Yesterday, Phillip Hammond delivered his third budget as Chancellor and also the first UK Autumn Budget in twenty years. With the triggering of Article 50 and the snap General Election in June, the UK economy has withstood a series of significant shifts over the past year.
The main headline grabbing news from the Budget was the Chancellor’s decision to immediately abolish Stamp Duty for first-time buyers purchasing properties worth up to £300,000. However, even this eye catching proposal couldn’t deflect from the serious issues facing the UK economy. The growth forecast for 2017 has been slashed from 2% to 1.5% with forecasts for 2018, 2019, 2020 and 2021 revised down to 1.4%, 1.3%, 1.5% and 1.6% respectively.
Productivity of growth has also been revised down by an average of 0.7% a year up to 2023 and the annual rate of CPI inflation forecast to fall from peak of 3% towards 2% target later this year.
With regards to Brexit, a further £3bn is to be set aside over next two years in addition to £700m already allocated to prepare the UK for every possible outcome it leaves the EU. It’s easy to see why many felt the Chancellor had little wiggle room within the budget while planning for the unknown ahead.
However, the budget presented The Enterprise Investment Scheme (EIS) with a huge vote of confidence. The Chancellor addressed several areas that are critical to the progression of Britain’s scaling businesses and the investor communities that support private sector development.
Several changes were announced in connection with the new industrial strategy. Leading the charge was the announcement that the EIS investment limit will be doubled to £2 million for knowledge-intensive companies, alongside numerous initiatives set in place to support Research and Development and tech-innovation for scaling companies. These decisions are part of an effort to realise the government’s idea of a highly-skilled UK private sector that is future-proofed as a global leader.
The Chancellor also took action in relation to business rates, bringing forward the changes for small businesses to receive the CPI rate ahead of the original schedule.
The main points for businesses from the budget are as follows:
- VAT threshold for small business to remain at £85,000 for two years
- £500m support for 5G mobile networks, full fibre broadband and artificial intelligence
- £540m to support the growth of electric cars, including more charging points
- A further £2.3bn allocated for investment in research and development
- Rises in business rates to be pegged to CPI measure of inflation, not higher RPI, a cut of £2.3bn
- Digital economy royalties relating to UK sales which are paid to a low-tax jurisdiction to be subject to income tax as part of tax avoidance clampdown.
- Expected to raise about £200m a year
- Capital gains tax relief for overseas buyers of UK commercial property to be phased out, with exemptions for foreign pension funds
- Charges on single-use plastic items to be looked at
- £30m to develop digital skills distance learning courses
- Business rate rises to be eased
- Tech giants targeted over VAT payments
- Research money central to Budget
If you would like to discuss the implications that this may have on your currency or cash management requirements, please get in touch and one of expert advisors will be on hand to help.