Sunak said corporation tax would rise to 25% in 2023 © Getty Images
Sunak said corporation tax would rise to 25% in 2023 © Getty Images

Budget tax rises will see procurement 'come to the fore'

Will Green is news editor of Supply Management
3 March 2021

A freeze on fuel duty and the extension of the furlough scheme in the UK budget have been welcomed by the logistics sector.

The Road Haulage Association (RHA) described the freeze as a “shot in the arm”, while Logistics UK said the extension of furlough was “great news for businesses in the logistics industry”.

Chancellor Rishi Sunak said furlough would be extended to the end of September, though firms will have to make a contribution of 10% in July and then 20% in August and September. He said the fuel duty freeze would be extended for another year.

Sunak also said corporation tax would rise to 25% in 2023 for firms with profits of more than £250,000. For companies with profits of less than £50,000 the rate will remain at 19%, with a taper for those with profits between £50,000 and £250,000.

Sunak said following the financial support given to firms, which had contributed to borrowing rising to the highest level since the Second World War, “it’s fair and necessary to ask them to contribute to our recovery”.

Simon Geale, SVP client solutions at procurement consultancy Proxima, said: “The increase in corporation tax will lead many finance leaders to look closely at their spending priorities over the next year. While the initial levies may be minor, this is likely to be the first of many, and external expenditure will be one of the areas that finance leaders look to drive down to free up funds for taxation going forward.”

Geale said Proxima research found external spend made up an average of 70-80% of total corporate spend. “Procurement teams will therefore come increasingly to the fore as business look at their supply base as a source of saving.”

The chancellor said companies could benefit from a “super deduction” in their tax bill by investing, getting back 130% of the cost of their investment.

He said the economy had shrunk by 10% as a result of the pandemic and unemployment was expected to peak at 6.5%.

Alex Veitch, general manager of public policy at Logistics UK, speaking about the fuel duty freeze, said: “At a time when many businesses are yet to open up fully, or to see the first signs of recovery, another charge to already fragile balance sheets could have been catastrophic for the organisations which are at the heart of every element of the economy. 

“The continuation of the furloughing scheme is great news for businesses in the logistics industry which rely on sectors of the economy like retail and hospitality which are yet to reopen.”

RHA chief executive Richard Burnett said: “The chancellor’s announcement of a fuel duty freeze for the 11th year in succession comes as very good news for the hundreds of thousands of commercial vehicle operators who have been struggling as a result of the pandemic.”

Sunak also announced eight new freeports across England, where imported goods will face no duties until they leave the zone and none at all if they are re-exported.

David Jinks, head of consumer research at ParcelHero, said: “That’s great news, but only really serves to undo the self-imposed damage created by Brexit. Before we left the EU, there were no tariffs to pay on materials arriving from Europe and no need to create an exempt area.”

Colin Elkins, VP, manufacturing industries at enterprise software firm IFS, said: “One area that is notably absent from today’s budget is the circular economy. While the UK produces significant quantities of high-value machinery and electric vehicles, some of the components for those products, like cobalt and nickel, have to be dug out of the earth elsewhere and imported.

“Instead of relying on imports of scarce natural resources, we should be placing more of a focus on recovering, reusing, and recycling those resources from assets already in circulation at the end of their life.”

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