In his spring Budget, the Chancellor has outlined a three-point, £65b plan which aims to provide support for jobs and businesses and "forge a path to recovery" in the wake of the Covid-19 pandemic.
Rishi Sunak said his immediate priority continues to be supporting those hardest hit, with extensions to furlough, self-employed support, business grants, loans and VAT cuts – bringing total fiscal support to over £407b. He also set out plans to drive jobs, growth and investment to help the economy rebound.
In line with the government’s roadmap for the cautious easing of social distancing rules, the Chancellor pledged to keep economic support in place until lockdown ends. The Coronavirus Job Retention Scheme (furlough) will be extended to September, and the Self-Employment Income Support Scheme (SEISS) will continue with a fourth and a fifth grant. The Chancellor announced that more than 600,000 people, many of whom became self-employed in 2019-20, may now be able to claim direct cash grants under SEISS.
In addition, the business rates holiday in England has been extended by a three months. That means 750,000 retail, hospitality and leisure properties in England will pay no business rates for three months from 1st April when combined with Small Business Rates Relief, with further relief available for the rest of the year.
Grant funding will be available to businesses in England through a new £5b Restart Grant scheme to help the high street, providing up to £18,000, bringing the total spent on business grants to £25b (see related).
A new Recovery Loan Scheme will also be launched to replace the existing Government-guaranteed schemes, which have supported £73b of lending to date and close at the end of March.
As part of the UK Government’s Plan for Jobs to support, protect and create jobs, the Chancellor is increasing support, with £126m of new money to enable 40,000 more traineeships, and doubling the cash incentive to firms who take on an apprentice to a £3000 payment per hire. The National Living Wage will be increased to £8.91 from April.
A new mortgage guarantee scheme will enable homebuyers to secure a mortgage up to £600,000 with a 5% deposit, and an extension to the temporary cut in Stamp Duty Land Tax to September will support the housing market and protect and create jobs.
Income tax personal allowance and the higher rate threshold will rise next year as planned, and will then be maintained at that level until April 2026.
The rate of Corporation Tax will increase to 25% in 2023. Businesses with profits of £50,000 or less (around 70% of actively trading companies, will continue to be taxed at 19%. A tapered rate will also be introduced for profits above £50,000, so that only businesses with profits of £250,000 or greater will be taxed at the full 25% rate.
New English Freeports will be established in East Midlands Airport, Felixstowe & Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames and Teesside, and will be special economic zones with different rules to make it easier and cheaper to do business.
The Budget coincides with the publication of the the Government’s new Build Back Better: our plan for growth strategy, setting out how infrastructure, skills and innovation could drive the UK economy. 130,000 SMEs will be supported through the new Help to Grow scheme, providing the digital and management tools needed to innovate, grow and help drive recovery.
Beginning in April, a new super-deduction will cut companies’ tax bill by 25p for every pound they invest in new equipment, meaning they can reduce their taxable profits by 130% of the cost.
Responding, Helen Dickinson, chief executive of the British Retail Consortium (BRC), says: “The Chancellor has listened to many of our concerns and we welcome the extension of key business funding schemes. This announcement provides some targeted support to struggling businesses across the country. Action to support the retail industry will be vital to reviving the economy – including business rates relief, restart grants and loans, and an extension to the furlough scheme.
"However, for many retailers the devil will be in the detail, with caps on funding limiting access to this support. Retail accounts for over three million jobs, spread across every region of the UK – supporting the success of our industry will be essential to unlocking consumer spending and driving forward the UK’s economic recovery. The Chancellor must keep the situation under review, as we wait to see how the economy responds to reopening.
“The Chancellor has taken steps to avoid the business rates cliff edge on 1st April, and the three-month extension will provide essential funding at this challenging time. Beyond this point, relief is capped at only £2m for closed businesses, a tiny fraction of their total liability. Without further funding, it is likely that many ‘non-essential’ retailers will struggle under sluggish consumer demand and high Covid costs. The business rates system remains broken – it is vital that the ongoing business rates review delivers on its promise to reduce the burden on retail which already results in store closures and job losses.
“Restart grants provide a vital injection of funding during this extremely challenging period. No businesses have remained untouched by the pandemic and we welcome this cash to help ‘non-essential’ retailers improve safety measures, build up stocks, and prepare for re-opening. However, the Chancellor gave no clarity on EU state aid rules – if these continue to apply to grants for closed businesses, then many larger companies, employing hundreds of thousands of people, will miss out on millions of pounds of vital support. We need an immediate amendment to the state aid system which is stopping impacted companies from accessing the grants which were announced on Wednesday, and earlier this year.
“We hope the loan scheme will play an important role in addressing the cash flow challenges that many firms are facing. But it is vital that the aspirations of the Chancellor are met by action from commercial lenders to ensure that this all important finance reaches its destination quickly.
“We welcome the extension of the furlough scheme, which provides retail colleagues with a safety net against unnecessary job losses. This generous scheme will help protect the future of the 600,000 retail employees currently on furlough.
“We understand the need for increased taxation to restore public finances and cover some of the vital spending on business support. Corporation tax is a fairer way to achieve this as it ensures those with the broadest shoulders take the largest burden. However, increases in corporation tax must go hand-in-hand with bringing business rates down to a sustainable level to prevent the shuttering of many more local shops. On its own, corporation taxes would just be another tax on an industry that has faced rounds of forced closures, high costs of implementing Covid-safety measures, and the recent scrapping of tax-free shopping. It is vital that the ongoing business rates review meets its objective to reduce the rates burden on retail, which is causing stores to close and jobs to disappear.
“The additional incentive to take on new apprentices is welcome, but what is most important to the success of such training and the upskilling of our future workforce would be greater flexibility in how firms are able to spend their Apprenticeship Levy funds.
Investment and Digital
“The UK retail industry is a global leader in digital innovation and online retail has provided a vital lifeline for many households across the country over the course of this pandemic. Support for businesses to improve digital skills and develop their online offering will boost an already-dynamic sector.
“The 'super-deduction' must include investment in new technology. The UK retail industry’s investment in digital innovation, which is already world-beating, could be further boosted if this is tailored appropriately. This in turn will create more high-value jobs and added value for UK plc.”