Business leaders have largely welcomed the UK's mini budget but warned “lessons need to be learned from the past” to support supply chains through a period of high inflation.
Chancellor of the exchequer Kwasi Kwarteng said the measures would support businesses and generate growth across the UK – with a target to reach 2.5% GDP growth.
He said the budget marked the start of a “new era built around three central priorities: reforming the supply side of the economy, maintaining a responsible approach to public finance, and cutting taxes”.
He said: “We want businesses to invest in the UK, we want the brightest and the best to work here and we want better living standards for everyone.”
Kwarteng said a planned rise in corporation tax will be cancelled – keeping it at 19% – along with the rise in National Insurance.
Paul Johnson, director of the Institute for Fiscal Studies, said the measures represented the biggest tax cuts since 1972.
Kwarteng additionally announced that almost 40 low-tax “investment zones” could be set up across the country.
In a Growth Plan, the government further said it will review the spending control framework, including the business case process, to accelerate decision making across government. The Growth Plan outlined details to drive greater “efficiency” across its operations, and departments will be asked to prioritise growth within their economic plans.
A new Energy Supply Taskforce will be established to negotiate long-term agreements with gas producers. The taskforce will also work to reduce the wholesale price of energy for the UK by reforming the wholesale energy market to “reduce the likelihood of similar energy price crises in the future”.
Shevaun Havilland, director general of the British Chambers of Commerce, welcomed the budget but warned “lessons also need to be learned from the past”.
She said “the devil will be in the detail of these proposals” and “the government must ensure a balance between reform and providing a sustainable future”.
“This is a bold start, and the chancellor must now use this as a springboard to develop a comprehensive long-term economic strategy,” she said.
The Growth Plan includes measures to speed up the delivery of infrastructure by reducing “burdens” from regulations, bureaucracy and environmental assessments.
Mike Elton, director at logistics and supply chain firm FarEye, said the chancellor had served his “trump card” through the budget.
“We needed a growth plan to help attract and retain staff right across the industry, and on the surface, we got it. But will it be enough to keep the shelves stacked and books balanced? Retail businesses and their supply and logistics chains are really in dire straits.”
He continued: “Simple economics tells us that inflation is fuelled by too much money chasing too few goods and services, so a short-term reprieve through these tax cuts is likely to further push inflation – including wage inflation - upwards. For many, the maths still won’t add up.”
He noted many details regarding the government’s energy plan remain unclear, including which businesses will qualify as “vulnerable” following the initial six month energy support package.
Martin McTague, national chair of the Federation of Small Businesses, particularly praised the decision to cut corporation tax, saying: “It’s good that the planned corporation tax increase has been scrapped. The £50,000 threshold for the main rate would have captured many small firms, so keeping tax on profits over £50,000 at 19% is welcome.
“This will free up funds for small businesses to invest, and mitigate the impact of continuing high inflation levels.”
He continued: “Ministers need to be relentless in removing barriers to small business success – especially with the current headwinds. The government has today signalled its determination to back small firms and we look forward to working with ministers and departments to put in place measures to help small businesses grow and succeed.”
David Jinks, head of consumer research at logistics firm ParcelHero, also praised cuts to corporation tax and the announcement that the Annual Investment Allowance will be made permanent. However, he said “other key new measures have a dark side for all those manufacturers, retailers and delivery companies”.
Jinks said: “There was considerable focus in chancellor Kwarteng’s statement on infrastructure development, which is excellent news for businesses and their transport partners keen to end logistics bottlenecks and ensure swift deliveries. The new plan lists rail and road projects that will help ensure Britain keeps on the move.”
But he warned these plans “come at a potentially heavy price to the environment”, and questioned the government’s Growth Plan commitment to “reduce unnecessary burdens” and “barriers” to infrastructure.
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