult on the possibility to withdraw central government support for LEPs from April 2024, with the aim to publish an updated policy position by the summer.

Taxation

On the tax front, the increase of the Corporation Tax rate to 25% next month has been confirmed, although the Chancellor was keen to emphasise that "only 10% of companies will pay the full 25% rate." 

in addition to various forms of support to research and development, the budget is introducing a temporary 100% First Year Allowance on capital investment. 

The rates of fuel duty will be frozen at the current levels for an additional 12 months, through the  extension of the temporary 5p fuel duty cut and the cancelling of the planned increase in line with inflation for 2023-24. 

The government has published a call for evidence on options to reform the VAT relief for the installation of energy-saving materials in the UK. The call for evidence will consider the inclusion of additional technologies and the possible extension of the relief to include buildings used solely for a relevant charitable purpose.

The Climate Change Agreement scheme is to be extended for two years to allow eligible businesses £600 million of tax relief on energy efficiency measures.

The statement also announces a number of consultations on tax simplication, following the closure of the Office of Tax Simplification.

Employment

The government will introduce 'Returnerships', a new offer promoting existing skills interventions to the over-50s, focussing on flexibility and previous experience to reduce training length.

They will be supported by a £63.2 million investment for an additional 8,000 Skills Bootcamps in 2024-25 in England and 40,000 new Sector-Based Work Academy Programme placements for the next two years in England and Scotland.

An additional £3 million, also over the next two years, will be invested in the Supported Internships Programme to pilot an expansion in England to young people entitled to Special Educational Needs support who do not have an Education, Health and Care Plan.

The government will expand a subsidy pilot scheme to support small and medium-sized businesses in England with the cost of purchasing occupational health services. It will also consult on options to increase investment in occupational health services by UK-wide employers through the tax system.

The government is supporting Private Members Bills that provide a day one right to request flexible working and grant specific groups protections or leave entitlements, including enhanced redundancy protection for pregnancy, family leave, carer’s leave, and neonatal care leave.

Reactions

The Builders Merchants Federation (BMF) has welcomed the raft of measures to support employees in the Budget, but is concerned that a lack of commitment to infrastructure projects, the construction of new properties and introduction of home energy-retrofitting measures could impact on the economic outlook for the industry.

With the building materials supply chain sector playing a significant part in the UK economy, the BMF had hoped to see more being announced to generate infrastructure projects, as well as new homes and a more energy efficient housing stock. 

John Newcomb, BMF CEO, said: “We welcome measures which will help employees in the industry, including childcare support and changes to pension rules.

“Our members prioritised recruitment, staff retention, careers support, training and apprenticeships in a survey conducted recently, so extended free childcare and pension alterations can be considered to be positive factors in retaining and attracting new people into the sector.

“The new £9bn policy of full capital expensing, initially for the next three years, will also allow firms to write off all investment against their tax bills.

 “However, our concern is that budget constraints mean some infrastructure projects, particularly rail and roads, are likely to be delayed, cut or scrapped, which could impact our industry.

“Delays to HS2, and cuts to the Road-Building Capital Programme are being put forward, with no mention of support for getting the infrastructure pipeline moving.

“House building completion is also in slowdown, with local authorities reducing numbers in local plans, meaning 122,000 less homes will be built, a situation not helped by nutrient neutrality.

“The Chancellor could have also taken the opportunity to announce a National Retro-fit Strategy, which would support the installation of energy-efficient technology into existing dwellings, but there appears to have been no support for that.

“We need to see a commitment to decarbonising homes on the road to a New Zero economy, as this will be crucial to achieving these sustainability goals nationally.

“The two major issues that affect our members are narrowing the gap between housing demand and supply, and the decarbonisation of heating and electrification of homes. We will continue to work with the Government to address these issues.”

The Federation of Small Businesses (FSB) has accused the Government of snubbing small businesses after today’s “meagre” Spring Budget announcement.

“The Chancellor has set high expectations for supporting small firms during these challenging times, but today’s Budget will leave many feeling short changed,” said national chair, Martin McTague.

“The distinct lack of new support in core areas proves that small firms are overlooked and undervalued. Budgets are about tough choices, and with today’s billions fo pounds being allocated to big businesses and households, 5.5 million small businesses and the 16 million people who work for them will be wondering why the choice has been made to overlook them.

“We’ve got a Budget that on energy helps households but not small firms. On business taxes, it spends £27 billion extra on big businesses, arguing that small businesses are already catered for. This will leave to a feeling of being left behind instead of being considered equal partners in economic recovery – trickledown economics here simply does not work.

“Proposals to help people with health conditions are ill-designed and won’t help people get back to work, and we fear the work capability assessment changes won’t happen for years. The Chancellor has failed to take any action to make it easier for small firms to recruit people locked out of the labour market.

“Those with health conditions and disability have been let down by a Government that does nothing to work with small employers and is continuing with its failing Jobcentre-focused approach. Small measures on subsidising occupational health are welcome but not the big bang needed.

“Measures on the over 50s are token efforts at best, though we are pleased the Government is committing to the skills bootcamp model.

“The fuel duty freeze is a result of FSB’s campaigning and the springboard small firms need to help navigate the difficult roads ahead. This will save them money and provide some breathing space, allowing them to focus on growth.

“However, some of today’s smaller measures will benefit the economy. The enhanced R&D tax credit is a significant step towards promoting innovation. However, the large proportion of firms who fall outside of the 40% intensity threshold will be left feeling mystified by the change in policy since last Autumn. R&D tax credits have been the most effective industrial policy of the last ten years, creating cutting edge products and services in the small business community.

“While there are some positive words in today’s Budget, the Government’s lack of support for small firms in critical areas is glaring. The Chancellor stressed that the UK is one of the best places to do business and we’ll avoid a technical recession this year – but small businesses need more ambition and more focus.”

Martyn Bridges, Director of Technical Services at Worcester Bosch, said: “We were hoping to see a national grant scheme encouraging homeowners to insulate their properties and increase energy efficiency. A solution that would reduce energy usage and costs for the long-term.

“But given cost-of-living, homeowners will generally struggle to consider property improvements. This could also have a knock-on effect on our road to decarbonised home heating, as more efficient homes are suited for low carbon technology. We hope to see further commitment and measures from Government in supporting homeowners in increasing their EPC Ratings in the near future.”