BUDGET 2024 – business and insolvency sectors reaction

Chancellor Jeremy Hunt has announced the budget for 2024. Commenting on the Chancellor’s Budget Statement, Federation of Small Businesses (FSB) Policy Chair Tina McKenzie said “We welcome today’s increase in the VAT threshold as well as the cut to self-employed National Insurance Contributions (NICs). Elsewhere, we were pleased to see a package of small business support in the Budget documents, including commitments to make progress on the HMRC administrative burden and on the national roll-out of the Business Energy Advice Service, as well as extending the Recovery Loan Scheme under a new name – the Growth Guarantee Scheme. Small firms are crucial for economic growth, and we were glad the Chancellor said that clearly from the despatch box.

“That said, many of those running businesses face serious challenges – not least through rapid hikes in labour and input costs – and many will have understandably hoped that there would be more measures announced today that would help ease the tough decisions small employers are having to make day-in day-out to keep their businesses going.

“There’s still a real gap when it comes to the crunch small firms are facing – and the growth, jobs and economic security small businesses provide is not something the country can afford to risk. While keeping the £5,000 Employment Allowance for the tenth year in a row is invaluable, it should have been uprated to keep pace with the National Living Wage – especially if employer tax thresholds remain frozen. Government must not be over-confident on jobs and hours in this economic environment.

“While more help with rising costs would have been welcome, we were pleased to see help for theatres and productions and fuel duty frozen again.

“As always, the devil is in the detail, and we will be examining the full range of measures. It’s not enough to just make ends meet, we need to make great leaps forward for the sake of the economy, and all the small business owners that operate within it.”

Arun Singh, Global Chief Economist at Dun & Bradstreet said “Businesses will have eagerly followed what is likely to be the last Budget before an early general election is called this year. At the outset, the Chancellor declared the fiscal statement was a Budget for long term growth. By the end, we discovered this meant a 2p cut in National Insurance contributions, lower property tax and improved childcare and child benefit for households. And for businesses, the extension of the recovery loan scheme, an increase in the VAT registration threshold and the enlargement of the full expensing scheme to leased assets. Businesses will be heartened by OBR forecasts that show inflation falling below the Bank of England’s target 2% in two months time – implying that interest rate cuts and lower borrowing costs are just around the corner. This will boost business optimism: Dun & Bradstreet’s recent Global Business Optimism Insights report revealed businesses were more optimistic than at any time during the recession period of last year. Uncertainty remains, businesses are looking for more guidance and support, and it’s never been more important for businesses to know who to trust, where risks are emerging and how to manage them.

“Having the correct tools for the job means your ability to understand and respond to threats – whether it’s threats to your workforce, to your finances, or something else entirely –  is increased and it provides a strong foundation for resilience. In today’s economic environment, businesses must start leveraging data-driven insights to mitigate risk and navigate challenges to help them make smarter decisions. Having business resilience is key when it comes to adapting to the latest tax cuts and will help businesses to stay ahead of the competition.”

Dr. Roger Barker, Director of Policy at the Institute of Directors, said “First and foremost, business was hoping for a Budget that would maintain a stable and credible policy framework for business. The Chancellor largely delivered that. However, beyond that, there was little in the announcements that can be regarded as a game-changer for business.

“The net fiscal giveaway of £13.9bn, or 0.5% of GDP, in 2024/25 may at the margin help lift the economy out of its mild recession before an election later this year. However, business still faces the prospect of an economy that is unlikely to experience meaningful growth for some time – despite the slightly more optimistic growth forecasts from the OBR.

“The extension of the Recovery Loan Scheme was welcome and will provide some support for bank lending to SMEs. The Chancellor’s commitment to extend full expensing to leasing was also helpful, although there was little indication of when that might be implemented.

“The Chancellor rightly acknowledged that skills and labour shortages are a major problem for many UK enterprises. Although cuts to national insurance and boosts to child benefit provision may attract some people back into the workforce, the Budget offered little to address the economy’s deep-seated skills gaps. This was a major omission and business will be looking to a future government to urgently address this issue.

“Clearly this was a Budget aimed at rallying political support rather than addressing the UK’s longer-term economic issues. However, it fell short of a delivering a comprehensive plan for sustainable growth and investment.”

Suren Thiru, Economics Director at ICAEW said “The OBR’s latest forecasts provide a surprisingly upbeat assessment of the UK’s near-term growth prospects. However, with little new action to address the supply side constraints weighing on economic activity, the recovery from recession may be more muted than the OBR are forecasting.

“While the Chancellor is right to say that stimulating investment is key to lifting productivity, the litmus test of these interventions will be whether they provide businesses with the headroom to kickstart new projects despite the broader economic and political uncertainty they are currently operating in.

“The boost to people’s incomes from another cut in National Insurance will be limited given that many are being dragged into higher tax bands by the freeze on thresholds.

“This budget leaves policymakers with little fiscal wiggle room to safeguard the UK against future shocks and leaves significant questions over the realism of future spending plans.”

Steven Mason, Insolvency Practitioner at Inquesta, said “There were a few crumbs of comfort but, overall, there was not much in the Budget for businesses. Mostly it was about what hasn’t been introduced, namely not funding Transport for London and keeping the ‘tourist tax’.

“It was a Budget that focused more on households, in an election year, with a 2p cut in National Insurance contributions, the abolition of the ‘non-dom’ status and changes to the child benefit regime.

“From a business point of view, it was encouraging to see that the Office for Budget Responsibility (OBR) said the UK economy was already out of recession after shrinking in the second half of 2023, therefore Jeremy Hunt was able to introduce more in his announcement than had first been expected.

“The VAT threshold is increasing from £85,000 to £90,000 from April 2024. There is an argument that this is meant to incentivise work and help businesses, but £5,000 is quite a small increase and it’s five years since the last one, so it is pretty much negligible. Had the threshold risen in line with inflation, it would be over £100,000.

“Britain is estimated to narrowly avoid the highest tax burden on record. The government will collect 37.1p of every pound generated in the economy in 2028/29. The Recovery Loan Scheme is being extended and renamed as the Growth Guarantee Scheme, ‘helping 11,000 SMEs to access the funding they need’, in the Treasury’s words.”