Hampshire's businesses react to the Chancellor's Autumn Statement

Yesterday marked the release of the Chancellor’s Autumn Statement.

Chancellor Jeremy Hunt announced that business investment tax relief has been made permanent and national insurance has been cut by 2 per cent.

The main rate of national insurance will be cut by two points to ten per cent from January 6 at a cost of £9bn while a scheme which gives companies tax relief on capital investments will be made permanent.

The capital expensing scheme, which was due to expire in 2026, allows a company to immediately deduct all of its spending on IT equipment, plant or machinery from taxable profits.

Chancellor Jeremy Hunt also announced plans to sell the government’s entire holding in NatWest by 2025-26 subject to market conditions.

Businesses in Hampshire have been reacting to the announcements.

Hampshire Chamber Chief Executive Ross McNally said: “The Chancellor has heeded calls from many in the business community, including ourselves, to create a more favourable environment for investment and growth. And it’s about time, after the economic shocks we have seen and the challenges we continue to face.

“There are welcome measures on planning reform, National Insurance, apprenticeships and skills, late payments for small businesses and more incentives around Freeports and investment zones.

“The extended freeze on the small business multiplier for business rates, and the extension of the 75% discount for hospitality, retail and leisure will be a comfort to many although fundamental business rates reform remains to be done.

“Making the system of allowances for capital investment in plant, machinery and IT equipment permanent is excellent.

“Overall, this was not a gamechanger but it is certainly a better outcome than we had been expecting only a few weeks ago given the weaker growth forecasts since the Budget in March.

“The Chancellor has signalled support for business and, although not voiced as a formal industrial strategy, there are incentives, tax breaks and planning changes here that will be good for firms of all sizes and in all sectors.

“Businesses will assess what the package means to them, aligning their processes to overall tax policy and seeking to take advantage of the changes.

“They will find strength through collaboration, with the input of peer networks and groups such as ourselves who are here to help.

“We stand with our members to make sure that Hampshire makes the most of every opportunity the Autumn Statement offers.”

Michaela Johns, Director at Hampshire-based HWB Chartered Accountants, said: “The government is cutting the main rate of Class 1 employee National Insurance contributions from 12% to 10% ­– effective from January 6 and saving those saving those on an average salary of £35,000 more than £450 a year. This will no doubt cause payroll issues with software suppliers needing to amend their packages quickly.

“The Chancellor cutting National Insurance (NI) contributions for the self-employed – who many people call the backbone of this country – is to be applauded. From April those earning more than £12,570 will no longer have to pay Class 2 NI and those paying Class 4 contributions will see that cut from 9% to 8% on earnings up to £50,270. However, tax remains at a 70-year high.

“The minimum wage, known officially as the National Living Wage – changes to £11.44 per hour, a rise of 9.8% from April 2024 – and for the first time will include workers aged 21 and 22, having previously been restricted to those 23 and above.

“With regard to business rates, the small business multiplier will be frozen for the fourth consecutive year. In the Retail, Hospitality and Leisure sector (RHL) the 75% relief will be extended to ensure the most vulnerable businesses can be supported. This measure gives these businesses a little more certainty for the next 12 months.

“We also welcome the package of investment worth £20 billion a year to support growth in the economy. The tax allowance of fully expensing capital investment, permanently, is great news for SME business owners who are the lifeblood of the UK economy.

“From April 2024, firms bidding for government contracts over £5 million will have to demonstrate they pay their own invoices within an average of 55 days, tightening to 45 days in April 2025, and to 30 days in the coming years – this is hugely relevant to SMEs who deal with large companies and for whom cashflow is critically important.”

Alan Fisher, CEO of Farnborough Aerospace Consortium (FAC), which represents hundreds of businesses in the aerospace, aviation, defence and space sectors, gave a cautious welcome to the Chancellor’s autumn statement.

He said: “There were some announcements that will assist the sector, but we’ll have to see exactly what the details are to assess the overall impact.

“SMEs will be pleased that late-payments are being addressed. Many of our smaller members have told us that they can wait a great deal of time before invoices are paid and this has a very negative knock-on effect.

“The Chancellor said that in future businesses will have to show how long they take to pay invoices when applying for government work, with those taking longer than 30 days being denied contracts.

“Nearly £1bn was announced to encourage investment into the aerospace sector ‘building on decades of success for firms like Airbus and Rolls-Royce’.

“This recognises the importance of the sector, particularly in the south-east, and it is something we very much welcome.

“The UK’s aerospace sector is genuinely world-leading and we must stay in that position, so any increase in investment is to be welcomed.

“One reason we are world leaders is due to the innovations our companies make, so we need research and development incentives.

“The Chancellor announced that full expensing will become permanent – so for every £1m a company invests they will get £250,000 off the next tax bill. This will hopefully incentivise businesses to look at their R&D in the longer term.

“While welcome, the full expensing only partly makes up for the increase in corporation tax to 25 per cent.”

Mike Burton, Director at Hampshire-based housebuilder Metis Homes, said: “The major change signalled for our sector in this budget is to reforming the planning system. This is a positive step from a political standpoint in that the government has finally taken some action.

“Whilst incentivising local authorities may seem like a good idea on paper, and it is positive to see action being taken, I would see this move likely result in more local level refusals if local authorities are not given the resource to deal with them within these timeframes and therefore put in a position to make a decision or lose the fee.

“This could lead to greater planning timescales and result in more planning appeals putting more pressure on the planning inspectorate and creating a backlog there instead, at greater cost to the housebuilders and landowners.

“The devil will be in the detail no doubt. What is missed is that the planning system is not just a problem because of delays at the application stage, and are not solely symptomatic of authorities not dealing with things quickly.

“The many problems in, and in many cases complete lack of, Local Plan making and the issues of nutrient neutrality are still critical hold ups. Both of these feed into the delays of the planning process and uncertainty remains with both. Biodiversity Net Gain is also coming into force, which will require another level of complexity for local authorities to navigate as part of this process.

“It was good to see £110m to allow local authorities to deal with nutrient neutrality which will certainly be beneficial in the medium term, I fail to see how this will provide an immediate ability to unlock the 140,000+ homes that HBF have said are affected and it does not seem to be enough to do this from our experience of the cost of mitigation.

“What we had hoped would be brought forward but wasn’t were more measures aimed at catalysing action in the housing market to counteract the impacts of the interest rate hikes. They could have looked at schemes to help those trying to get on the housing ladder, a review or reduction in SDLT and other measures like a reduction in income tax to improve buying power of customers but none of these were forthcoming.

“Not only this, but absent from the statement was any direction in terms of enabling and ensuring local authorities deliver Local Plans, no review of the planning position of smaller sites to help enable SMEs to bring forward more schemes quickly and reduce the burden on local authorities of these smaller planning applications.

“There was also no mention of green/energy efficient mortgages. These were all items put forward by the HBF recently and are all pragmatic solutions to allowing housebuilding to move forward.

“Also, it will be good to see some money back in people’s pockets as this will help towards affordability both in terms of cost of living and their ability to deal with the increased mortgage costs created by the higher interest rate environment. However the reality of this is that for someone earning a national average salary, this difference is minimal.”

If you would like to comment on the Chancellor’s Autumn Statement, please email us at [email protected]

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